Obama promotes tax agenda, Congress in stand-off

WASHINGTON Tue Nov 27, 2012 6:31pm EST

Darkness sets in over the U.S. Capitol building hours before U.S. President Barack Obama is set to deliver his State of the Union address to a joint session of Congress on Capitol Hill in Washington January 24, 2012. REUTERS/Jonathan Ernst

Darkness sets in over the U.S. Capitol building hours before U.S. President Barack Obama is set to deliver his State of the Union address to a joint session of Congress on Capitol Hill in Washington January 24, 2012.

Credit: Reuters/Jonathan Ernst

WASHINGTON (Reuters) - President Barack Obama on Tuesday launched a public relations push for his bid to raise taxes on wealthy Americans, but U.S. lawmakers remained deadlocked over dramatic, year-end tax increases and spending cuts known as the "fiscal cliff."

At the White House, small business leaders emerged from a one-hour meeting with Obama to voice support for his goal of extending low tax rates for the middle class beyond the end of the year, while letting rates rise for wealthier taxpayers.

The business owners urged Obama "to fight to keep the middle class tax cuts," said Lew Prince, co-founder of Vintage Vinyl, an independent music store in St. Louis, Mo.

"What grows jobs in America is consumers spending money, and the average person needs that two or three thousand dollars a year in his pocket to help drive the economy," Prince told reporters at a news conference outside the White House.

Republicans want to extend low tax rates - enacted a decade ago under the administration of former Republican President George W. Bush - for all taxpayers, including households earning more than $250,000 a year.

Raising tax rates on the wealthy would discourage investment and hiring at a time of high unemployment, Republicans say.

Congressional Democrats allied with the president showed no signs of backing down from his stance on raising taxes for the wealthy. But both sides have softened on some long-held positions: Republicans have been showing a willingness to consider new revenue increases while Democrats have relaxed their hard line against new savings to the Medicare and Medicaid healthcare programs.

With just a month left before the Bush tax cuts expire and automatic spending cuts begin to take hold, markets were anxious about predictions that falling off the "fiscal cliff" could trigger another recession.

"There remains no clarity on the ultimate status on the Bush tax cuts, which have to be resolved before you can move forward with the remainder of the fiscal cliff," said Chris Krueger, an analyst at Guggenheim Securities' Washington Research Group.

MARKETS DOWN MODESTLY

Stock prices declined modestly despite government reports that planned U.S. business spending rose again in October and that single-family home prices rose again in September.

Despite a mild sell-off in stocks, the Dow Jones industrial average closed at about 12,878, up 14 percent from a year ago.

Brian Gardner, an analyst at financial firm Keefe Bruyette & Woods, said a limited deal would likely be struck to avert the fiscal cliff, with larger fiscal issues pushed into 2013.

"Fiscal cliff headlines could have the biggest impact on the market," he said. "Over the coming weeks, we expect many headlines that will raise and then dash investors' hopes ... The next three weeks could be a bumpy ride."

Fresh from his November 6 re-election, Obama was set to hold another meeting with business executives from larger companies on Wednesday and then to travel to a toy factory in Pennsylvania on Friday to press his case on taxes.

Senate Republican leader Mitch McConnell ripped into Obama for planning to take his agenda to the public. "Rather than sitting down with lawmakers of both parties and working out an agreement, he's back out on the campaign trail," McConnell roared on the Senate floor.

"We already know the president is a very good campaigner. What we don't know is whether he has the leadership qualities necessary to lead his party to a bipartisan agreement."

Obama last met with congressional leaders on November 16. A follow-up session was not expected this week, but could come next week, congressional aides said.

In the interim, little progress was made over the holidays in meetings between the staffs of the White House and Republican Speaker of the House of Representatives John Boehner, aides said.

LEADERS CANVAS RANKS

Ron Bonjean, a former aide to Republican leaders in the House and Senate, said leaders were still checking with their rank-and-file to gauge what concessions they might be able to stomach. In a week or so, Bonjean said, "the level of intensity will go up" with more meetings.

Senate Democratic leader Harry Reid said he was disappointed there has been "little progress" on a deal to avoid the "fiscal cliff" and warned that "we only have a couple weeks to get something done.

Despite frustration, Reid said he was optimistic lawmakers would avoid plunging off the "cliff," a convergence of an estimated $600 billion in tax increases and spending cuts. "I'm extremely hopeful, and I do not believe that the Republicans are going to allow us to go over the cliff," he said.

While Republicans have not shifted from their opposition to tax rate increases, a few have publicly disavowed a no-new-taxes pledge to which most of them have adhered for years, putting tax revenues, if not higher rates, on the negotiating table.

Also on Tuesday, Dick Durbin, a senior Senate Democrat and close Obama ally, urged fellow liberals to consider reforming the costly Medicare and Medicaid healthcare programs, signaling possible Democratic compromise in an area where they have steadfastly resisted change.

"Progressives should be willing to talk about ways to ensure the long-term viability of Medicare and Medicaid" for the elderly and poor, Durbin said in excerpts from a speech.

But he added that Medicare and Medicaid should not be part of the current negotiations on averting the fiscal cliff. On that front, Durbin stood firmly with Obama, urging extension of middle class tax cuts for 98 percent of Americans.

(Additional reporting by Thomas Ferraro, Kim Dixon, Patricia Zengerle, Lucia Mutikani and Mark Felsenthal, with Adam Kerlin in New York. Writing by Kevin Drawbaugh. Editing by Karey Wutkowski, Jackie Frank and Vicki Allen)

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Comments (17)
JohnnyRacer wrote:
McConnell – somebody should have put that blow-hard “gobbler” in a deep fryer for Thanksgiving….

Nov 27, 2012 1:58pm EST  --  Report as abuse
Duffminster wrote:
Here is the type of straight forward fair plan that neither side will even consider. Average Americans can agree on it but can politicians beholden to unlimited campaign spending and rigid lock step mentality and political theocracy of group conformity designed by their cynical Machiavellian propagandists like Norquist, Rove and their army of AM talk show, religious and mainstream think tank trained shills? Apparently not.

A Simple plan to secure Social Security and Medicare and reduce the Deficit without hurting the most vulnerable:First of all extend the limits on SS and Medicare contributions because right now the rich pay a vastly lower percentage of their income to these programs than the middle class and poor. I believe the cap on taxable income for Social Security is $106,000. So, someone making a $250,000 is paying less than half the percentage rate as someone making $50,000. Also, stop I would also lower the corporate tax rate substantially but cut out all the legalized corruption in the tax code that Enables many Hugely Profitable Companies to end up Paying No Corporate Income Tax. Our corporate tax code is worse than Swiss cheese but the printed top rate only hurts small businesses who don’t have the benefit of armies of accountants and lawyers to exploit the corrupted tax code.This should be followed up by the following simple changes:

1. Cap deductions, raise marginal rates on the high income earners.

2. Put capital gains tax on a progressive scale.

3. Cut out subsidies to established profitable industries like oil, gas and coal.

4. Drop subsidies for corn to ethanol conversion and other boondoggles.

5. Cut military spending.

6. Have zero income tax on start up corporations (meeting specific standards, business plan, etc.) and provide zero interest loans backed by the Fed for all well vetted start up companies and maintain financing them for a period of up to 3 years based on established revenue growth bench marks. Lets do something to create jobs in the tax code. And also, huge tax incentives to bring factory and service jobs and money home. This has to do with cutting the top corporate tax rate and cutting out loopholes that make exporting jobs so profitable.

We also need to require that these giant multinationals pay taxes on profits they are making over seas and not allow companies to move their head quarters to the Caymans and pretend they are not primarily US corporations.

Finally, our power grid is a joke and even more than highways and bridges, we need to rebuild our power grid and that could be a source for billions in new jobs and associated revenues while bringing our power grid into the 21st century.Finally, we need to allow collective bargaining for Medicare and Medicaid and the new Affordable Care law. If all these programs could negotiate for pricing on all health services and products, including the part D drug benefit, the people of United States could save hundreds of billions over time.Then again, with the unlimited money flooding in under the corruption installed by the corrupt Supreme Court in their decision on “Citizens United vs. the Federal Election Board”, which should have been called “Lobbies United Against Democracy in the United States” we can expect either party to get behind common sense legislation that puts fairness and the long term well being of the People of this nation first. Its up to us to lobby for common sense. The age of the Public Citizen has never been more clear. – Duffminster

Nov 27, 2012 2:08pm EST  --  Report as abuse
ThomasShaf wrote:
In my opinion nothing should be done. The country has just said enough of our own Congressmen holding the economy down. All Americans have been sujected to the election and media saturation. Let the Bush breaks expire and in January reinstate the middle class tax breaks separately. The Republicans see the “midterm elections” as a horror event with respect to loss of party Representatives. They will capitulate to save their seats, or try to save them – I predict a rout. The Republicans have lost the moral high ground. Americans know it. The country will survive just fine. Don’t put too much effort into getting the Republicans to compromise – they have to Mr. President.
Thomas E. Shafovaloff

Nov 27, 2012 2:27pm EST  --  Report as abuse
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