Democrats are objecting to continuing tax cuts for the wealthy. Republicans insist that be part of the deal.
The president quickly called a news conference as a Democratic revolt over his tax compromise with Republicans started growing. Obama said his preferred option is not to continue the Bush Administration tax cuts for the wealthy. But the Senate won't go along.
"If we don't get my option through the Senate right now and we do nothing, on January 1st of 2011, the average family's going to see their taxes go up about $3,000," said Obama.
The compromise extends unemployment insurance benefits for an additional 13 months for about 9 million Americans. Two million would have lost benefits by Christmas.
The compromise extends several tax credits for working families, including for children and college tuition.
There's a 2 percent payroll tax, or Social Security "tax holiday," for every American for a year.
More than three-quarters of all Americans pay more in the so-called payroll taxes than in federal income taxes.
For someone earning $40,000 per year it would mean an $800 benefit; $70,000 a year would save $1,400.
Obama admits there is a temptation not to negotiate with hostage takers unless the hostages get hurt.
"In this case the hostage was the American people and I was not willing to see them get harmed," said Obama.
The average yearly household income of nearly $50,000 gets the lower tax, or tax cut of more than $2,000.
But some Democrats object to the cut for the wealthy.
The average Wall Street banker's salary is more than $311,000, and the banker gets to keep more than $9,300.
"On the Republican side this is their holy grail, these tax cuts for the wealthy," said Obama. "This seems to be their central economic doctrine."
The Obama Administration says overhaul of the tax-cut plans could add $900 billion to the federal deficit. But unless both houses of Congress approve some version of the tax proposal this year, income taxes will go up for nearly all American taxpayers. Some Democrats say it's not a done deal yet.