Obama pushes tax agenda, Congress in stand-off
President Barack Obama on Tuesday has launched a public relations push for his bid to raise taxes on wealthy Americans, but U.S. lawmakers remained deadlocked over dramatic, year-end tax increases and spending cuts known as the "fiscal cliff."
At the White House, small business leaders emerged from a one-hour meeting with Obama to voice support for his goal of extending low tax rates for the middle class beyond the end of the year, while letting rates rise for wealthier taxpayers. The business owners urged Obama "to fight to keep the middle-class tax cuts," said Lew Prince, co-founder of Vintage Vinyl, an independent music store in St. Louis, Mo.
"What grows jobs in America is consumers spending money, and the average person needs that two or three thousand dollars a year in his pocket to help drive the economy," Prince told reporters at the White House.
Republicans want to extend low tax rates - enacted a decade ago under the administration of former Republican President George W. Bush - for all taxpayers, including households earning more than $250,000 a year.
Raising tax rates on the wealthy would discourage investment and hiring at a time of high unemployment, Republicans say.
Congressional Democrats allied with the president showed no sign of backing down from his stance on raising taxes for the wealthy. But both sides have softened on some long-held positions: Republicans have been showing a willingness to consider new revenue increases while Democrats have relaxed their hard line against new savings to the costly government-run Medicare and Medicaid healthcare programs.
With just a month left before the Bush tax cuts expire and automatic spending cuts begin to take hold, markets were anxious about predictions that falling off the "fiscal cliff" could trigger another recession.
"There remains no clarity on the ultimate status on the Bush tax cuts, which have to be resolved before you can move forward with the remainder of the fiscal cliff," said Chris Krueger, an analyst at Guggenheim Securities' Washington Research Group.
Stock prices declined modestly despite government reports that planned U.S. business spending rose again in October and that single-family home prices rose again in September. Despite a mild sell-off in stocks, the Dow Jones industrial average closed at about 12,878, up 14 percent from a year ago.
Brian Gardner, an analyst at financial firm Keefe Bruyette & Woods, said a limited deal would likely be struck to avert the fiscal cliff, with larger fiscal issues pushed into 2013.