President Obama on Wednesday slammed suggestions that Republicans could allow upper-income tax cuts to expire now only to use the nation’s debt limit as leverage to push for new concessions next year.
In a meeting with leaders of the nation’s biggest businesses, the president said firmly that he would not allow the nation’s borrowing to again be used as a negotiating point in the nation’s efforts to tame its debt.
“The thinking is the Republicans will have more leverage because there will be another vote on the debt ceiling, and we will try to extract more concessions with a stronger hand on the debt ceiling,” Obama told members of the Business Roundtable. “That is a bad strategy for America, it’s a bad strategy for your businesses, and it is not a game that I will play.”
With income tax rates set to automatically go up on nearly all Americans at the end of the year without further congressional action, Republicans are feeling strong pressure to acquiesce to Obama’s demand to freeze taxes for the middle class and allow them to rise for the wealthy to avert the “fiscal cliff.”
But some Republicans have been suggesting that even if the upper-income tax cuts expire, the GOP could use the debt limit to reduce taxes and spending next year.
The nation will run up against its legal borrowing limit by January, but the Treasury Department can deploy special procedures to permit borrowing to continue until late winter. Then, Congress will have to raise the debt limit or the nation will be at risk of defaulting on some of its obligations.
White House officials hammered home the president’s position at a press briefing later Wednesday, saying that Obama won’t negotiate a fiscal cliff solution until Republicans agree to raise the rate on the wealthiest two percent and warning them not to engage in any “gamesmanship” related to the debt ceiling
“The fact of the matter is, the president has an absolute principle that he’s not going to abandon, which is that rates are going up on top earners,” Press Secretary Jay Carney told reporters. He also confirmed that the Office of Management and Budget has asked federal agencies to provide information to prepare for the automatic spending cuts that would go into effect along with the tax increases if a deal is not reached. But, Carney said, “this action should not be read as a change in commitment” to reach a deal.
Senior Republican aides have confirmed in recent days that House GOP leaders are looking for a way out if they cannot reach a budget deal with Democrats, including linking the deal to the debt ceiling. In one scenario, the House would take up a Senate-passed bill that would extend the Bush-era tax rates for the middle class and have Republicans vote “present,” forcing Democrats to pass the bill alone and take the blame for letting taxes rise on the rich. The two sides could then take up the fight over spending cuts again in a few weeks.
The aides said that all the tactics so far considered by the GOP leaders are highly unappealing and that none had emerged as a preferable strategy to going over the cliff.
As part of his fiscal cliff proposal, Obama has sought to effectively end Congress’s role in setting the debt limit. But Republicans have balked at giving up that power, which they used in summer 2011 to force significant cuts in domestic and defense spending.
Obama referred to that proposal at the meeting with business leaders. “Most of you were involved in discussions and watched the catastrophe that happened in August of 2011,” he said. “There’s no uncertainty like the prospect that the United States of America, the largest economy that holds the world’s reserve currency, potentially defaults on its debts, that we give up the basic notion that the United States stands behind its obligations. We can’t afford to go there again. And this isn’t just my opinion. It’s the opinion of most of the folks in this room.”
Obama’s visit to the Business Roundtable, whose leaders had been critical of the president’s approach to business in the past, was part of a push by the White House to conscript executives in its efforts to win agreement on the fiscal cliff.
The president said a deal could be reached within a week if Republicans just gave a bit of ground on allowing tax rates to rise on the wealthy. Notably, he used relatively soft language in saying how far rates should rise, without demanding that they return to the Bill Clinton-era height of 39.6 percent.
“We’ve seen some movement over the last several days among some Republicans. I think there’s a recognition that maybe they can accept some rate increases as long as it’s combined with serious entitlement reform and additional spending cuts,” Obama said. “And if we can get the leadership on the Republican side to take that framework, to acknowledge that reality, then the numbers actually aren’t that far apart.”