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Defiant Obama defends tax cuts

Washington - US President Barack Obama came out fighting Tuesday, urging Democratic allies to back a hard-won compromise deal on tax cuts and putting Republicans foes on notice ahead of the 2012 elections.

In face of criticism from many on the left of the Democratic Party, Obama passionately defended the deal that will see tax breaks extended for the wealthiest Americans saying his critics had to take a long-term view.

"I'm as opposed to the high-end tax cuts today as I've been for years. In the long run, we simply can't afford them. And when they expire in two years, I will fight to end them," Obama vowed at a White House press conference.

Analysts have said the tax breaks will add some $900bn over two years to the already massive US national debt.

Obama defiantly warned Republicans he would turn the 2012 presidential elections, when he is expected to seek a second four-year term, into a referendum on their differing economic visions.

"On the Republican side, this is their holy grail. These tax cuts for the wealthy. This... seems to be their central economic doctrine," Obama said, pledging to fight any move to make tax breaks for the wealthy permanent.

The US president brokered a deal Monday on keeping tax cuts for all following weeks of political wrangling after major Republican gains in November's congressional polls limited his room for maneuver.

In return, Republicans agreed to a 13-month extension of jobless benefits set to expire on December 31, and which would have seen millions lose their meagre incomes as unemployment hovers just below 10%.

The deal has been met with a frosty reception from some Democratic lawmakers, who would have preferred to see any blame for failing to reach a deal fall on Republicans.

Democratic Senate Majority Leader Harry Reid said the agreement was "only a framework" and vowed to work with the White House and Republicans to address "wide-ranging" concerns among his rank-and-file.

"It's something that's not done yet. Let's make that clear. We're working through all this," he told reporters.

But Obama argued that doing nothing was not an option, and taking a "purist position" meant the American people would be the losers.

"If we don't get my option through the Senate right now and we do nothing, then on January 1st of this 2011, the average family is going to see their taxes go up about $3 000," he warned.

"At any given juncture, there are going to be times where my preferred option, what I'm absolutely positive is right, I can't get done," the US president said, stabbing his finger for emphasis.

"And so then my question is, does it make sense for me to tack a little bit this way or tack a little bit that way because I'm keeping my eye on the long term and the long fight."

In one of his most fiery speeches for some time, Obama said the deal achieved his goal of avoiding a tax hike on the middle class amid the sputtering economic recovery.

"Overall, every economist I've talked to suggests that this will help economic growth and this will help job growth over the next several months. And that is the main criteria by which I made this decision," Obama said.

The arrangement, which faces an uphill battle in Congress, would extend massive tax cuts passed in 2001 and 2003 under former president George W Bush beyond January 1.

It would also include a temporary cut in the payroll social security tax to replace an expiring tax credit for workers, and restore the estate tax, which expired in 2010 but was due to resume in 2011. The rate would be 35%, but only for estates above $5m.

Democrats including Obama had pushed for only extending tax cuts for those earning less than $200 000 for individuals and $250 000 for couples.

But one senator, Independent Bernie Sanders, who usually backs the Democrats, vowed to try to derail the deal, saying it was a "moral outrage" for Republicans to "hold hostage" middle-class tax relief and jobless benefits.

Republicans will "come back and say 'oh, my word, we have a growing national debt and a big deficit, we are going to have to cut back... on education, on health care, on environmental protection,' all of which will impact the middle class," Sanders warned.

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