Seeking to avoid fiscal cliff, Obama challenges GOP on taxing the rich
Published Thursday, November 15, 2012 7:52AM EST
Last Updated Thursday, November 15, 2012 9:39PM EST
WASHINGTON -- President Barack Obama opens face-to-face negotiations with Republican opponents in Congress at the end of the week, getting down to the messy business of finding common ground on U.S. government spending and taxes to ease a looming threat that could throw the country back into recession.
Obama has challenged Republicans to let taxes rise on the wealthiest Americans, insisting they join him in his campaign pledge to increase the burden on high-income earners while leaving substantial tax deductions in place for the middle class.
The president's remarks at a Wednesday news conference were his first extended public discussion of the issue that is dominating the postelection session of Congress. Known as the "fiscal cliff," the convergence of mandatory spending cuts and the expiration of tax cuts is scheduled to take effect Jan. 1.
"A modest tax increase on the wealthy is not going to break their backs," Obama said of the nation's top income earners at his first news conference since winning a second term. "They'll still be wealthy."
At the same time, the president stressed he was open to compromise on other approaches from Republicans who say they will refuse to raise tax rates. "I believe this is solvable," he said.
Economists in both parties have cautioned that, given the sluggish economy, a return to recession is likely unless lawmakers and the president reach a compromise.
At his news conference, Obama laid out bleak prospects if he and lawmakers can't reach agreement.
"Everybody's taxes will automatically go up, including the 98 per cent of Americans who make less than $250,000 a year, and the 97 per cent of small businesses who earn less than $250,000 a year. ... Our economy can't afford that right now," he said.
As an alternative, Obama suggested that Congress pass legislation immediately to "prevent any tax hike whatsoever on the first $250,000 of everybody's income," a measure that he noted has passed the Democratic-controlled Senate and that Democrats in the Republican-controlled House are ready to embrace.
He said legislation along those lines would eliminate half of the fiscal cliff.
At a news conference of his own before talks begin Friday at the White House, Republican House Speaker John Boehner agreed that a bipartisan "spirit of co-operation" has been evident since the election.
However, he said of the president's proposal, "We are not going to hurt our economy and make job creation more difficult, which is exactly what that plan would do."
Obama seemed eager to avoid issuing any ultimatums. Asked if it would be a deal-breaker for Republicans to refuse to allow the top tax rate to revert to 39.6 per cent from the current 35 per cent, he sidestepped. "I just want to emphasize I am open to new ideas if the Republican counterparts or some Democrats have a great idea for us to raise revenue, maintain progressivity, make sure the middle class isn't getting hit, reduces our deficit."
Wall Street wasn't encouraged. The Dow Jones industrial average dropped 185 points for the day.
The president has also met this week on fiscal cliff issues with labour leaders, representatives of liberal groups and a delegation of corporate chief executives.
Boehner and Mitch McConnell, the Senate Republican leader, have said they, too, want a compromise and are willing to support additional tax revenues as part of a deal that includes tax reform and measures to recast the government's largest benefit programs. But they appear to rule out any legislation that raises tax rates.
McConnell issued a statement calling on Obama to "propose a specific plan that includes meaningful entitlement reforms to strengthen and protect these programs for future generations." He referred to government-sponsored health insurance for the elderly, the poor, and the pension plan.
Aides said the president is prepared to go to the public in the coming days to enlist support for his position. Obama said Wednesday, "The American people understood what they were getting" when they voted for him after a campaign that focused heavily on taxes.
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.