Obama Addresses Looming Fiscal Cliff

10 Nov 2012

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President Obama addressing the media while his vice, Joe Biden (L) looks on

Newly re-elected President Barack Obama has said the wealthy must pay more taxes under any political deal to avert a looming budget crisis.

He said Congress must act against the so-called fiscal cliff, a package of tax rises and spending cuts due early next year.

Obama said he was inviting party leaders to the White House next week to discuss the issue, reports the BBC.

Budget analysts warn the US will tip into recession unless a deal is struck.

Obama has repeatedly called for the affluent to pay more, but such a plan is anathema to Republicans.

The fiscal cliff would see the expiry of George W Bush-era tax cuts at the end of 2012, combined with automatic, across-the-board reductions to military and domestic spending.

In the East Room of the White House on Friday, Obama said: "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."

The president added he was "open to compromise" and new ideas, adding: "I'm committed to solving our fiscal challenges, but I refuse to accept any approach that isn't balanced."

Tax rises were a "central question" during the election campaign, Obama said, and "the majority of Americans agree with my approach".

The International Monetary Fund has repeatedly warned that failure by US lawmakers to reach a deal would deepen uncertainty over the global economy.

Investor concerns over the issue have been partly blamed for two straight days of losses on financial markets this week.

Earlier on Friday, John Boehner, leader of the Republican-controlled House of Representatives, held a news conference.

He suggested "special-interest loopholes in the tax code, both corporate and personal" could be eliminated.

Boehner, who has struck a conciliatory tone to the president since his re-election, also restated his support for "entitlement reform as well as tax reform with lower rates".

"Entitlement reform" is Washington-speak for cuts to federal spending - cherished among Obama's Democratic allies - on programmes such as healthcare for the poor and elderly and Social Security pensions.

Boehner also cited a Congressional Budget Office (CBO) report on Thursday which warned the US economy would fall back into recession if no deal were struck on the fiscal cliff.

The analysis projected that the package of tax rises and spending cuts would cut the ballooning US deficit by $503bn (£315bn) through to next September, but also shrink the economy by 0.5% and cost millions of jobs.

In an interview with ABC News on Thursday, Boehner said: "Raising tax rates is unacceptable. Frankly, it couldn't even pass the House. I'm not sure it could pass the Senate."

But an Obama official said the president's oft-stated call for tax rises on the wealthy has been vindicated by his resounding victory over Republican challenger Mitt Romney in Tuesday's election.

"[Voters] clearly chose the president's view of making sure that the wealthiest Americans are asked to do a little bit more in the context of reducing our deficit in a balanced way," said senior White House adviser David Plouffe.

Obama's position has been that taxes should rise on earnings above $250,000.

Meanwhile, as Mr Obama turns his attention to shaping a second term in office his administration is expected to undergo a shake-up in the coming weeks.

Secretary of State Hillary Clinton, Defence Secretary Leon Panetta and Treasury Secretary Timothy Geithner are among those expected to leave their posts.

Speculation has been swirling in Washington over possible replacements, with Democratic Senator John Kerry among those tipped as a substitute for Mrs Clinton.

Meanwhile, Republicans are carrying out a post-mortem on their presidential election campaign.

Former Secretary of State Condoleezza Rice told CBS News on Friday the party's loss "really necessitates" new thinking.

They had sent "mixed messages" on immigration and women's issues, she added.

While Obama carried the popular vote by only a narrow margin, "clearly we are losing important segments" of the electorate, she said.

Tags: Politics, World, Obama, FISCAL CLIFF

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