WASHINGTON -- President Obama signed into law a huge, holiday-season tax bill extending cuts for all Americans on Friday, saluting a new spirit of political compromise as Republicans applauded and liberals seethed. The benefits range from tax cuts for millionaires and the middle class to longer help for the jobless.
The most significant tax legislation in nearly a decade will avert big increases that would have hit millions of people starting in two weeks on New Year's Day. Declared Obama: "We are here with some good news for the American people this holiday season."
"This is progress and that's what they sent us here to achieve," Obama said as a rare bipartisan assembly of lawmakers looked on at the White House.
The package retains Bush-era tax rates for all taxpayers, including the wealthiest Americans, a provision Obama and congressional liberals opposed. It also offers 13 months of extended benefits to the unemployed and attempts to stimulate the economy with a Social Security payroll tax cut for all workers.
At a cost of $858 billion over two years, the deal contains provisions dear to both Democrats and Republicans. It represents the most money that Obama was likely to have been able to dedicate over the next year to the slowly recovering economy. Yet it also increases the federal deficit at a time when the country is growing increasingly anxious about the red ink.
Dramatic both as an economic and a political accomplishment, the agreement sets the stage for Obama's new relationship with Congress in the aftermath of a midterm election wave that devastated Democrats and stripped them of control of the House.
Obama called for maintaining the spirit of cooperation, declaring he was hopeful "that we might refresh the American people's faith in the capability of their leaders to govern in challenging times."
He conceded the White House and Congress face a difficult challenge when it comes to controlling the deficit and tackling the nation's debt.
"In some ways this was easier than some of the tougher choices we're going to have to make next year," he said.
To strike the bargain, Obama set aside his vow to extend tax cuts only for the middle class and lower wage earners. The measure also enacts an estate tax that is more generous to the wealthy than Obama had sought.
The extended tax cuts include rates lower than those that would have gone into effect Jan. 1, a $1,000-per-child tax credit, tax breaks for college students and lower taxes on capital gains and dividends. The bill also extends through 2011, a series of business tax breaks designed to encourage investment that expired at the end of 2009.
Social Security taxes would be cut by nearly a third, from 6.2 percent to 4.2 percent, for this coming year. A worker making $50,000 would save $1,000; one making $100,000 would save $2,000.
But the payroll tax cut also means that workers will face an increase in 2012 if the full 6.2 percent rate is restored. And by scheduling President George W. Bush's 2001 and 2003 tax rates to expire in two years, the law ensures that taxes will be a top issue in the 2012 presidential election.
Republicans boasted that their success in extending tax cuts for all was a sign of things to come.
"The American people are seeing change here in Washington; they can expect more in the new year," said Senate GOP leader Mitch McConnell of Kentucky, who was singled out for praise by Obama and shook hands with the president after the signing.
Liberals, unable to alter the plan, were left bristling. They argued Obama should have bargained harder, and they especially objected to the new estate tax, which will allow the first $10 million of a couple's estate to pass to heirs without taxation. The balance would be subject to a 35 percent tax rate.
Rep. Anthony Weiner, D-N.Y., a critic of the bill, said Obama and lawmakers will face enormous election-year pressure in 2012 to extend the cuts again or make them permanent. Weiner said the
Republicans turned out to be "better poker players" than Obama.
Obama struck the compromise with the GOP after November election results that wrested control of the House from Democrats. Though Republicans won't take over until January, their new influence was evident immediately after the election.
The White House, while celebrating the bipartisan outreach represented by the tax bill, cautioned Republicans that Obama was not going to abandon fellow Democrats in every case. "There will be times when we will draw the line and have big fights," said presidential press secretary Robert Gibbs said.