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Obama stands firm on tax demand in face of looming 'fiscal cliff'

By Andrew Taylor

Associated Press

LAST UPDATED: 10:26 a.m. HST, Dec 04, 2012

WASHINGTON » President Barack Obama said today avoiding an economic plunge over the "fiscal cliff" comes down to Republicans' realizing that tax rates must go up on wealthiest Americans. "We're not going to be able to get a deal without it," he said.

The president said he would consider lowering rates for the top 2 percent of earners next year as part of a broader tax overhaul effort that closes loopholes, limits deductions and finds other sources of revenue.

"It's possible that we may be able to lower rates by broadening the base at that point," Obama said in an interview with Bloomberg Television today.

The remarks, which reiterated a position that White House officials have expressed privately, is designed to give Republicans an opportunity to lower rates for the rich, but only after they rise at year's end when Bush-era tax cuts expire.

Later, however, White House spokesman Jay Carney left open the possibility that the rate would not have to rise to 39.6 percent, the rate in place during the administration of President Bill Clinton.

Obama's remarks came a day after Republicans proposed a "fiscal cliff" plan that revives ideas from failed budget talks with Obama last year, calling for raising the eligibility age for Medicare, lowering cost-of-living hikes for Social Security benefits and bringing in $800 billion in higher tax revenue.

The counter to a White House plan last week relies more on politically sensitive spending cuts and would raise half the $1.6 trillion in revenue proposed by Obama over the coming decade.

The 10-year, $2.2 trillion proposal from House Speaker John Boehner, R-Ohio, resembles a framework similar to what Boehner supported last year, but Obama is pressing for additional tax increases and appears to be balking at spending cuts discussed in those talks and since.

Administration officials from Obama on down say it'll take money from raising tax rates on the rich — instead of GOP proposals to simply curb their deductions — to win Obama's approval of any plan to avoid the "fiscal cliff."

Boehner's plan, which was signed by other House Republican leaders including recent vice presidential candidate Paul Ryan, drew a sharp dismissal from Republican Sen. Jim DeMint of South Carolina, a leader of tea party conservatives in Congress.

"Speaker Boehner's $800 billion tax hike will destroy American jobs and allow politicians in Washington to spend even more, while not reducing our $16 trillion debt by a single penny," DeMint said.

It has been nearly a week since Obama and Boehner talked directly about the looming cliff, though their staffs have been in contact. Boehner attended a congressional holiday party at the White House Monday night, but avoided the photo line where members get their picture taken with the president and have a few minutes to talk.

Obama met with a bipartisan group of governors, who sought assurances that any cuts in spending as part of an agreement on the fiscal cliff wouldn't shift the burden onto states. The governors said they wanted flexibility from the federal government on certain mandated programs like Medicaid to allow them to do more with less.

"We asked for flexibility on how the federal money is passed down to the states and the cuts that are passed down, that we could have some flexibility to do what's in the best interest of our states," said Oklahoma Gov. Mary Fallin, a Republican.

The governors said they were not endorsing any particular proposal but said they wanted to share their ideas on ways that states could play a role in helping reduce the deficit. The governors were meeting later in the day with congressional leaders and said they planned to work with Vice President Joe Biden in the coming weeks.

The Republican proposal Monday sparked a predictable round of partisanship.

"To protect the middle class while reducing the deficit, simple math dictates that tax rates must rise on the top 2 percent of taxpayers next year," Senate Majority Leader Harry Reid, D-Nev., said in a statement. "The sooner Republicans grasp that reality, the sooner we can avoid the fiscal cliff."

The fiscal cliff is a combination of expiring Bush-era tax cuts and automatic, across-the-board spending cuts due to take effect in January. The cliff is a result of prior failures of Congress and Obama to make a budget deal.

The GOP proposal itself revives a host of ideas from failed talks with Obama in the summer of 2011. Then, Obama was willing to discuss politically risky ideas such as raising the eligibility age for Medicare, implementing a new inflation adjustment for Social Security cost-of-living adjustments and requiring wealthier Medicare recipients to pay more for their benefits.

By GOP math, the plan would produce more than $2 trillion in budget savings over the coming decade: $800 billion in higher taxes; $600 billion in savings from costly health care programs like Medicare; $300 billion from other proposals such as forcing federal workers to contribute more toward their pensions; and $300 billion in additional savings from the Pentagon budget and domestic programs funded by Congress each year.

Last week, the White House delivered to Capitol Hill its opening proposal: $1.6 trillion in higher taxes over a decade, a possible extension of the temporary Social Security payroll tax cut and heightened presidential power to raise the national debt limit without the approval of Congress.

In exchange, the president would back $600 billion in spending cuts, including $350 billion from Medicare and other health programs. But he also wants $200 billion in new spending for jobless benefits, public works projects and aid for struggling homeowners. His proposal for raising the ceiling on government borrowing would make it virtually impossible for Congress to block him going forward.

Other participants in today's meeting between Obama and the governors included Republicans Gary Herbert of Utah and Scott Walker of Wisconsin and Democrats Mike Beebe of Arkansas and Mark Dayton of Minnesota.

Associated Press writers Julie Pace and Ken Thomas contributed to this report.

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CriticalReader wrote:
Ha ha! Obama, his staff and cabinet are just soooooo much smarter than the GOP.
on December 4,2012 | 09:53AM
ichiban wrote:
Yep..Leading us all further down the road towards socialism. Next stop Communism. Some examples--bailout plan for "big banks" like TARP program that the banks totally misappropriated the funds. Also GM, Wash. Mutual. etc. Oh and our government still have stocks galore from these companies as collateral. Imagine that, a government having direct interest in private enterprise. This reminds me of countries in South America where the ruling government nationalized foreign private industries working on their soil. Now he wants Obamacare to pass, increase the tax on the rich and raise the tax on capital gains and dividends. No wonder our economy is in this stale condition. Its socialism. Entitlement is alive an well. Strive for mediocrity. Let the government control your well-being. Like sheep led to slaughter. WAKE UP!!!!!!
on December 4,2012 | 11:10AM
Anonymous wrote:
TARP was under President Bush's watch. Are you implying he was a socialist or a socialist on his way to becoming a communist? Just want to keep the talking points straight...
on December 4,2012 | 12:58PM
CriticalReader wrote:
1. TARP was the creation of the BUSH Administration in 2008. 2. It's generally agreed that without TARP, a reasonable view was that the World Financial system (not only the US Financial System) would have collapsed - the issue was confidence. 3, At the time of TARP's inception, the Bush US Treasury estimated TARP losses would be close to $350 Billion. That's the figure the Bush Administration argued the US government should be willing to lose in order to save the World Financial System. Under Obama's leadership, current estimates are about $70 Billion in losses or below. 4. Assuming TARP was the only real option available (and I think that is correct considering the circumstances and timing), what would you have had the Federal Government do when distributing so much cash? Not take security (in the form of stock from the distributees)? 5. As things stand now, Obama has done a pretty darn good job (assuming anyone can give him personally credit) stemming TARP's initially projected losses. 6. Obamacare is a program by which this nation can measure its humanity. It provides health insurance to those who need it whereas the opposition to Obamacare is that there would definitely be Americans who would go without health insurance. 7. Blaming anything having to do with TARP on Obama is folly. It became necessary because of the pandering Bush did to "business" and Wall Street in particular - pandering that almost destroyed the World Financial System. It is something Obama was handed when he became President. 8. Objecting to Obamacare has undertones of either sado-masochism or complete selfishness. 9. In either case, the neocon position on both issues is both dishonest and evidence of the worst humanity has to offer. far below $oaooim. Onoone with responsibility
on December 4,2012 | 01:08PM
lee1957 wrote:
Both sides are too entrenched in their rhetoric to find an adult solution.
on December 4,2012 | 10:17AM
hawaiikone wrote:
Unfortunately, very true.
on December 4,2012 | 12:34PM
entrkn wrote:
Sounds like Karl Rove, Grover Norquist, the Koch bros, and the rest of their fascist gang are really putting the squeeze on their bought and paid for gop politician puppets...
on December 4,2012 | 11:41AM
false wrote:
How do you borrow and spend your way to a responsible fiscal equilibrium.? Oh thats right you don't want fiscal sanity.
on December 4,2012 | 12:09PM
hawaiikone wrote:
You seem to be a perfect example of lee1957's comment above
on December 4,2012 | 01:17PM
Bdpapa wrote:
President Obama, step up and be a leader.
on December 4,2012 | 12:51PM
AhiPoke wrote:
As an independent I could clearly see that Obama outwitted the republicans during the last election. However, the election is over and now is the time to do what's best for everyone. Remember his speech, "It's not about red or blue states but the united states". Stop playing politics and do the right thing. It doesn't take a genius to understand that this is mostly a spending problem that can't be completely solved with more taxes. IMHO, I think the republicans should give Obama everything he wants. Maybe then he'll take personal responsibility instead of blaming everyone else. BTW, Warren Buffet doesn't pay a lower tax rate than his secretary because the rates are too low, it's because of too many tax deductions and credits. Loopholes for special interests are the problem.
on December 4,2012 | 01:12PM
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