The American President insisted the deal was not a sign of "weakness or compromise", adding "because of this agreement, middle class Americans won’t see their taxes go up on Jan 1".

President Barack Obama said on Tuesday he had to compromise on tax cuts for the wealthy because Republicans were holding middle class Americans hostage.

At a short-notice news conference, Mr. Obama repeated his deep philosophical opposition to portions of the deal he struck with the opposition party, which extend Bush-era tax cuts for two years.

Republicans had wanted the cuts made permanent.

Despite his distaste for the deal, Mr. Obama called on fellow Democrats in Congress to join him by passing the measure even though it goes back on a promise he had made as a candidate and throughout the first two years of his presidency.

Mr. Obama said he could have continued fighting the Republicans and that “might have been good politically, but it would have been a bad deal for the American economy” and the American people.

Broadly put, Mr. Obama caved in to Republican demands that tax cuts for wealthy Americans -- households earning more than $250,000 a year -- be extended beyond their expiration at the end of the year.

Tax rates for Americans families earning less than $250,000 annually also are set to expire at year’s end, but Republicans were blocking a Democratic attempt to extend those cuts unless higher wage earners also were granted a lower rate.

Mr. Obama said he had no choice now because he did not have the votes in Congress. For Republicans, he said, “this is their holy grail, these tax cuts for the wealthy.”

The president said, “It’s tempting not to negotiate with hostage takers {hbox}” unless the hostage gets harmed. Then, people will question the wisdom of that strategy. In this case, the hostage was the American people, and I was not willing to see them get harmed.”

While Mr. Obama made a passionate defense of a compromise he did not want, Democrats in Congress signaled they would seek changes in the agreement.

Senate Majority Leader Harry Reid said the deal is not yet completed and that “more work” needs to be done. Reid met earlier with Vice President Joe Biden and members of the Democratic rank—and—file.

In the House of Representatives, its leader, Speaker Nancy Pelosi, issued a statement saying that discussions with the president and the Democratic caucus will continue in the days ahead.

The deal provided the first big test of whether Mr. Obama can work out compromises with Republicans after their landslide victory in last month’s election. Republicans will take control of the House of Representatives next month and narrow the Democratic majority in the Senate.

While under fire from liberal Democrats who accused him of being too quick to cave in to Republican demands, Mr. Obama said he was motivated by doing the best he could under present circumstances for the American people who are suffering through a deep economic malaise and nearly 10 percent unemployment.

White House aides said Mr. Obama counseled pragmatism among party rank and file so that they move on to other issues before the party loses control of the House in January.

Vice President Joe Biden met with senators shortly before Mr. Obama spoke asking them to swallow their objections to the proposed compromise.

In return for extending Bush-era tax cuts for all Americans, including the richest, he gained Republican agreement to extend unemployment benefits for 13 months and reduce payroll taxes for a year.

Before the Republicans assume the House majority next month, the White House wants Congress to take up ratification of a new nuclear treaty with Russia, a top year-end priority for Mr. Obama, then address the Dream Act. It is a measure to give young people whose parents brought them into the U.S. illegally a path to legal status. Democrats also want to vote on whether to repeal the military’s policy that prevents gays from serving openly in the armed services.

While most Democratic leaders in the House and Senate were noncommittal, some had spoken in vigorous dissent.

“Senate Republicans have successfully used the fragile economic security of our middle class and the hardship of millions of jobless Americans as bargaining chips to secure tax breaks for the very wealthiest among us,” said Democratic Sen. Tom Harkin.

Republicans praised the deal.

Senate Minority Leader Mitch McConnell thanked Mr. Obama for “working with Republicans on a bipartisan plan to prevent a tax hike on any American and in creating incentives for economic growth.”

On Tuesday, Sen. Joe Lieberman, an independent who sides with the Democrats, urged his colleagues to quickly back the compromise.

“This tentative agreement is an example of Washington working across party lines to confront the challenges facing our nation,” said Mr. Lieberman, who is up for re-election in 2012.

“Make no mistake, allowing taxes to go up on all Americans would have raised taxes by $3,000 for a typical American family and that could cost our economy well over a million jobs,” Mr. Obama said when he announced the plan Monday night.