President Barack Obama expressed confidence that he and Congress would reach an agreement that will avoid the automatic spending cuts and tax increases that are scheduled to occur at the end of the year.
“I am confident we can get our fiscal situation dealt with,” Obama said at a news conference in Bangkok, where he began a three-nation trip that will include the first visit by a sitting U.S. president to Myanmar.
Before Obama left for Asia, he began on a new round of deficit-reduction talks with top Republicans and Democrats in a bid to avoid the combination of $607 billion in automatic tax increases and spending cuts that threatens to throw the country into a recession next year.
He arrived in Asia today on his first foreign trip since re-election, underscoring the region’s importance to U.S. growth. The Nov. 17-20 trip is built around a summit in Phnom Penh, Cambodia, where Obama will meet with leaders from China, Japan, Russia, India and other Asia-Pacific countries.
Speaking in a region where some nations are still moving toward allowing greater political and economic freedom, Obama said the squabbling in Washington is an outgrowth of one of the key strengths of the democratic system because it ensures that all sides are heard.
“Democracy is a little messier than alternative systems of government but that’s because democracy allows everybody to have a voice,” he said at a joint news conference with Thailand’s Prime Minister Yingluck Shinawatra. “And that system of government lasts. And it’s legitimate. And when agreements are finally struck, you know that nobody is being left out of the conversation and that’s the reason for our stability.”
Taxes and Spending
While Obama has repeatedly called for an immediate extension of middle-class tax cuts, he has been less vocal on how Congress should try to avert the spending cuts that are also part of the so-called fiscal cliff.
His Treasury secretary, Timothy F. Geithner, said Nov. 16 that a deal must be reached soon to prevent further damaging consumer confidence. The lack of agreement is “this huge cloud of uncertainty hanging over the economy,” he said in Washington on Bloomberg Television’s “Political Capital With Al Hunt” airing this weekend.
As the peak of holiday shopping season approaches, “You’d want to do it as soon as you can,” Geithner said.
Republicans are also signaling a willingness to compromise, with House Speaker John Boehner repeating his offer to discuss tax changes that would increase government revenue in exchange for spending cuts.
The administration also must negotiate to increase the federal debt ceiling. The Treasury said Oct. 31 it expects to reach the limit near the end of this year and can take “extraordinary measures” to meet its payment obligations “until early in 2013.”
Geithner said in the interview the debt ceiling should be eliminated, and “the sooner the better.” Without an increase in the ceiling, the government may not be able to pay all of its bills and risks defaulting on its debt. Congress and the Obama administration debated the limit for months last year before reaching an 11th-hour agreement in August 2011.
Under some readings of the tax code, Geithner could have the authority to blunt the economic impact of higher marginal rates by leaving this year’s paycheck withholding rules in place. Such a move carries risk because taxpayers could face higher tax bills and penalties in early 2014 if Congress can’t ultimately agree to extend the lower rates.
“Don’t over-interpret what that authority gives me,” Geithner said. He said he doesn’t have the power to let Congress “avoid making some decisions on rates and policy.”
Geithner said he agreed with Michael Duke, chief executive officer of Wal-Mart Stores Inc., that consumers need a quick agreement on the fiscal cliff.
“The uncertainty right now about whether this will be resolved on sensible terms, whether our middle-class families will see their taxes go up, already is having an effect on consumer confidence and the economy,” he said.
Geithner, 51, who is planning to leave the administration, said he will stay in his post until mid-January. He brushed aside suggestions that he might stay longer if a successor isn’t confirmed by then.
He said he’s “very confident that we’re going to get enough done in these next few weeks” and that Obama will “have a successor in place so I’ll be able to go off and do some other things.”
Need for Prayer
Earlier in the day, during a tour of Wat Pho Royal Monastery in Bangkok, Obama joked with a monk that he needed his prayers for the U.S. to resolve the deficit-reduction talks he is undertaking with Congress.
“Yes, we’re working on this budget,” a laughing Obama told the monk who was guiding him and Secretary of State Hillary Clinton on the monastery tour. “We’re going to need a lot of prayer for that.”
Later, at the press conference, Obama said, “I always believe in prayer.”
“If a Buddhist monk is wishing me well, I am going to take whatever good vibes he can give me to deal with some challenges back home,” he said.