Obama defiant on tax rises for rich
Barack Obama signalled he was willing to compromise with Republicans – but refused to give ground on tax rises for the rich.
The newly re-elected US president declared he was not “wedded to every detail” of his approach to prevent a looming set of automatic tax rises and budget cuts that threaten to wipe out millions of jobs and push America back into an economic recession.
But he insisted his re-election gave him a mandate to raise taxes on wealthier citizens.
The changes, widely characterised as a dangerous “fiscal cliff” set to kick in on January 1, include a series of expiring tax cuts that were approved in the George Bush administration.
The other half of the problem is a set of punitive across-the-board spending cuts, looming only because a partisan panel of politicians failed to reach a debt deal.
Put together, they could mean the loss of around three million jobs.
“The majority of Americans agree with my approach,” said Mr Obama, brimming with apparent confidence in his first White House statement since securing a second term.
But the Republicans who run the House of Representatives plainly do not. Speaker John Boehner insisted that Mr Obama’s plan to raise tax rates “will destroy jobs in America”.
So began the “fiscal cliff” political manoeuvring that will determine which elected power centre – the White House or the House – bends more on its promises to voters.
An exhausting presidential race barely history, Washington was back quickly to governing on deadline, with agreement on a crucial goal, but divisions on how to get there.
Mr Obama invited the top four leaders of Congress to the White House next week for talks, just before he departs on a trip to Asia.
World stocks mostly fell yesterday as fears persisted over the fiscal cliff seen as a big threat to the economic recovery.
On Wall Street, stocks managed a small rally. The Dow was up about 30 points when Mr Boehner started talking and about 80 points shortly afterwards.
Then Mr Obama said he would not accept any approach to government deficit reduction that did not ask the wealthy to pay more in taxes. A spokesman later said the president would veto legislation extending tax cuts for families earning 250,000 dollars (£157,000) or more.
The Dow began sliding just before Mr Obama spoke, at 1pm US time, and had lost its gain for the day by 1:30.
A Congressional Budget Office (CBO) analysis says the looming combination of automatic tax increases and spending cuts would cut the massive US deficit by 503 billion dollars (£316bn) through next September, but that the financial austerity would cause the economy to shrink by 0.5% next year and cost millions of jobs.
The new study estimates that the nation’s gross domestic product would grow by 2.2% next year if all Bush-era tax rates were extended and would expand by almost 3% if Mr Obama’s two percentage-point payroll tax cut and current jobless benefits for the long-term unemployed were extended as well.
Since the election, Mr Boehner and Mr Obama have responded to the reality that they need each other.
Compromise has become mandatory if the two leaders are to avoid economic harm and the wrath of a public sick of government dysfunction.
Mr Obama says he is willing to talk about changes to government-funded medical insurance for the poor and elderly, earning him the ire of the left.
Mr Boehner says he will accept raising tax revenue and not just slashing spending, although he insists it must be done by reworking the tax code, not raising rates. The framework, at least, is there for a broad deal on taxes.
Yet the top Democrat and Republican in the nation are trying to put the squeeze on each other as the public waits for answers.
“This is his opportunity to lead,” Mr Boehner said of Mr Obama, not long before the president said: “All we need is action from the House.”
Mr Obama said the uncertainty now spooking investors and employers would shrink if Congress extended – quickly – the tax cuts for all those except the wealthiest.
The Senate has passed such a bill, but the House showed no interest yesterday in Mr Obama’s idea.
Mr Obama and Republicans have tangled over the Bush tax cuts for years. The president gave in to Republican demands to extend the cuts across the board in 2010, but he ran for re-election on a pledge to allow the rates to increase on families on more than 250,000 dollars a year.
Also lurking is the expiration of the nation’s debt limit in the coming weeks. The last fight on that nearly led the United States to default on its bills.
When asked if he would try to use that issue as leverage, Mr Boehner said it must be addressed “sooner rather than later”.
The national debt now stands above 16 trillion dollars. The government borrowed about 31 cents of every dollar it spent in 2012.
