‘Read my lips, I will raise your taxes’-obama to GOP

President Barack Obama has thrown down to gauntlet to Republican leaders, inviting them to the White House next week to discuss the so-called fiscal cliff but insisting any compromise will include higher taxes on the rich.

A crisis is looming at the end of the year is agreement cannot be reached on how to avoid falling over the cliff - a scheduled combination of tax increases and spending cuts due at the end of this year.

'We can't just cut our way to prosperity,' Obama said in an event in the East Room in the White House Friday staged with what aides described as ordinary middle-class Americans arranged behind him.

'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.'

While not using the word 'mandate', Obama all but insisted he had a mandate to raise taxes on the wealthy.

He flexed his political muscles, indicating he would use his enhanced power following his re-election in an electoral college landslide by strongarming Republicans into raising taxes.

'I'm not going to ask students and seniors and middle class families to pay down the entire deficit, while people like me making over $250,000 aren't asked to pay a dime more in taxes. I'm not going to do that.

'And I just want to point out, this was a central question during the election. It was debated over and over again. And on Tuesday night we found out that the majority of Americans agree with my approach.'

Earlier, John Boehner, Speaker of the House of Representatives, which remained in Republican control after Tuesday's elections, said that while he looked forward to 'productive conversa- tion', raising taxes was not the way forward

Any deal, he said, should include lower tax rates, eliminating special interest loopholes and revising the tax code.

As an example of a possible compromise, Obama pointed to the deficit-reduction plan he released last year. He said the plan offered a 'balanced approach' but that he wasn't wedded to every aspect of it.

He invited Republicans Boehner and Senate Minority Leader Mitch McConnell and Democrats House Minority Leader Nancy Pelosi and Senate Majority Leader Harry Reid to the White House meeting.

Obama said he would also invite business, civic and labour leaders to talks but reiterated: 'I refuse to accept any approach that isn't balanced.'

Boehner did leave the door open to new revenue from ending some tax deductions.

'The problem with raising tax rates on the wealthiest Americans is we know that more than half of them are small-business owners,' he said.

Without congressional action, federal income taxes will rise at the end of the year, as would rates levied on capital gains, dividends and estates. Last year's deficit law also requires $110 billion in cuts to defence and other domestic spending.