Obama takes first swipe in year-end debt showdown

Obama's top Republican antagonist, House speaker John Boehner, set out a rival position, warning that raising taxes would hurt job creation, as fears mounted that the budget imbroglio could trigger a new recession.

The president, in his first public appearance since winning a second term on Tuesday, put in a punchy, energetic performance, seemingly refreshed by his triumph ahead of a new round of draining budget wars in Washington.

"We can't just cut our way to prosperity. If we are serious about reducing the deficit, we have to combine spending cuts with revenue, and that means asking the wealthiest Americans to pay a little more in taxes," he said.

Obama also called top Republican and Democratic leaders to the White House for talks on Friday, and with a showman's flourish, whipped a pen from his pocket to show he would sign a bill on middle class tax relief immediately.

Ambitious second term agenda
The talks will focus on averting the so-called "fiscal cliff"   a catastrophic blend of automatic tax hikes and harsh defense and domestic spending cuts due to come into force on January 1.

The showdown will be a crucial test of whether the newly reelected Obama can bend gridlocked Washington to his political will, with implications for his capacity to enact an ambitious second term agenda.

Obama campaigned on raising taxes on the rich to pay for deficit reductions and to finance spending on education and in other areas likely to make the economy more equitable and improve the lot of the hurting middle classes.

He signaled a willingness to deal on the details of a deficit reduction plan, but he made clear that his bottom line principle involved rejecting the Republicans' flat refusal to agree to higher taxes for the wealthy.

"This was a central question during the election, it was debated over and over again. On Tuesday night, we found that the majority of Americans agree with my approach," an invigorated Obama said in the White House briefing room.

"I want to be clear. I'm not wedded to every detail of my plan. I'm open to compromise. I'm open to new ideas."


Room for negotiation
With Vice President Joe Biden, likely to play a key role in negotiations, by his side, the president warned: "I refuse to accept any approach that isn't balanced."

"I'm not going to ask students and seniors and middle class families to pay down the entire deficit while people like me making over $250 000 aren't asked to pay a dime more in taxes. I'm not going to do that."

Obama's approach left room for negotiation with Republicans and could possibly permit a compromise that keeps the top level of income tax rates the same for the rich, but involves a removal of deductions on investment income.

But the White House said that the president would veto any bill that came to his desk that meant an extension of the George W. Bush era tax cuts for the 2% of Americans earning more than $250 000 a year.

The president urged Congress to immediately send him a bill however to extend the same Bush-passed tax cuts on those earning less than $250 000.

House Speaker John Boehner earlier set out his stall on the negotiations to come, sticking by Republican principles on no tax hikes but hinting at room for compromise.

Obama's opportunity to lead
"This is an opportunity for the president to lead," Boehner said.

"This is his moment to engage the Congress and work towards a solution that can pass both chambers," he said. "I think it's important for us to come to an agreement with the president. But this is his opportunity to lead."

Boehner said he hoped to quickly start talks on the "fiscal cliff" but he warned: "Raising tax rates will slow down our ability to create the jobs that everyone says they want."

The speaker pointed to "special interest loopholes in the tax code, both corporate and personal," as well as deductions that could be eliminated as a way to raise revenue while not deterring investment.

But Boehner, like Obama, declined to go into great detail of his proposal, apparently seeking to avoid becoming boxed in ahead of the negotiations.

Next week's talks at the White House will involve Boehner, Senate Republican minority leader Mitch McConnell, Democratic Senate Majority leader Harry Reid and House Democratic minority leader Nancy Pelosi.  – Sapa-AFP

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