U.S. President Barack Obama said Tuesday avoiding an economic plunge over the "fiscal cliff" comes down to Republicans' realizing that tax rates must go up on wealthiest Americans.
"We're not going to be able to get a deal without it," he said.
The president said he would consider lowering rates for the top two per cent of earners next year as part of a broader tax overhaul effort that closes loopholes, limits deductions and finds other sources of revenue.
"It's possible that we may be able to lower rates by broadening the base at that point," Obama said in an interview with Bloomberg Television Tuesday.
The remarks, which reiterated a position that White House officials have expressed privately, is designed to give Republicans an opportunity to lower rates for the rich, but only after they rise at year's end when Bush-era tax cuts expire.
Later, however, White House spokesman Jay Carney left open the possibility that the rate would not have to rise to 39.6 per cent, the rate in place during the administration of President Bill Clinton.
Obama's remarks came a day after Republicans proposed a "fiscal cliff" plan that revives ideas from failed budget talks with Obama last year, calling for raising the eligibility age for Medicare, lowering cost-of-living hikes for Social Security benefits and bringing in $800 billion in higher tax revenue.
Democrats want taxes on rich raised
The counter to a White House plan last week relies more on politically sensitive spending cuts and would raise half the $1.6 trillion in revenue proposed by Obama over the coming decade.
The 10-year, $2.2 trillion proposal from Republican House Majority Leader John Boehner resembles a framework similar to what Boehner supported last year, but Obama is pressing for additional tax increases and appears to be balking at spending cuts discussed in those talks and since.
Administration officials from Obama on down say it'll take money from raising tax rates on the rich — instead of GOP proposals to simply curb their deductions — to win Obama's approval of any plan to avoid the "fiscal cliff."
Boehner's plan, which was signed by other House Republican leaders including recent vice presidential candidate Paul Ryan, drew a sharp dismissal from Republican Senator Jim DeMint of South Carolina, a leader of tea party conservatives in Congress.
"Speaker Boehner's $800 billion tax hike will destroy American jobs and allow politicians in Washington to spend even more, while not reducing our $16 trillion debt by a single penny," DeMint said.
It has been nearly a week since Obama and Boehner talked directly about the looming cliff, though their staffs have been in contact.
Boehner attended a congressional holiday party at the White House Monday night, but avoided the photo line where members get their picture taken with the president and have a few minutes to talk.
Obama met with a bipartisan group of governors, who sought assurances that any cuts in spending as part of an agreement on the fiscal cliff wouldn't shift the burden onto states.
The governors said they wanted flexibility from the federal government on certain mandated programs like Medicaid to allow them to do more with less.
"We asked for flexibility on how the federal money is passed down to the states and the cuts that are passed down, that we could have some flexibility to do what's in the best interest of our states," said Oklahoma Gov. Mary Fallin, a Republican.
The governors said they were not endorsing any particular proposal but said they wanted to share their ideas on ways that states could play a role in helping reduce the deficit.
The governors were meeting later in the day with congressional leaders and said they planned to work with Vice President Joe Biden in the coming weeks. The Republican proposal Monday sparked a predictable round of partisanship.
'Fiscal cliff' arises from last year's impasse
"To protect the middle class while reducing the deficit, simple math dictates that tax rates must rise on the top two per cent of taxpayers next year," Senate Democratic Majority Leader Harry Reid said in a statement.
"The sooner Republicans grasp that reality, the sooner we can avoid the fiscal cliff."
The fiscal cliff is a combination of expiring Bush-era tax cuts and automatic, across-the-board spending cuts due to take effect in January.
The cliff is a result of prior failures of Congress and Obama to make a budget deal.
The GOP proposal itself revives a host of ideas from failed talks with Obama in the summer of 2011. Then, Obama was willing to discuss politically risky ideas such as raising the eligibility age for Medicare, implementing a new inflation adjustment for Social Security cost-of-living adjustments and requiring wealthier Medicare recipients to pay more for their benefits.
By GOP math, the plan would produce more than $2 trillion in budget savings over the coming decade: $800 billion in higher taxes; $600 billion in savings from costly health care programs like Medicare; $300 billion from other proposals such as forcing federal workers to contribute more toward their pensions; and $300 billion in additional savings from the Pentagon budget and domestic programs funded by Congress each year.
Last week, the White House delivered to Capitol Hill its opening proposal: $1.6 trillion in higher taxes over a decade, a possible extension of the temporary Social Security payroll tax cut and heightened presidential power to raise the national debt limit without the approval of Congress.
In exchange, the president would back $600 billion in spending cuts, including $350 billion from Medicare and other health programs. But he also wants $200 billion in new spending for jobless benefits, public works projects and aid for struggling homeowners.
His proposal for raising the ceiling on government borrowing would make it virtually impossible for Congress to block him going forward.