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Obama Insists On Tax Increases In Debt Talks

by Mike Godfrey Tax-News.com, Washington

05 July 2011


While President Barack Obama, at a press conference, insisted that the abolition of selected tax breaks should form part of a political agreement on an increase to the United States debt ceiling, leaders of the Republican party rejected the idea immediately, calling for additional reductions in government spending.

The Democrat and Republican parties have been holding negotiations since the Treasury confirmed in May that the US public debt limit had been reached, and that its borrowing authority would have to be extended by August 2, or the US government would have to shut down.

Matters reached a deadlock recently when two of the Republican leaders, including the House of Representatives Majority Leader, Eric Cantor, who had been talking with Vice President Joe Biden and Democrat members of Congress on the terms of a deal to increase the debt limit, confirmed that they will no longer attend those negotiations, and called for an intervention at a higher level - by the two leaders, President Obama and the House Speaker John Boehner.

In the press conference, however, President Obama appeared to play hardball. While disclosing that the previous negotiations had identified more than USD1 trillion in government spending cuts, his opinion was that a deal could not be reached on the USD4 trillion in spending cuts needed.

He insisted that part of the equation should be getting rid of selected tax breaks – those for “millionaires and billionaires”, oil companies, hedge fund managers and corporate jet owners. “It would be nice if we could keep every tax break there is,” he stressed, “but we’ve got to make some tough choices here if we want to reduce our deficit.”

Emotively, he said that “if we choose to keep those tax breaks for millionaires and billionaires, if we choose to keep a tax break for corporate jet owners, if we choose to keep tax breaks for oil and gas companies that are making hundreds of billions of dollars, then that means we’ve got to cut some kids off from getting a college scholarship. That means we’ve got to stop funding certain grants for medical research.”

“Any agreement to reduce our deficit is going to require tough decisions and balanced solutions,” he concluded. “And before we ask our seniors to pay more for health care, before we cut our children’s education, before we sacrifice our commitment to the research and innovation that will help create more jobs in the economy, I think it’s only fair to ask an oil company or a corporate jet owner that has done so well to give up a tax break that no other business enjoys.”

However, subsequently, while the President was still expressing the belief that “we can actually bridge our differences,” Boehner's immediate reaction was a continued sharp rejection of any action that would raise taxes “on the very people that we expect to invest in our economy and create jobs.”

“The President's remarks today ignore legislative and economic reality,” he said, “and demonstrate remarkable irony. His administration has been burying our kids and grandkids in new debt and offered no plan to rein in spending. Republicans have been leading and offering solutions to put the brakes on this spending binge.”

“The President is sorely mistaken if he believes a bill to raise the debt ceiling and raise taxes would pass the House,” Boehner emphasized. “A debt limit increase can only pass the House if it includes spending cuts larger than the debt limit increase; includes reforms to hold down spending in the future; and is free from tax hikes. The longer the President denies these realities, the more difficult he makes this process.”

TAGS: tax | economics | fiscal policy | budget | oil and gas | United States | tax breaks

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