Obama signs tax compromise into law

The legislation includes a two-year extension of across-the-board tax cuts that were first enacted under former president George W. Bush, and extends unemployment benefits for out-of-work Americans for an additional 13 months.

"It's a good deal for the American people," Obama said shortly before signing the bill at the White House. "This is progress and that's what they sent us here to achieve."

The tax extension marks one of the most bipartisan pieces of major legislation ever approved during Obama's nearly two years in office, which have been highlighted by intense partisan divides.

The stand-off had threatened to harm a still-fragile US economy by causing all Americans to face a tax increase in January. Obama brokered the compromise with Republicans in early December and the measure was passed by both chambers of Congress earlier this week.

Obama signalled hope that the bipartisanship could continue once Republicans, who emerged victorious from last month's congressional elections, gain more clout in Congress in January.

"There will be moments ... where the holiday spirit won't be as abundant as it is here today," Obama quipped. But "whenever we can it makes sense for our country's success and our children's future to work with people of both parties."

Yet the compromise also sparked a revolt among the left wing of Obama's Democratic Party, who believed the president made too many concessions, and opposition from many conservatives, including potential 2012 presidential candidates Sarah Palin and Mitt Romney.

Deficit hawks in both parties noted the bill's price tag of $800-900 billion, which would be added to an already skyrocketing budget deficit. Moody's rating agency warned it could eventually lead to a downgrade of the US Aaa credit rating if other actions to curb the deficit weren't taken.

Notably absent from the signing ceremony were key members of the Democratic Party's leadership, including Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi. Mitch McConnell, the top Republican in the Senate, did join Obama on the White House podium.

Obama's Democrats had insisted the cuts be extended only for households making under 250,000 dollars per year. Republicans had demanded an extension of the tax cuts for all income brackets.

"That's the nature of compromise," Obama said, "yielding on something each of us cares about to move forward on something all of us care about."