President Barack Obama said voters sent a “very clear message” on Election Day that they want both parties work together to cut the budget deficit with a mix of tax increases for the wealthy and cuts in spending.
Obama opened a White House news conference today reiterating his call for immediate action by Congress to extend the Bush-era tax cuts for the first $200,000 of annual income for individuals and $250,000 for married couples. Rates on earnings above those levels should be allowed to rise when they expire at the end of the year, he said.
“We should at least do what we agree on,” Obama said. “I won’t pretend that figuring out everything else will be easy.”
If Congress doesn’t act by the end of 2012, $607 billion in automatic spending cuts and tax increases 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.
Following his news conference, Obama met with a dozen corporate executives, including Honeywell International Inc. Chief Executive Officer David Cote, American Express Co. CEO Kenneth Chenault, Ford Motor Co. CEO Alan Mulally and General Electric Co. CEO Jeffrey Immelt.
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 one-hour and 20-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.
The session was part of an administration campaign to build support for the president’s position in advance of a White House meeting on Nov. 16 with congressional leaders. He met yesterday with labor representatives and plans events outside of Washington to rally public support after the Thanksgiving holiday.
While Obama has signaled willingness to compromise, neither he nor top congressional Republicans have publicly offered any concessions. House Speaker John Boehner, in letter today 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 today 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 tax loopholes 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 two 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.”
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, an Ohio Republican, discussed in talks last year.
Obama said it isn’t realistic to expect 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 so-called fiscal cliff risks pushing the U.S. back into a recession.
The Standard & Poor’s 500 Index has fallen about 5 percent since Election Day set up a budget showdown between Obama and the Republican-controlled House of Representatives. The benchmark gauge is trading below its average price from the past 200 days, and has pared its 2012 gain to about 8 percent. It tumbled 1.4 percent to 1,356.29 at 4 p.m. in New York, reversing an early gain of 0.4 percent and closing at the lowest level since July.
Treasuries 10-year note yields traded close to two-month low, dropping to 1.59 percent at 4:59 p.m. in New York, according to Bloomberg Bond Trader prices.
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.
Obama also took questions on topics including the scandal that forced CIA Director David Petraeus to resign last week, the deadly attack on the U.S. consulate in Benghazi, Libya, and the chances for legislation to revamp the nation’s immigration laws.
He said there was no indication so far that classified information was disclosed as a result of the extramarital affair that led Petraeus to resign.
Petraeus’s resignation, and a related investigation of Marine General John Allen, the president’s now on-hold nominee to be NATO’s top commander, complicates Obama’s task as he prepares to overhaul his Cabinet for his second term.
Congressional panels have scheduled hearings into the Benghazi attack and Petraeus had been called to testify. Obama said a full investigation is under way and the results will be presented to the public.
The president also said he expects that “very soon after” his inauguration that there will be legislation introduced that will include a pathway to legal status for some of those now in the U.S. illegally.