November 4, 2010 / 2:30 AM / 7 years ago

White House signals tax compromise with Republicans

WASHINGTON (Reuters) - The White House signaled on Thursday it could compromise with Republicans on tax cuts, the first possible policy shift by President Barack Obama since his Democrats lost this week’s midterm elections.

Reeling from an electoral defeat that gave Republicans control of the House of Representatives and strengthened their ranks in the Senate, Obama invited top leaders from both parties to a meeting and a dinner at the White House on November 18.

The two parties need to agree on extending the Bush-era tax cuts or they will all run out at the end of the year. Although Obama campaigned against keeping tax cuts for the wealthy, White House spokesman Robert Gibbs said the president was willing to discuss keeping lower taxes for all income levels.

“He’d be open to having that discussion and open to listening to what the debate is on both sides of that,” Gibbs told reporters.

That would come with a caveat, however: the cuts for higher earners would not continue forever.

“Making those tax cuts for the upper end permanent is something that the president does not believe is a good idea.”

Voters, upset at high unemployment, gave Republicans 60 extra House seats in the election, knocking Democratic House Speaker Nancy Pelosi from power. It was the biggest shift in power since Democrats gained 75 House seats in 1948.

The vote was a severe blow to Obama, who took office in early 2009 after promising a wave of change. Seemingly chastened, he told top advisers that improving relations with congressional leaders would be critical in the coming months.

During the weeks before Tuesday’s poll, Obama spoke against extending tax cuts for high-earners, saying the United States could not afford it while trying to tame the budget deficit.

The election thrashing may have changed that logic, with the White House appearing to bend in order to ensure tax cuts for middle class Americans -- a key constituency before his own 2012 re-election bid -- also continue.


Obama said taxes would be high on the agenda at the meeting later this month with eight Democratic and Republican congressional leaders.

“We have to act in order to assure that middle class families don’t see a big tax spike because of how the Bush tax cuts have been structured,” Obama told reporters during a meeting with top Cabinet officials at the White House.

“It is very important that we extend those middle class tax provisions,” he said.

Republicans signaled their determination to push the issue of an across-the-board tax cut extension.

“On the economy, we will work hard to ensure Democrats don’t raise taxes on anybody, especially in the middle of a recession,” Senate Republican leader Mitch McConnell said in the speech at the Heritage Foundation.

John Boehner, who is expected to be the next Speaker of the House of Representatives, predicted “a whale of a fight over taxes and spending” over the next few months.

Boehner told Fox News that he felt the message of the election was that voters wanted spending cuts and no tax increases.

The Speaker of the House has a powerful role in Washington and is second in line, after Vice President Joe Biden, to assume the U.S. presidency in the case of an emergency.

Obama met with Cabinet officials at the White House on Thursday to discuss the aftermath of the election.

“What’s going to be critical for the coming months is creating a better working relationship between this White House and the congressional leadership that’s coming in as well as the congressional leadership that carries over,” he said.

Eight leaders were invited to the November 8 event, including Boehner and Pelosi, a Democrat, who holds the position of Speaker of the House now.

McConnell and Senate Majority Leader Harry Reid, a Democrat, were also invited.

“This is going to be a meeting in which I want us to talk substantively about how we can move the American people’s agenda forward,” Obama said. “It’s not just going to be a photo-op. Hopefully, it may spill over into dinner.”

A spokesman for McConnell said his office was “working to find a date and time” for a discussion with Obama about reducing spending, increasing jobs, and boosting domestic energy resources.

Obama said the focus of the meeting would be what to get done during the “lame duck” congressional session.

A lame-duck period is the time between a congressional election in November and the start of the new Congress in January. During that time, Congress operates, but with many lawmakers who have just been voted out of office and with no newly elected members, except victorious incumbents.

Additional reporting by Matt Spetalnick and Kim Dixon; Editing by Jackie Frank and Cynthia Osterman

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