Washington, D.C. - President Obama urged Republicans in Congress to agree on a compromise on the soon-to-expire tax cuts, even as the prospects for an agreement remained uncertain.

In his weekly address Saturday, Obama acknowledged the results of the midterm elections, which elevated Republicans to a leadership position in the House and a more evenly divided Senate. “You’re rightly frustrated with the pace of our economic recovery,” he said. “So am I. You’re fed up with partisan politics and want results. I do too.”

Obama said he has asked the leaders of both parties to have an extended discussion about moving the country forward. A meeting has been scheduled for Nov. 18. Obama also referred to the upcoming lame duck session of Congress, in which the fate of the expiring Bush tax cuts is expected to come up for debate.

“Early in the last decade, President Bush and Congress enacted a series of tax cuts that were designed to expire at the end of this year,” he said. “What that means is, if Congress doesn’t act by New Year’s Eve, middle-class families will see their taxes go up starting on New Year’s Day. But the last thing we should do is raise taxes on middle-class families.  For the past decade, they saw their costs rise, their incomes fall, and too many jobs go overseas. They’re the ones bearing the brunt of the recession. They’re the ones having trouble making ends meet. They are the ones who need relief right now.”

Up until this past week, Obama has said that he would only extend the Bush tax cuts for couples making less than $250,000 a year and individuals earning less than $200,000. But since the elections, the White House has begun to indicate some flexibility on extending the tax cuts for high-income people on a temporary basis, for perhaps one or two years. Also reportedly under consideration, according to some press reports, is the possibility of permanently extending them for people at income levels of $500,000 or less.

“Something’s got to be done,” said Obama. “And I believe there’s room for us to compromise and get it done together.”

He suggested that Congress start at a point where both Democrats and Republicans agree.
“All of us want certainty for middle-class Americans,” he said. “None of us want them to wake up on January 1 with a higher tax bill. That’s why I believe we should permanently extend the Bush tax cuts for all families making less than $250,000 a year. That’s 98 percent of the American people.”

However, Obama insisted that extending the tax cuts for the wealthy would work against the goal of deficit reduction.

“We also agree on the need to start cutting spending and bringing down our deficit,” he said. “That’s going to require everyone to make some tough choices. In fact, if Congress were to implement my proposal to freeze non-security discretionary spending for three years, it would bring this spending down to its lowest level as share of the economy in 50 years. But at a time when we are going to ask folks across the board to make such difficult sacrifices, I don’t see how we can afford to borrow an additional $700 billion from other countries to make all the Bush tax cuts permanent, even for the wealthiest 2 percent of Americans. We’d be digging ourselves into an even deeper fiscal hole and passing the burden on to our children.”

Obama reiterated the need for compromise, but argued against making tax cuts for the wealthy permanent.

“I recognize that both parties are going to have to work together and compromise to get something done here,” he said. “But I want to make my priorities clear from the start. One: middle class families need permanent tax relief. And two: I believe we can’t afford to borrow and spend another $700 billion on permanent tax cuts for millionaires and billionaires.”

Senate Minority Leader Mitch McConnell, R-Ken., said on CBS’s “Face the Nation” on Sunday that Republicans are ready to talk about the tax cuts with Democrats. “We’re willing to start talking about getting an extension of some kind,” said McConnell. “We don’t think raising taxes on small business is a good idea.”

House Minority Leader John Boehner, R-Ohio, who is expected to take over as Speaker of the House in January, said, in response to the jobs report on Friday, that the priority should be to stop all the tax hikes.

“Any job growth is a positive sign, but stagnant and stubbornly high unemployment makes clear why permanently stopping all the looming tax hikes should top Washington’s to-do list this month,” Boehner said in a statement. “Stopping these tax hikes — and cutting spending to pre-‘stimulus,’ pre-bailout levels — would help eliminate the uncertainty gripping small businesses and show Americans asking ‘where are the jobs?’ that Washington is finally on the job.”



Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access