Obama: Voters’ wishes are clear

Entitlements, Bush-era tax rates drive up deficits, president says

“A modest tax increase on the wealthy is not going to break their backs,” President Barack Obama said Wednesday at his White House news conference.
“A modest tax increase on the wealthy is not going to break their backs,” President Barack Obama said Wednesday at his White House news conference.

— President Barack Obama on Wednesday said voters sent a “very clear message” on Election Day that they want both parties to work together to cut the budget deficit with a mix of tax increases for top earners and cuts in spending.

Obama opened a White House news conference reiterating his call for immediate action by Congress to extend the George W. Bush-era tax cuts for the first $200,000 of annual income for individuals and $250,000 for married couples.

He noted a measure accomplishing that has passed the Senate and that Democrats in the House are ready to embrace it.

“We should not hold the middle class hostage while we debate tax cuts for the wealthy, and we should at least do what we agree on, and that’s keep middle-class taxes low,” he said.

Rates on earnings above those levels should be allowed to rise when they expire at the end of the year, he said.

If Congress doesn’t act by the end of 2012, $607 billion in automatic spending cuts and tax increases, the so-called “fiscal cliff,” are scheduled to take effect starting in January. Taxes on ordinary income, capital gains, dividends and estates will increase, pushing the top tax rate to 39.6 percent from 35 percent.

“Our economy can’t afford that right now,” Obama said.

He said enactment of legislation along the lines of the Senate measure would eliminate half of the fiscal cliff, and he suggested that he and lawmakers could then “shape a process whereby we look at tax reform” and “take a serious look at how we reform our entitlements, because health-care costs continue to be the biggest driver of our deficits.”

Obama signed legislation two years ago extending the Bush-era tax cuts in their entirety after saying he wouldn’t.

Asked why this time will be different, he said, “What I said at the time was what I meant, which is that this was a one-time proposition.”

Now, he said, legislation that keeps most of the cuts in place but not those for the upper-income earners would be “actually removing half the fiscal cliff.”

At a news conference of his own a short while later, House Speaker John Boehner, R-Ohio, agreed that a bipartisan “spirit of cooperation” has been evident since the election that augurs well for talks expected to begin Friday at the White House.

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.”

After his news conference, Obama met with a dozen corporate executives, including Honeywell Chief Executive Officer David Cote, American Express CEO Kenneth Chenault, Ford Motor Co. CEO Alan Mulally, General Electric Co. CEO Jeffrey Immelt and Mike Duke, president and CEO of Wal-Mart Stores Inc.

Cote said most of the executives “came away encouraged” that the president understands that a deal must be struck or the recovery will be at risk. A revamp of the tax code and entitlement programs should be part of a wider deal, he said.

Corporate leaders accept that some higher taxes will be part of any plan to bring down the debt, he said.

“All of us understand that there’s going to have to be more collected in taxes,” Cote said in a Bloomberg Television interview after the 80-minute meeting with Obama.

Once work is done on the deficit, Cote said he hopes there is “political will left” to support spending on infrastructure and on math and science education.

“We encourage the White House and Congress to work together on an approach that includes additional revenue, comprehensive tax reform, and spending cuts, including entitlement reforms, to get our fiscal house in order while creating economic growth,” said Duke in a statement.

The session was part of an administration campaign to build support for the president’s position in advance of a White House meeting Friday with congressional leaders. He met Tuesday with labor representatives and plans events outside of Washington to rally public support after the Thanksgiving break.

While Obama has signaled a willingness to compromise, neither he nor top congressional Republicans have publicly offered any concessions. Boehner, in a letter Wednesday to fellow House Republicans, said they were “the last line of defense in Washington” against a “government that spends too much, taxes too much, and borrows too much.”

Averting the fiscal cliff should happen “in a manner that steers clear of increased tax rates and encourages economic growth instead,” Boehner said.

The president said Wednesday that it would be “very difficult” to cut the deficit by curbing breaks in the tax code without raising rates. Some Republicans have called instead for closing provisions and lowering rates.

“There are loopholes that can be closed and we should look at how we can make the process of deductions, the filing process easier, simpler,” Obama said. “But when it comes to the top 2 percent, what I’m not going to do is to extend further a tax cut for folks who don’t need it, which would cost close to a trillion.”

“A modest tax increase on the wealthy is not going to break their backs,” Obama said of the nation’s top income earners. “They’ll still be wealthy,” he said at his first news conference since winning a second term.

Obama’s position, from his fiscal 2013 budget, calls for $1.6 trillion over 10 years in additional revenue from high-income taxpayers. That’s twice the amount that Boehner discussed in talks last year.

Obama said it isn’t realistic to expect that Republicans will adopt his budget proposal. “I recognize that we’re going to have to compromise,” he said.

Failure to reach an agreement to avoid the fiscal cliff risks pushing the U.S. back into a recession.

The blueprint for a deal to avoid the fiscal cliff early next year may be found in the failed debt negotiations between Obama and Boehner in mid-2011.

The contours of that plan included revenue increases, spending cuts and changes to lower the long-term costs of entitlement programs. Before the talks collapsed, Boehner was willing to accept $800 billion in revenue increases and Obama was ready to settle for $1.2 trillion.

Part of their negotiations on a $4 trillion deficit-cutting plan included a gradual increase in the Medicare eligibility age to 67 and an alternative yardstick for calculating inflation that would reduce annual Social Security cost-of-living adjustments and raise taxes by slowing the annual adjustments in tax bracket thresholds.

In recent days, Boehner has emphasized opposition to higher tax rates rather than talking about higher taxes or higher revenue. He has endorsed the idea of increasing government revenue through an overhaul of the tax code without saying explicitly whether he would support a tax increase or the elimination of tax breaks without a corresponding rate cut.

Information for this article was contributed by Hans Nichols, Margaret Talev, Richard Rubin, Julianna Goldman and Heidi Przybyla of Bloomberg News and by David Espo of The Associated Press.

Front Section, Pages 1 on 11/15/2012

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