President Barack Obama sketched out a potential year-end deal pairing tax increases and spending cuts to avert the so-called fiscal cliff, while insisting Republicans must accept higher tax rates for top earners as a condition for negotiations.
“We have the potential of getting a deal done,” Obama said at the White House Tuesday on Bloomberg Television in his first interview since winning re-election. “We’re going to have to see the rates on the top 2 percent go up, and we’re not going to be able to get a deal without it.”
Obama’s comments underscored both the possibilities and the hurdles for breaking the stalemate in talks to avoid more than $600 billion in automatic tax increases and spending cuts that will begin to take effect if the president and Congress fail to reach a deal on reducing the deficit before year’s end.
The president said he would be “flexible,” yet named a price Republicans have so far been unwilling to pay -- tax-rate increases -- as the only path to reaching a deal.
“It’s not me being stubborn; it’s not me being partisan,” Obama said. “It’s just a matter of math.”
In greater detail than he has since winning a second term last month, Obama, 51, outlined his vision for a two-stage process wherein both he and congressional Republicans would get immediate “down payments” on their top priorities. He said that would be followed by more sweeping changes in 2013.
Compromise would mean the president and Democrats accept more spending reductions this year -- potentially including slowing the growth of Medicare benefits -- and Republicans agreeing to tax rate increases.
“I don’t expect Republicans to agree to any plan where they’re just betting on the come that entitlement reform will happen,” Obama said.
He spoke the day after House Speaker John Boehner sent a letter to the White House laying out a proposal to avert the fiscal cliff that included $2.2 trillion in spending cuts and new tax revenue, without raising rates.
“Unfortunately,” Obama said, Boehner’s proposal “right now is still out of balance.”
The speaker, an Ohio Republican, had called Obama’s initial offer a “la-la land” proposal.
Reacting to the president’s latest comments, Boehner said Obama “has an obligation” to present a counterproposal that can be passed by Congress -- a test he said Obama’s current plan fails -- and that Republicans are “ready and eager” to discuss such an offer with him.
“If the president really wants to avoid sending the economy over the fiscal cliff,” Boehner said in a statement, “he has done nothing to demonstrate it.”
Patrick Griffin, former chief congressional lobbyist for Bill Clinton, predicted “there will likely be more blood in the street before this is resolved.”
“But I think we’ll come back to this as the defining framework in the broadest sense,” he said.
Obama can cite public backing for his stance on taxes, which was the centerpiece of his re-election campaign. Exit polls conducted during the Nov. 6 balloting found that 47 percent of voters said they favored letting taxes rise for high earners and 13 percent said they should go up for everyone. Obama’s public approval rating has averaged more than 51 percent in polls since the election.
Obama is insisting that any deal must raise income tax rates on individuals earning $200,000 or more a year and married couples earning $250,000 and more annually, while Republicans are demanding entitlement benefit cuts.
There are about four weeks left to break the logjam. The Congressional Budget Office has warned that failing to do so would pitch the U.S. economy into a recession.
Even as he insisted on higher tax rates, Obama left room for compromise with Republicans in endgame talks.
He sidestepped a question about whether he would accept a measure that increased the top rate from 35 percent to 37 percent or 38 percent -- short of the 39.6 percent marginal rate when the current levels went into effect. Obama didn’t flatly rule out entitlement cuts, including changing the annual cost- of-living adjustment for Medicare, the government health program for the elderly and disabled.
“I am willing to look at anything that strengthens our system,” Obama said. Still, when asked whether he would be open to benefit cuts, the president said: ‘Well, no, that’s not what I’m saying.’’
Obama also made it clear he wants an increase in the U.S. debt limit as part of any compromise. The U.S. will reach the $16.4 trillion debt ceiling this year, though Treasury can use so-called extraordinary measures to extend the deadline until at least mid-February, according to the Congressional Budget Office.
The president said business leaders have told him they don’t want to see another “debt ceiling crisis” early next year.
“America is poised to take off,” Obama said. “Let’s make sure that we don’t have a self-inflicted wound, because there are a lot of silly games played up on Capitol Hill.”
Boehner and Obama, who last year fell short of forging a bipartisan bargain to reduce the deficit while averting a breach of the U.S. government’s legal borrowing limit, have yet to engage in the personal negotiations that previously brought them to the brink of a deal.
At a White House holiday party last night, the two men holding the keys to a compromise did not speak even to exchange pleasantries, according to aides to both.
“Speaker Boehner and I speak frequently,” Obama said. “I don’t think that the issue right now has to do with sitting in a room.”
Both are facing pressure from their respective political bases to resist a compromise, with Boehner’s Tea Party-infused House Republicans balking at raising tax rates while labor and other Democratic-aligned interest groups reject the idea of slashing entitlements including Medicare and Social Security.
Some fiscally conservative lawmakers are criticizing Boehner for proposing revenue-raising tax changes in his latest offer. Senator Jim DeMint said today it would “destroy American Jobs,” and urged Republicans to oppose it.
Obama’s explanation for insisting on higher tax rates was at odds with his own budget. The president said lawmakers could only generate revenue “in the range of $300 billion to $400 billion” through curtailing tax breaks, Republicans’ proposed way of doing so.
“It’s a simple proposition that you can’t raise enough revenue,” without hiking rates, he said. “And if you don’t raise enough revenue through loopholes and deductions, then it’s going to be middle-class families who make up the difference, and that actually would be bad for business.”
Obama’s own plan includes more than $750 billion in revenue that could be generated from top earners.
The president acknowledged that his relationship with the business community was strained in his first term and signaled his intent to work closely with them in his second, saying he’s considering recruiting a business leader join his economic team.
“It’s something I would have loved to have done in the first term,” he said. “One of the biggest problems we’ve got in terms of recruiting business leaders into the administration is the confirmation process has become so miserable, so drawn out, that for successful folks to want to put themselves through that process, you know, a lot of folks are just shying away.”
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