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UPDATE 3-Top US House Republican hints at tax compromise
* Boehner says would back middle-class cuts alone if must
* Promises to fight to extend tax cuts for the wealthy
* W.House gives qualified welcome to "change in position" (Adds Geithner newspaper interview)
By John Whitesides
WASHINGTON, Sept 12 (Reuters) - The top Republican in the U.S. House of Representatives offered a hint of compromise on the divisive issue of taxes on Sunday, saying he would support extending tax cuts for the middle class even if cuts for the wealthy are allowed to expire.
Representative John Boehner said President Barack Obama's proposal to renew lower tax rates for families making less than $250,000 but let the lower rates for wealthier Americans expire was "bad policy" -- but he will support it if he must.
"If the only option I have is to vote for some of those tax reductions, I'll vote for it," Boehner said on CBS's "Face the Nation" program.
"If the only option I have is to vote for those at 250 and below, of course I'm going to do that," he said. "But I'm going to do everything I can to fight to make sure that we extend the current tax rates for all Americans."
Boehner's comments suggested some room for compromise ahead of a showdown on tax rates that could become a flashpoint in the Nov. 2 mid-term elections in which Republicans are seeking to wrest control of Congress from Obama's Democrats.
The White House responded cautiously. "We welcome John Boehner's change in position and support for the middle class tax cuts, but time will tell if his actions will be anything but continued support for the failed policies that got us into this mess," Obama spokesman Robert Gibbs said in a statement.
The biggest challenge to the sluggish economy recovery right now is Washington paralysis, U.S Treasury Secretary Timothy Geithner said in a Wall Street Journal interview.
"If the government does nothing going forward, then the impact of policy in Washington will shift from supporting economic growth to hurting economic growth," Geithner said, urging Congress to act quickly on White House proposals to support businesses and individuals.
Republicans want to extend all of the cuts passed under former President George W. Bush, which expire at the end of the year. They say raising taxes on the rich would hurt a flagging economy.
"I've been making the point now for months that we need to extend all the current rates for all Americans if we want to get our economy going again, and we want to get jobs in America," Boehner said.
"I think raising taxes in a very weak economy is a really, really bad idea, and most economists would agree with that," he said.
FOCUS FIRST ON MIDDLE CLASS
The Obama administration has pressured Republicans to quickly agree to a permanent extension of the middle-class cuts but cite a Congressional Budget Office estimate that extending cuts for the wealthy would increase the budget deficit by $700 billion over a decade.
"You cannot afford to raise taxes on the middle class. We should make that permanent," top White House economic adviser Austan Goolsbee said on "Fox News Sunday."
"What we cannot afford to do is pass 700 billion additional dollars of tax cuts for the millionaires and billionaires at a time when we are just going to borrow that money," he said.
Opinion polls show a majority of Americans support letting the tax cuts for the wealthy expire, but the issue has made some Democrats nervous ahead of elections that could see them lose their majorities in the House and Senate.
Some Democrats in both chambers have backed away from Obama's stance on the tax cuts for the wealthy. In the Senate, at least three Democrats and independent Joe Lieberman have said they would prefer an extension of all the rates, citing the economic malaise.
"I think there's a growing chorus on Capitol Hill to extend all of these tax rates, and I would hope that we would do it," Boehner said.
Former Obama administration budget director Peter Orszag suggested last week a two-year extension for all levels of income, and then ending the tax cuts altogether.
Republican former House Speaker Newt Gingrich told Fox News that Republicans would probably agree to a compromise on the middle-class cuts and address the cuts for the wealthy in January, if they take control of Congress.
"I think the Republicans will probably surprise the president by offering to pass whatever tax cut he'll sign, as long as it isn't offset by tax increases," Gingrich said.
Senior White House adviser David Axelrod pressed Republicans to move forward on the permanent extension on the middle class cuts, even without cuts for the wealthy.
"We agree on the middle class tax cuts. Let's not hold them hostage while we debate whether we're going to give this very small number of people at the top a tax cut that we can't afford," Axelrod told NBC's "Meet the Press" program. (Additional reporting by Matt Spetalnick and JoAnne Allen; Editing by Anthony Boadle)
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