Obama calls bipartisan meeting on 'fiscal cliff,' digs in on tax hike

Obama, in first remarks from White House since reelection, says he will compromise with Republicans to avoid the fiscal cliff, but won't agree to a plan that doesn't raise taxes on wealthiest Americans.

Election over, the “fiscal cliff” is upon us.

An energized President Obama invited bipartisan congressional leaders to a meeting at the White House next week to talk deficit reduction, and indicated flexibility as the clock ticks down toward a Dec. 31 deadline to avert potentially recession-inducing tax increases and deep spending cuts.

“I’m open to compromise. I’m open to new ideas,” Mr. Obama said Friday, in his first statement from the White House since reelection on Tuesday. “I’m committed to solving our fiscal challenges. But I refuse to accept any approach that isn’t balanced.”

For Obama, the term “balanced” is code for allowing the Bush-era income-tax cuts to expire for the wealthiest 2 percent of taxpayers, while keeping reduced tax rates for the rest. In a press briefing immediately after Obama’s remarks, White House press secretary Jay Carney doubled down on the president’s long-standing rejection of any year-end legislation that allowed tax cuts to continue for the most affluent taxpayers.

“The president has long made clear that he will veto an extension of tax cuts for the top 2 percent of wealthiest Americans,” Mr. Carney said.

The Republicans have been adamantly opposed to tax increases on anyone, but since the election, Republican House Speaker John Boehner has softened his tone. The speaker now says he’s willing to accept “new revenue,” perhaps through closing loopholes and eliminating tax deductions, but still calls any rise in tax rates “unacceptable.” In a statement, Speaker Boehner accepted Obama’s invitation to meet at the White House next week. 

In a press conference Friday before Obama’s remarks, Boehner proposed a temporary measure extending the Bush-era tax cuts into 2013, allowing the new Congress to work with the White House on a comprehensive package of tax reform, entitlement reform, and deficit reduction.

“I’m proposing that we avert the fiscal cliff together in a manner that ensures 2013 is finally the year that our government comes to grips with the major problems that are facing us,” Boehner said.

Since the election, the speaker has also called on Obama several times to step up his leadership. “This is an opportunity for the president to lead,” Boehner said Friday.

Boehner also revealed that he had had a “short conversation” with Obama earlier this week. The president has been criticized for not reaching out regularly to Republicans, especially as his reelection campaign kicked into gear last year.

In his remarks, Obama did not use the word “mandate,” but he nevertheless suggested he had one from the election results.

“On Tuesday night, we found out that the majority of Americans agree with my approach,” Obama said. “And that includes Democrats, independents, and a lot of Republicans across the country, as well as independent economists and budget experts. That's how you reduce the deficit, with a balanced approach.”

Boehner has maintained that his party, too, has a mandate, as Americans returned a Republican majority to the House. (In the Senate, however, the Democrats gained seats and are expected to have a 55-to-45 majority.)

Still, in the wake of a bruising election campaign, both men sounded conciliatory in the runup to the lame-duck session of Congress that will deal with the fiscal-cliff issues. Until the next Congress is seated in January, current members who are retiring or have been voted out will have their final moments in power. Typically, lame-duck sessions don’t accomplish much, though there have been exceptions. Two years ago, the lame-duck Congress voted to repeal the ban on open service by gays in the military.

Some Democratic strategists have suggested that the Democrats allow all the tax cuts to expire, then introduce legislation in the new Congress to lower rates for all except the top 2 percent of taxpayers. Republicans would be caught in a bind of either rejecting tax cuts for most Americans or approving a tax rate reduction that excludes the wealthiest Americans.

Republicans say that effectively raising taxes on the top taxpayers would harm small businesses – the engine of job growth – as many file their taxes as individuals.

“The problem with raising tax rates on the wealthiest Americans is that more than half of them are small-business owners,” Boehner said Friday, referring to a study by the accounting firm Ernst & Young indicating 700,000 jobs would be lost if the Bush tax cuts expire. “We also know that it would slow down our economy.”

Obama rejected that argument, saying that taxes would not be raised on 97 percent of small-business owners.

In a statement after Obama’s remarks, Senate Republican leader Mitch McConnell criticized the president for not putting out a specific proposal.

“While I appreciate and share the president’s desire to put the election behind us, the fact is we still have yet to hear an actual plan from the president for addressing the great economic challenges we face,” Senator McConnell said. “What’s needed now is a realistic and specific proposal from the president that can actually pass the Congress."