WASHINGTON (Reuters) - President Barack Obama said on Tuesday he still disagreed with Republicans on whether to extend Bush-era tax cuts for the wealthiest Americans, but the two sides agreed to negotiate a deal in the coming days.
Obama said he appointed Treasury Secretary Tim Geithner and budget director Jack Lew to work with congressional Republicans and Democrats to come up with a compromise to prevent broad tax increases from occurring next year.
“We should work to make sure that taxes will not go up by thousands of dollars on hard-working middle-class Americans come January 1, which would be disastrous for those families but also could be crippling for the economy,” Obama told reporters after a meeting with congressional leaders at the White House.
“There was broad agreement that we need to work to get that resolved before the end of the year.”
If no agreement is reached, all tax-paying Americans could see higher bills next year, giving Republicans a chance to score politically by making tax cuts their priority when taking control of the House of Representatives in January.
Finding common ground before that time will be tricky.
Obama said he and many Democrats continued to believe that it would be “unwise and unfair” to spend $700 billion to extend tax cuts for the wealthiest Americans while also trying to bring down the U.S. deficit.
Republican leaders, emboldened by gains in the November 2 elections, argued that it would be better for the economy if tax cuts for all Americans were extended.
“Republicans made the point that stopping all the looming tax hikes and cutting spending would, in fact, create jobs and get the economy moving again,” said Representative John Boehner, who will become Speaker of the House next year.
“We’re looking forward to the conversation with the White House over extending all of the current rates, and I remain optimistic,” he said.
Obama met with Boehner and Mitch McConnell, the Republican leader in the Senate, as well as Democrats Nancy Pelosi, the current House speaker, and Harry Reid, the Senate majority leader.
The meeting at the White House lasted roughly two hours. Obama said he hoped the meeting would lead to a better relationship with congressional leaders, and White House spokesman Robert Gibbs said the president expressed regret for not having reached out more to Republicans in the past.
Republicans won a majority in the House in the November 2 elections, but the Democrats retained control of the Senate.
Obama said congressional leaders agreed to appoint members to help in the negotiation process with results expected in “the next couple of days,” and Gibbs said those discussions could begin later on Tuesday.
“We agreed that there must be some sensible common ground, so I appointed my Treasury secretary, Tim Geithner, and my budget director, Jack Lew, to work with representatives of both parties to break through this logjam,” Obama said.
The president may have to agree to extend cuts for Americans of all income levels for one to three years — an onerous option to many Democrats, but one that may be the most likely outcome if the two sides agree on anything at all.
“There is some thought that the last thing that Nancy Pelosi wants to do on her way out of the Speaker’s office is to have Congress approve an extension for tax cuts for the wealthy,” said Brian Gardner, an analyst for investors at Keefe, Bruyette and Woods.
“She could muck things up a little bit.”
New York Democratic Senator Charles Schumer has floated a possible compromise to keep the tax cuts for those making less than $1 million a year.
Reid has made clear he would like to hold a Senate vote on extending the rates only for those up to the $250,000 level to underscore the Democratic position, although such a vote is sure to fail.
Nobel laureate Peter Diamond, a nominee to the Federal Reserve Board of Governors, told Reuters Insider television that extending the tax cuts should be limited to those below the highest income bracket and should be temporary.
Additional reporting by Kim Dixon, Thomas Ferraro, Caren Bohan, Alister Bull, Patricia Zengerle, Matt Spetalnick; Editing by David Storey and Paul Simao