Obama addresses fiscal cliff, warns taxes must rise on wealthy
US President Barack Obama Friday claimed a mandate to hike taxes on the rich to pay down the deficit, firing his first post-election shot at Republicans in a year-end showdown on debt and spending.
The president also announced in a punchy, televised White House appearance, his first since his election night address, that he would invite top Republican and Democratic leaders to the White House next week.
The talks will focus on averting the so-called “fiscal cliff” - a catastrophic blend of automatic tax rises and harsh spending cuts due to come into force on January 1, which analysts warn could cause a new recession.
The showdown will be a crucial test of whether the newly reelected Obama can bend gridlocked Washington to his political will, with implications for his capacity to enact his second term agenda.
Obama campaigned on raising taxes on the rich to pay for deficit reductions and to finance spending on education and in other areas likely to make the economy more equitable and improve the lot of the hurting middle classes.
“We can’t just cut our way to prosperity. If we are serious about reducing the deficit, we have to combine spending cuts with revenue, and that means asking the wealthiest Americans to pay a little more in taxes,” he said Friday.
Obama signaled a willingness to deal on the details of a deficit reduction plan, but he made clear that his bottom line principle involved rejecting the Republicans’ flat refusal to agree to higher taxes for the wealthy.
“This was a central question during the election, it was debated over and over again. On Tuesday night, we found that the majority of Americans agree with my approach,” an invigorated Obama said in the White House briefing room.
“I want to be clear. I’m not wedded to every detail of my plan. I’m open to compromise. I’m open to new ideas.”
But with Vice President Joe Biden, who is likely to play a key role in negotiations, by his side, the president warned: “I refuse to accept any approach that isn’t balanced.”
“I’m not going to ask students and seniors and middle class families to pay down the entire deficit while people like me making over US$250,000 aren’t asked to pay a dime more in taxes. I’m not going to do that.”
Obama’s approach left room for negotiation with Republicans and could possibly permit a compromise that keeps the top level of income tax rates the same for the rich, but involves a removal of deductions on investment income.
House Speaker John Boehner earlier set out his stall on the negotiations to come, and displayed a fealty to Republican principles, but also hinted at room for compromise in what are certain to be tough negotiations.
“This is an opportunity for the president to lead,” Boehner said.
“This is his moment to engage the Congress and work towards a solution that can pass both chambers,” he said. “I think it’s important for us to come to an agreement with the president. But this is his opportunity to lead.”
Boehner said he hoped to quickly start talks on the “fiscal cliff” but he warned: “Raising tax rates will slow down our ability to create the jobs that everyone says they want.”
Boehner pointed to “special interest loopholes in the tax code, both corporate and personal,” as well as deductions that could be eliminated as a way to raise revenue while not deterring investment.
But Boehner, like Obama, declined to go into great detail of his proposal, apparently seeking to avoid becoming boxed in ahead of the negotiations.
Next week’s talks at the White House will involve Boehner, Senate Republican minority leader Mitch McConnell, Democratic Senate Majority leader Harry Reid and House Democratic minority leader Nancy Pelosi.