President Barack Obama said that Republicans and Democrats need to work in tandem to ensure that the United States will not careen off the so-called “fiscal cliff” by the first of next year.
Obama said that he was ready to make a deal with Republicans—ready to make a short-term compromise.
However, he said that any short-term, bipartisan deal needs to be packaged with tax increases for the wealthy and an extension of tax cuts for the vast majority of Americans.
“This is just a matter of whether or not we come together and go ahead and say—Democrats and Republicans, we’re both going to hold hands and do what’s right for the American people. And I hope that’s what happens,” Obama said in his first televised news conference since Election Day.
If lawmakers do not come to an agreement by Jan. 1, there will be a sharp hike in taxes in combination with spending cuts in order to reduce the federal budget deficit, according to the nonpartisan Congressional Budget Office (CBO). If the United States crosses over the metaphorical fiscal cliff, it could imperil the economic progress that has been made over the past several years, the CBO has warned.
Obama stressed that the Bush-era tax cuts should be extended to 98 percent of American families and 97 percent of small businesses—those making less than $250,000 per year—otherwise consumer spending will decrease sharply after the first of next year.
“If we get that in place, we are actually removing half of the fiscal cliff. Half of the danger to our economy is removed by that single step,” Obama said. “And what we can then do is shape a process whereby we look at tax reform—which I’m very eager to do. I think we can simplify our tax system.”
“A modest tax increase on the wealthy is not going to break their backs. They’ll still be wealthy.”
—President Barack Obama
At the same time, however, the Bush-era cuts should not apply to the top 2 percent of wealthy households, according to the president.
“A modest tax increase on the wealthy is not going to break their backs. They’ll still be wealthy. And it will not impinge on business investment,” he said.
The middle class, Obama said, cannot be held “hostage” while debate continues over tax cuts for the wealthiest Americans.
In a CBO report released last week, “Economic Effects of Policies Contributing to Fiscal Tightening in 2013,” the CBO implied that the fiscal cliff represents a conundrum of sorts.
In the short-term, if most of the fiscal tightening measures used to deal with the federal budget deficit were removed, the U.S. economy “would remain below its potential and the unemployment rate would remain higher than usual for some time,” the report states.
However, if the current policies that are in effect continue, there would be an increase in federal debt during the remainder of this decade and until even later, the CBO said, adding that the increase in debt would raise the specter of a fiscal crisis in the future.
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