- Obama is urging Congress to approve legislation that ensures taxes don’t go up on 98 per cent of all Americans
- Republicans and Democrats have sworn to work together to hash out a deal to avoid the U.S. going over ‘fiscal cliff’
- Congressional leaders of both parties on Friday gave a joint speech for the first time in over a year in an effort to project a message of bipartisan unity
- Republicans have suggested generating more revenue by limiting tax breaks for the wealthiest, rather than raising their rates
PUBLISHED: 11:55 EST, 17 November 2012 | UPDATED: 12:26 EST, 17 November 2012
Only the top 2% should be taxed more to help avert a potential fiscal cliff, says President Barack Obama.
Obama is urging Congress anew to approve legislation that ensures taxes don’t go up on 98 percent of all Americans, families earning less than $250,000 a year.
Obama again used his weekly radio and Internet address Saturday to urge action to avert the so-called fiscal cliff, which would raise taxes on all Americans and cut spending across the board starting January 1.
Obama says he had a constructive meeting with congressional leaders Friday as officials look for ways to reduce the federal deficit and strengthen the economy.
Republicans have suggested generating more revenue by limiting tax breaks for the wealthiest, rather than raising their rates. Obama has said that would not raise enough money.
New Hampshire Sen. Kelly Ayotte says in the Republican response that failure to act on the fiscal cliff is not an option. She says any effort to address the crisis without reforming entitlements such as Social Security ‘can’t be taken seriously.’
Republicans and Democrats have sworn to work together to hash out a deal to avoid the U.S. going over the ‘fiscal cliff’ which would tip the country back into recession.
Following a meeting with Barack Obama on Friday, congressional leaders of both parties gave a joint speech for the first time in over a year in an effort to project a message of bipartisan unity.
Each side at least signaled a willingness to put ‘on the table’ issues dear to the two parties, agreeing on a framework to discuss both tax and entitlement reform next year.
The two Democrats, Senate Majority Leader Harry Reid and Nancy Pelosi, the minority leader in the House of Representatives, said they recognised the need to curb spending.
John Boehner, the Republican Speaker of the House, and Mitch McConnell, who leads the party in the Senate, said they had agreed to put ‘revenue on the table’ as the two sides enter what are likely to be weeks of tense negotiations before a December 31st deadline.
Starting on January 2nd, about $600billion worth of tax increases and spending reductions, including $109billion in cuts to domestic and defence programmes, will begin to kick in if Congress cannot decide how to replace them with less extreme deficit-reduction measures.
Nonpartisan budget forecasters say failure to reach a deal could push the U.S. economy back into recession and drive up the unemployment rate.
Both sides are eager to reassure the public that Washington will not see a repeat of the white-knuckle budget standoffs that spooked consumers and investors last year.
‘We have the cornerstones of being able to work something out,’ Reid said, standing outside the White House after a meeting with Obama, Vice President Joe Biden and other top officials that lasted more than an hour.
The S&P 500 stock index has dropped 4.7 per cent since the November 6th election as investors have turned their attention to the uncertainty surrounding the fiscal cliff.
But stocks closed up on Friday on hopes that politicians would find common ground to steer clear of the danger.
The meeting marked the first time Obama has sat down with his Republican opposition since he won re-election last week.
‘I think we’re all aware that we have some urgent business to do,’ the President told reporters at the beginning of the meeting.
Obama says tax rates on the wealthiest 2 per cent of Americans must rise, while Republicans say they will not agree to any rate increase.
Republicans are also eager to rein in government health costs, which are projected to explode over the coming decade.
‘We’re prepared to put revenue on the table provided we fix the real problem,’ McConnell said, referring to Medicare and other government benefit programs.
There could be room for compromise.
Obama could agree to allow the top tax rate to rise to something less than the 39.6 per cent he wants. Policymakers, for example, could also agree to limit the tax increase to households making more than $500,000 annually, rather than the $250,000 cap Obama is demanding.
While the government may have a little flexibility in softening the full impact of the budget cuts, Treasury Secretary Timothy Geithner told Bloomberg TV on Friday the Treasury Department did not have the authority to delay the tax increases that would take effect at the start of next year if the White House and Congress fail to reach a deal.
Business leaders say the uncertainty is already weighing on the economy as employers postpone hiring and capital expenditures until they get a better sense of the tax and spending environment.
Pelosi suggested two sides might forge a temporary deal that would get them past the fiscal cliff and give them more time to work out a more lasting solution. Lawmakers will almost certainly not have time to retool Medicare and overhaul the outdated tax code before the end of the year, but a preliminary agreement could provide a framework for doing so later.
Following the hour-long White House meeting, Boehner said he had ‘outlined a framework that deals with reforming our tax code and reforming our spending.’
A Boehner aide, who asked not to be identified, said later the spending cuts would cover ‘entitlements’ – the large federal benefit programs that include Medicare healthcare for the elderly and Medicaid for the poor.
‘The speaker spoke about a framework going into next year,’ Pelosi said. ‘I was focusing on how we send a message of competence to consumers, to the markets, in the short run, too.’
Boehner faces a delicate balancing act as he will have to sell any deal to rank-and-file conservatives, many of whom believe they owe it to their constituents to hold the line on taxes.
But after Obama won re-election and fellow Democrats picked up seats in the House and Senate last week, Republicans may be more willing to show that they can balance their ideals with the demands of the country as a whole.
‘Going over the fiscal cliff, in my view, is a bucket of crazy,’ Republican Representative Peter Roskam, one of Boehner’s deputies, said at a budget conference.