US congressional leaders agreed on Thursday on a $100 billion deal to extend a middle-class tax cut and unemployment benefits for millions of Americans in a rarely seen bipartisan deal in Washington.

The agreement was announced just after midnight on Thursday by Senate Finance Chairman Max Baucus, a Democrat, and House Ways and Means Chairman Dave Camp, a Republican, and could be voted on as early as Friday.

No details were given but the plan is expected to extend a cut in the Social Security tax rate - from 6.2 to 4.2 percent - for another 10 months, and extend unemployment benefits.

"This agreement will keep us moving forward, just as our economy is gaining steam," said Democratic Senator Harry Reid, the Senate Majority leader, in a statement.

The compromise will also prevent a sharp decrease in payments to physicians serving patients covered by the state-run Medicare health programme for elderly Americans.

In a key concession, Republicans reportedly did not require the cost of the tax cuts to be matched by spending cuts elsewhere in the budget.

The deal is a victory for President Barack Obama and points to a new spirit of compromise among bitterly divided Republican and Democratic lawmakers, conscious of record low approval ratings in the heat of an election year.

"Everything should not be a fight, and I am glad that most of my Republican colleagues put the interests of the middle class ahead of politics to forge this agreement," Reid said.

"Americans expect us to put our differences aside and find common ground. In the months ahead, I hope this shift to the middle becomes the norm, rather than the exception," he added.

The key compromise involved a deal whereby new federal employees will pay more into their pension plans while the contributions of existing employees will remain the same, the Washington Post reported.

Earlier this week, House Republican leaders dropped their opposition to extending the federal payroll tax holiday, averting a fight with Obama on an issue that threatened to hurt them with voters.

House Speaker John Boehner and his top lieutenants announced on Monday that they would no longer insist that the $100 billion cost of the extension be offset with spending cuts elsewhere.

The payroll taxes affect salaried workers, so reducing the amounts withheld from paychecks was a key element of the Obama administration's efforts to bolster the US economic recovery.

A two-month reduction in the payroll tax was agreed in December as part of a tax compromise, but only after a rebellion by some House Republicans caused a bitter partisan standoff.

In the wake of the fight, polls showed public approval of Congress falling to a record low.

 

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