A defiant President Obama insisted on Wednesday that any major deficit reduction package include increased tax revenue as well as substantial cuts in government programs– posing a direct challenge to congressional Republican leaders who have vowed to oppose any deal that includes a tax increase.
The president used a nationally televised White House news conference to berate Republicans who refuse to consider any tax increases as part of the overall mix – even cutting or eliminating tax breaks for oil companies and corporate executives who use private jets. He urged GOP leaders to quit playing to their conservative political base and begin working with him to develop a fair framework of spending cuts and revenue increases to reduce the long term debt while encouraging economic growth and job creation.
Obama said it was unreasonable for the Republicans to think he would go along with deep spending cuts in government services and benefits that help the middle class and poor while leaving unscathed billions of dollars worth of tax breaks and benefits for the wealthiest Americans and corporate giants.
“We’re going to need to look at the whole budget,” he said. “That means trimming the defense budget while still meeting our security needs. That means we’ll have to tackle entitlements as long as we keep faith with seniors and children with disabilities by maintaining the fundamental security that Medicare and Medicaid provide. And yes, we’re going to tackle spending in the tax code.”
House Speaker John Boehner, R-Ohio, and Senate Minority Leader Mitch McConnell, R-Ky., have repeatedly opposed either an increase in tax rates or the elimination of costly tax breaks or deductions as part of a long term plan for reducing the $1.5 trillion annual budget deficit. Republican lawmakers and anti-tax conservative groups like Americans for Tax Reform insist that raising taxes would hurt the economy and discourage job-creation in the private sector. Instead, they assert that only reductions in government services and entitlements should be considered in the budget talks.
“The President himself said in December that not raising taxes enables businesses to hire more employees,” Senate Minority Leader Mitch McConnell said today. “In other words, raising taxes leads to fewer jobs. So he can continue calling for tax hikes, but he can’t call for tax hikes AND job creation. It’s one or the other. They can't have it both ways.”
The White House and congressional leaders are struggling to negotiate a deal to slash $1.6 trillion to $1.7 trillion or more over 10 years as a condition for raising the $14.3 trillion federal debt ceiling before an August 2 deadline, when the Treasury says it will completely exhaust its borrowing authority and face the possibility of default. Republican presidential candidate Michele Bachmann and a growing number of conservatives argue that the Treasury could easily avert default on its debt by “prioritizing” tax revenues in August to pay the interest on the debt and cover other urgent costs while delaying other government expenditures until Congress and the White House reach a final budget agreement.
A new study by the Bipartisan Policy Center suggests it is highly unlikely the Treasury would actually default on its debt because there would be ample tax revenue in August to pay the $29 billion of interest coming due that month, as well as meet other obligations to Social Security, Medicare and Medicaid recipients. But the study warns that the government would almost immediately have to slash spending by 44 percent for most other government agencies and programs – forcing the Treasury to pick and choose among programs. And as time goes by, it would be more and more difficult to for the government to meet its obligations without additional borrowing authority.
But Obama today dismissed the idea of flirting with default as reckless and said that it would undermine international confidence in U.S. credit. “What I’m hearing from some quarters is that well maybe this debt limit thing is not really that serious, we can just pay interest on the debt,” he said. “This is the equivalent of me saying you know what, I will choose to pay my mortgage but I’m not going to pay my car note, or I’m going to pay my car note but I’m not going to pay my student loan. Now, a lot of people in really tough situations are having to make those tough decisions, but for the U.S. government to start picking and choosing like that is not going to inspire a lot of confidence.”
“We’re the greatest nation on earth and we can’t act that way,” he said.
In its annual report out today, the International Monetary Fund pressed Congress to raise the $14.3 trillion debt ceiling or risk incurring higher interest rates on government borrowing that would roil the U.S. economy and international markets. The IMF supported long-term moves to reduce the nation’s deficit, but did not endorse near-term spending cuts or tax increases, saying that such moves could interfere with the economic recovery.
Obama and the Republicans have had other high stakes confrontations before, including tough negotiations over spending for the remainder of the current fiscal year that almost ended in a government shutdown. Many budget and political experts say it would be unthinkable for Congress to refuse to raise the debt ceiling and risk an international financial crisis. But since Obama held his last press conference on March 11, tensions over raising the debt ceiling have heightened as the two parties have deadlocked over taxes.
The president repeatedly hammered away at the GOP’s anti-tax stance, noting that “The tax cuts I’m proposing, we get rid of tax breaks for millionaires and billionaires; tax breaks for oil companies and hedge fund managers and corporate jet owners. It would be nice if we could keep every tax break there is, but we’ve got to make some tough choices here if we want to reduce our deficit.”
In an apparent slap at the House and Senate GOP leaders, Obama said that “hopefully leaders at a certain point rise to the occasion and they do the right thing for the American people.”
Obama’s approval rating is just below 50 percent, where it has hovered for the last month according to a CBS News/New York Times poll out today. But with unemployment at 9.1 percent and persistent speculation that the economy may be losing altitude again, only 39 percent of respondents think Obama is doing a good job handling the economy compared with the 47 percent overall approval rating.
Obama has spent a good part of the last month making weekly visits to manufacturing plants and factories in states like Iowa and North Carolina to laud any hiring plans and clean-tech advances and highlight the role of his administration, through mostly tax credits and stimulus, in aiding that growth.
During his news conference today, Obama acknowledged that “there are a lot of folks out there still struggling with the effects of the recession” and that it will take considerably more time to solve the problems. He defended his administration’s efforts to boost the economy by targeting burdensome government regulations for elimination and spurring job training. At the same time, he blamed Congress for dragging its feet on a laundry list of measures that would help create jobs – including making it easier to patent new products, funding authority for road and bridge construction, and trade agreements.
“Many of these ideas have been tied up in Congress for some time, but all of them enjoy bipartisan support and all of them could help grow the economy.”
Obama and Vice President Joe Biden will meet with Senate Democrats later this afternoon to strategize how and if they will achieve at least $2 trillion in spending cuts to offset a debt ceiling increase. Though the group of lawmakers led by Biden tentatively generated hundreds of billions in possible spending cuts, negotiations collapsed when House Majority Leader Eric Cantor, R-Va., walked out over the tax issue.
With time running out before the August 2 deadline, Obama signaled that he would try to keep congressional negotiators in town until a deal is reached. The president chided the House and Senate for working in Washington on alternate weeks for the past month or so.
“If by the end of this week, we have not seen substantial progress, I think member of Congress will have to understand we will have to start to cancel things and stay here,” Obama said. “I’ve been doing Afghanistan, Bin Laden, Greek Crisis. You need to stay here, and get this done. “
Obama: GOP Position on Debt Limit ‘Not Sustainable’ (CBSNews)
Obama: GOP Strategy on Debt Talks ‘Not on the Level’ (POLITICO)
Obama: Republican Leaders Need to Bend on Taxes (New York Times)