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Obama addresses looming fiscal cliff Obama addresses looming fiscal cliff
(35 minutes later)
Newly re-elected President Barack Obama has said the wealthy must pay more taxes under any political deal to avert a looming budget crisis.Newly re-elected President Barack Obama has said the wealthy must pay more taxes under any political deal to avert a looming budget crisis.
He said Congress must act against the so-called fiscal cliff, a package of tax rises and spending cuts due early next year.He said Congress must act against the so-called fiscal cliff, a package of tax rises and spending cuts due early next year.
Mr Obama said he was inviting party leaders to the White House next week to discuss the issue. But in a duelling news conference, Republican House Speaker John Boehner said tax rises would not be acceptable.
Budget analysts warn the US will tip into recession unless a deal is struck.Budget analysts warn the US will tip into recession unless a deal is struck.
Mr Obama has repeatedly called for the affluent to pay more, but such a plan is anathema to Republicans.Mr Obama has repeatedly called for the affluent to pay more, but such a plan is anathema to Republicans.
The fiscal cliff would see the expiry of George W Bush-era tax cuts at the end of 2012, combined with automatic, across-the-board reductions to military and domestic spending.The fiscal cliff would see the expiry of George W Bush-era tax cuts at the end of 2012, combined with automatic, across-the-board reductions to military and domestic spending.
Ticking timebomb 'Open to compromise'
In the East Room of the White House on Friday, Mr Obama said: "If we're 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." In the East Room of the White House on Friday, Mr Obama said: "We can't just cut our way to prosperity. If we're 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."
The president added he was "open to compromise" and new ideas, adding: "I'm committed to solving our fiscal challenges, but I refuse to accept any approach that isn't balanced." President Obama is using the moral authority of his re election to push his case. There is nothing new in his call for Congress to extend "middle-class tax cuts" at once. He said it repeatedly before the election.
Tax rises were a "central question" during the election campaign, Mr Obama said, and "the majority of Americans agree with my approach". But it's different now. He has a renewed mandate and his demand has a fresh weight behind it. He pointed out even people who didn't vote for him told opinion pollsters that taxes should go up for the richest.
The International Monetary Fund has repeatedly warned that failure by US lawmakers to reach a deal would deepen uncertainty over the global economy. There has to be agreement on a plan to cut the deficit. If not, there will be pretty horrible consequences. If the bomb goes off, it is not just the politicians who will be hurt. It is the US economy that would explode, and it would probably take what's left of the world economy with it.
Investor concerns over the issue have been partly blamed for two straight days of losses on financial markets this week.
Earlier on Friday, John Boehner, leader of the Republican-controlled House of Representatives, held a news conference. Mr Obama said: "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... but I refuse to accept any approach that isn't balanced."
He suggested "special-interest loopholes in the tax code, both corporate and personal" could be eliminated. He repeated his oft-stated call for tax rises on earnings over $250,000 (£157,000), while urging Congress to extend existing tax rates for 98% of taxpayers.
Mr Boehner, who has struck a conciliatory tone to the president since his re-election, also restated his support for "entitlement reform as well as tax reform with lower rates". "This was a central question during the election," he added. "It was debated over and over again. On Tuesday night, we found out that the majority of Americans agree with my approach."
Mr Obama also said he was inviting party leaders to the White House next week to discuss the how to move forward.
The White House said afterwards that the president would veto any bill extending tax cuts for those making more than $250,000.
But battle lines were drawn earlier on Friday, as Speaker Boehner restated his party's opposition to tax increases.
The most powerful Republican lawmaker told a press briefing that "raising tax rates will slow down our ability to create the jobs that everyone says they want".
Mr Boehner did suggest "special-interest loopholes in the tax code, both corporate and personal" could be eliminated, while advocating "entitlement reform as well as tax reform with lower rates".
"Entitlement reform" is Washington-speak for cuts to federal spending - cherished among Mr Obama's Democratic allies - on programmes such as healthcare for the poor and elderly and Social Security pensions."Entitlement reform" is Washington-speak for cuts to federal spending - cherished among Mr Obama's Democratic allies - on programmes such as healthcare for the poor and elderly and Social Security pensions.
Mr Boehner also cited a Congressional Budget Office (CBO) report on Thursday which warned the US economy would fall back into recession if no deal were struck on the fiscal cliff.Mr Boehner also cited a Congressional Budget Office (CBO) report on Thursday which warned the US economy would fall back into recession if no deal were struck on the fiscal cliff.
The analysis projected that the package of tax rises and spending cuts would cut the ballooning US deficit by $503bn (£315bn) through to next September, but also shrink the economy by 0.5% and cost millions of jobs.The analysis projected that the package of tax rises and spending cuts would cut the ballooning US deficit by $503bn (£315bn) through to next September, but also shrink the economy by 0.5% and cost millions of jobs.
In an interview with ABC News on Thursday, Mr Boehner said: "Raising tax rates is unacceptable. Frankly, it couldn't even pass the House. I'm not sure it could pass the Senate." The International Monetary Fund has repeatedly warned that failure by US lawmakers to reach a deal would deepen uncertainty over the global economy.
Investor concerns over the issue have been partly blamed for two straight days of losses on financial markets this week.
Obama cabinet shake-upObama cabinet shake-up
But an Obama official said the president's oft-stated call for tax rises on the wealthy has been vindicated by his resounding victory over Republican challenger Mitt Romney in Tuesday's election.
"[Voters] clearly chose the president's view of making sure that the wealthiest Americans are asked to do a little bit more in the context of reducing our deficit in a balanced way," said senior White House adviser David Plouffe.
Mr Obama's position has been that taxes should rise on earnings above $250,000.
Meanwhile, as Mr Obama turns his attention to shaping a second term in office his administration is expected to undergo a shake-up in the coming weeks.Meanwhile, as Mr Obama turns his attention to shaping a second term in office his administration is expected to undergo a shake-up in the coming weeks.
Secretary of State Hillary Clinton, Defence Secretary Leon Panetta and Treasury Secretary Timothy Geithner are among those expected to leave their posts.Secretary of State Hillary Clinton, Defence Secretary Leon Panetta and Treasury Secretary Timothy Geithner are among those expected to leave their posts.
Speculation has been swirling in Washington over possible replacements, with Democratic Senator John Kerry among those tipped as a substitute for Mrs Clinton.Speculation has been swirling in Washington over possible replacements, with Democratic Senator John Kerry among those tipped as a substitute for Mrs Clinton.
Meanwhile, Republicans are carrying out a post-mortem on their presidential election campaign.Meanwhile, Republicans are carrying out a post-mortem on their presidential election campaign.
Former Secretary of State Condoleezza Rice told CBS News on Friday the party's loss "really necessitates" new thinking.Former Secretary of State Condoleezza Rice told CBS News on Friday the party's loss "really necessitates" new thinking.
They had sent "mixed messages" on immigration and women's issues, she added.They had sent "mixed messages" on immigration and women's issues, she added.
While Mr Obama carried the popular vote by only a narrow margin, "clearly we are losing important segments" of the electorate, she said.While Mr Obama carried the popular vote by only a narrow margin, "clearly we are losing important segments" of the electorate, she said.