Washington: American President Barack Obama on Sunday implored Congress to act within the next 48 hours to avert the sharp tax increases and benefit cuts scheduled to take effect on Tuesday.
In remarks taped for broadcast on NBC’s Meet the Press, Obama accused Republicans of blocking action on measures to prevent taxes from rising for most Americans, threatening the still-fragile economic recovery.
“We have been talking to the Republicans ever since the election was over,” Obama said. “They have had trouble saying yes to a number of repeated offers. Yesterday I had another meeting with the leadership, and I suggested to them if they can’t do a comprehensive package of smart deficit reductions, let’s at minimum make sure that people’s taxes don’t go up and that two million people don’t lose their unemployment insurance.”
“And I was modestly optimistic yesterday, but we don’t yet see an agreement,” the president said in comments that were taped on Saturday. “And now the pressure’s on Congress to produce.”
Unless Congress acts by midnight Monday, a broad set of tax increases and federal spending cuts will be automatically imposed on 1 January, affecting virtually every taxpayer and government programme. The spending cuts were put in place earlier this year as draconian incentives that would force the president and lawmakers to confront the nation’s growing debt. Now, lawmakers are trying to keep them from happening, though it seemed likely, that the cuts, known as sequestration, would be left for the next Congress, to be sworn in this week.
Some economists have warned that the one-two punch of higher taxes and lower government spending could tip the nation into recession.
“For the entire economy that means consumers have a lot less money to make purchases,” Obama said, “which means businesses are going to have a lot less customers, which means that they’re less likely to hire and the whole economy could slow down at a time when the economy is actually starting to pick up and we’re seeing signs of recovery in housing and employment numbers improving.”
Republicans have blamed Obama for seeking to punish the wealthy with large tax increases and for not negotiating in good faith. They say his approach would worsen the deficit by protecting Democratic constituency groups from tax increases and benefit reductions while imposing sharp penalties on farmers and small business owners.
Republican senator John Barrasso of Wyoming said Sunday on CNN’s State of the Union that Obama was not dealing with the real issue imperilling the economy—the Democrats “addiction to spending”.
The president and party leaders in the House and senate have been seeking a compromise measure that would protect middle-income families from the worst jolt of tax increases, but so far there is no agreement on where to draw the line. With the Bush-era tax cuts expiring, Obama and Democrats have said they want tax rates to rise on income over $250,000 a year, while Republicans want a higher threshold, perhaps at $400,000.
Senate leaders and their aides spent Saturday searching for a formula that could win bipartisan support in the senate and final approval in the fractious House by the new year.
As part of the last-minute negotiations, the lawmakers haggled over unemployment benefits, cuts in Medicare payments to doctors, taxes on large inheritances and how to limit the impact of the alternative minimum tax, a parallel income tax system that is intended to ensure the rich pay a fair share but that is increasingly encroaching on the middle class.
Obama has said that if talks between the senate leaders broke down, he wanted the senate to schedule an up-or-down vote on a narrower measure that would extend only the middle-class tax breaks and unemployment benefits. The senate majority leader, Harry Reid of Nevada, said he would schedule such a vote on Monday absent a deal.
The political drama in Washington over the weekend was given greater urgency by the fear that the economic gains of the past two years could be lost if no deal is reached.
Some of the consequences of Congressional inaction would be felt almost at once on Tuesday, in employee paychecks, doctors’ offices and financial markets. Analysts said the effect would be cumulative, building over time.
An early barometer would probably be the financial markets, where skittish investors could send the stock market lower on fears of another prolonged period of economic distress.
©2012/THE NEW YORK TIMES