President Barack Obama said on Wednesday that Republicans would have to agree to raise taxes on the wealthy as the first step in a budget deal that would prevent a dysfunctional Washington from pushing the economy into recession.
In his first news conference since winning re-election last week, Obama said he would be open to considering Republican priorities like entitlement reform and other ways to raise tax revenue as part of a broad-based deal to set the nation’s finances on a sustainable course.
But he said Republicans in Congress would first have to agree to his top priority in the complex negotiations aimed at preventing $600 billion in tax increases and spending cuts from kicking in at the beginning of next year, a toxic combination known as the “fiscal cliff” that could strangle the weak economic recovery. “What I’m not going to do is to extend further a tax cut for folks who don't need it,” Obama said, shortly before meeting with a dozen corporate executives who are pushing for a quick resolution.
Despite all the post-election talk about cooperation between Democrats and Republicans, the two sides seemed to be hardening their positions and Washington girded for a round of brinkmanship that could cast a pall of uncertainty over the economy through the Christmas holidays.
Republican leaders said Obama’s stance had little chance of becoming law, while Democrats said a Bill that passed the Senate a few months ago that would raise taxes on the wealthy should serve as the starting point. “It's our bill or bust,” a Democratic Senate aide said.
Both Republicans and Democrats want to keep low income tax rates in place for middle-income and low-income households, but Democrats say the wealthiest 2% should revert to the higher rates that were in place in the 1990s.
Obama made increased taxes on the wealthy a centrepiece of his re-election campaign, and polls show public opinion is on his side. Obama is reaching beyond Washington to ramp up pressure on Republicans and has already met with labour and liberal groups to build support.
Several of the chief executives who met with Obama on Wednesday support his stance that any budget deal must include tax hikes as well as spending cuts.
“There is a very good understanding that those of us who are more wealthy are going to have to pay more,” Honeywell International Inc. chief executive Dave Cote told CNBC after the meeting.
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