President addresses looming fiscal cliff
Obama said he is committed to solving the fiscal challenges. He spoke in the White House East Room to an audience a White House spokesman said included about 200 middle-class Americans.
“As I said on Tuesday night, the American people voted for action, not politics as usual. You elected us to focus on your jobs, not ours. And in that spirit, I’ve invited leaders of both parties to the White House next week, so we can start to build consensus around the challenges that we can only solve together,” Obama said.
He said he would also consult with business and labor leaders.
The president did not take questions from reporters.
“At a time when our economy is still recovering from the Great Recession, our top priority has to be jobs and growth,” Obama said.
House Speaker John Boehner, R-Ohio, said he would work with the president – within limits.
“Raising tax rates is unacceptable,” Boehner said Thursday in an interview on ABC. “Frankly, it couldn’t even pass the House, I’m not sure it could pass the Senate.”
Boehner said Republicans would consider raising revenue by closing loopholes but would not raise tax rates.
Obama said Friday that new revenue is necessary.
“But as I’ve said before, we can’t just cut our way to prosperity. If we’re serious about reducing the deficit, we have to combine spending cuts with revenue – and that means asking the wealthiest Americans to pay a little more in taxes,” Obama said.
Obama said that if Congress fails to agree on an overall deficit-reduction package by the end of the year, taxes will increase for everyone, including those who make less than $250,000 a year.
If the government fails to act soon, the fiscal cliff will come into play, fueling automatic tax increases and federal spending cuts, which could send the economy back into a recession, according to the Congressional Budget Office.
Congress and the president agreed earlier this year to the fiscal cliff if they could not agree on a budget.
The steep across-the-board spending cuts and tax increases could cut the deficit by $560 billion and would go into effect early next year. Temporary payroll tax cuts and certain tax breaks for businesses will end. The alternative minimum tax would also hit thousands of taxpayers for the first time.
However, continuing the current tax breaks would lead to a greater accumulation of government debt.
The Congressional Budget Office report released Thursday said if the immediate spending cuts and tax increases occur, revenues will fall short of federal spending, causing the economy to shrink by 0.5 percent next year and send the unemployment rate to 9 percent.
“Each problem matters. Avoiding a recession matters, and getting the deficit under control matters. But getting the deficit under control means having a balanced deficit reduction package that’s sustainable and that does not put an excessive burden on low-income households or spending in general,” Chad Stone, chief economist at the Center on Budget and Policy Priorities, said.
Stone said there needs to be a balance between revenues and taxes and suggested the following policy: to help the economy recover allow a larger deficit until the economy recovers, then put deficit reduction in place.
While Democrats continue to favor letting the Bush-era tax cuts lapse for those making $250,000 and up, Republicans insist on keep tax rates the same.
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