Obama confident fiscal cliff can be averted; U.S. can't afford across-the-board tax hike
Published Wednesday, November 14, 2012 7:26AM EST
Last Updated Wednesday, November 14, 2012 8:57PM EST
WASHINGTON -- President Barack Obama said Wednesday he was not going to "slam the door" in the face of Republican ideas for avoiding the so-called fiscal cliff, but he insisted the wealthy must pay more and that he was determined to keep taxes from rising on the middle class in the face of a year-end deadline to avoid big tax increases for all Americans and deep cuts in government spending.
The president, newly elected to a second four-year term, campaigned on raising the tax rate for U.S. households making more than $250,000 a year, citing the robust economic growth that accompanied higher rates for upper-income Americans during Bill Clinton's presidency in the 1990s. Congressional Republicans have hinted at a willingness to allow taxes to rise but insist, in line with party ideology, that rates cannot increase. They envision higher tax revenue through changes to the tax codes.
At issue is an annual U.S. budget deficit that now is routinely above $1 trillion and a national debt that has risen to near $16.5 trillion.
In his first press conference since the election, Obama appeared to signal the path toward a compromise that would avoid the potentially disastrous effects of going over the fiscal cliff. The non-partisan Congressional Budget Office has warned that failure to compromise by Jan. 1 would likely send the economy back into recession and cause a spike to more than 9 per cent in already stubbornly high unemployment.
"I am open to new ideas. ... I want to hear ideas from everybody. I believe this is solvable," Obama said, adding that "I'm not going to slam the door in their (the Republicans') face."
At the same time, he said Congress could act by next week to extend tax cuts for middle-income Americans, saying that would go halfway toward solving the dispute.
"The only question now is, are we going to hold the middle class hostage" to the argument over what the wealthy should pay, Obama asked.
The president also said they have to take a serious look at "our entitlements." The growing U.S. debt is in part driven by government social programs, in particular Medicare, which guarantees health insurance coverage for Americans when they reach age 65. With the huge population of post-World War II baby boomers reaching retirement, the Medicare program is ballooning and headed toward bankruptcy in the years ahead.
Later Wednesday, Obama was meeting with about a dozen business executives to hear their ideas for handling the fiscal cliff. On Tuesday, he met with labour leaders and liberal groups, telling them he would stand behind his campaign pledge to make the wealthiest Americans pay more in taxes.
Obama will meet with leaders of Congress on Friday.
White House press secretary Jay Carney said the president would bring to the table a proposal for $1.6 trillion in new taxes on business and the wealthy when he begins discussions with congressional Republicans, a figure that Obama outlined in his most recent budget plan. The targeted revenue is twice the amount Obama discussed with Republican leaders during debt talks during the summer of 2011.
Carney said the figure, combined with $1.1 trillion in spending cuts already signed into law, would reduce deficits by $4 trillion.
Obama was heading into negotiations on avoiding the fiscal cliff with what is known as a lame-duck session of Congress, so called because it involves the outgoing legislature. The newly elected membership is sworn in early next year. The present Congress has been criticized as the least productive in recent history.
Washington politicians have just over seven weeks, including breaks for the Thanksgiving holiday next week and the Christmas holiday season, to avert the year-end fiscal cliff.
That outcome -- barring legislative compromise by Jan. 1 -- is self-imposed punishment for last year's failure by a bitterly divided Congress and White House to deal with the government's spiraling debt and overhaul its unwieldy tax code.
The big question is how much ground both sides are willing to give after voters endorsed the status quo of divided government -- a Democratic president and Democratic-controlled Senate, and a Republican-controlled House of Representatives.
Republicans -- the low-tax, small-government tea party movement in particular -- insist that tax rates not be raised for any income level and instead call for even deeper cuts in spending, although the targets of those reductions are unknown.