The deal involves giving Republicans a two-year extension of Bush-era tax cuts for wealthy Americans and a reduction of estate taxes on wealthy heirs in exchange for giving Mr. Obama the same extension of tax cuts for the middle class and an extension of long-term unemployment benefits, all of which are otherwise set to expire in less than a month.
Many Democrats, however, are furious and believe Mr. Obama gave away the store to Republicans by allowing tax breaks for the wealthy, reports CBS News White House correspondent Bill Plante. All this leaves the president with a lot of work to do before the tax cuts can take effect.
"I don't think that the president should count on Democratic votes to get this deal passed," said New York Democratic Congressman Anthony Weiner on Tuesday. "I think there are a lot of people who are concerned that it wasn't a very good deal and that more needs to get done."
Some Democrats, like Vermont Senator Bernie Sanders, have gone so far as to say they will block any attempts to pass the deal, Plante reports, although Senate Majority Leader Harry Reid insists the deal is just a "framework."
Mr. Obama's advisers are trying to strike a pragmatic tone as they attempt to rally Democrats behind the deal.
"Any compromise is, by definition, is going to have things that each side don't like," said Senior White House Adviser David Axelrod on the CBS' "The Early Show" on Wednesday. "(Democrat's resistance to this compromise is a) kind of political kabuki dance that would ultimately end in a compromise not nearly as good as this and, in the meantime, taxes would go up on people across this country (and) people (would get) thrown off their unemployment insurance. That's just not a good idea. I think people will think about this and they're going to focus on the consequences of inaction and we'll get something done."
If Democrats kill the package, it would mark a stunning defeat for Obama and a huge political bet that voters will blame Republicans as much as Democrats for an impasse that would lead to higher taxes starting Jan. 1, reports the Associated Press. Many congressional insiders doubt that Democrats will take that gamble. But liberal lawmakers' discontent is hard to measure in the wake of last month's big election setbacks.
Mr. Obama, at a press conference Tuesday discussing the compromise, compared dealing with Republicans to negotiating with hostage takers, saying they were totally unwilling to allow tax cuts for the middle class unless the wealthy got them as well.
"I have not been able to budge them," Mr. Obama said at the televised news conference. Without a compromise, he said, 2 million unemployed people "may not be able to pay their bills, and tens of millions of people who are struggling right now are suddenly going to see their paychecks smaller. I'm not here to play games with the American people or the health of the economy."
Under the proposal cutting back Social Security payroll taxes, workers would pay a 4.2 percent tax rate instead of 6.2 percent; a $120 billion tax cut for workers, starting on Jan. 1, reports the AP.
Households making between $40,000 and $50,000 would get an average tax cut of $810 next year, according to an analysis by the Tax Policy Center, a Washington research group. Households making between $100,000 and $200,000 would get an average tax cut of $2,162.
The package would continue other programs such as enhanced tuition tax credits and tax breaks for businesses that hire new workers, the AP reports. It would impose a 35 percent federal estate tax, but each spouse could exempt up to $5 million from taxation.
Under current law, the estate tax, which was repealed for 2010, is scheduled to return next year with a top rate of 55 percent.
Officials said that, overall, the proposal could increase federal borrowing by $900 billion, the AP reports.
The lower estate tax has emerged as the biggest sticking point among House Democrats.
"That's the topper," Rep. Bill Pascrell Jr., D-N.J., told the AP. "I understand give and take. But I have to resolve in my mind if this was too much giving."
Watch CBSNews.com Editor-in-Chief Dan Farber and political reporter Brian Montopoli discuss the effects of the tax cut compromise: