The president gave his first press conference since being re-elected on Wednesday afternoon. Here's my live-blogging on his discussion of the austerity crisis and the Bush tax cuts:
2:27 pm: One reporter pointed out that Obama had agreed to extend the Bush tax cuts in 2010, asking why we should expect to ask any differently this time around. The president responded by saying, in a rather roundabout way, that the economy is in better shape now—the implication being that it's now better able to withstand higher taxes on top incomes. "Two years ago the economy was in a different situation. We were still very much in the early parts of recovering from greatest economic crisis since the Great Depression," he said.
The general economic outlook has, in fact, improved over the last two years: The unemployment rate in January 2010 was 9.7 percent, whereas now it stands at 7.9 percent. The housing market has finally begun to turn around, and retail sales have picked up. Businesses, however, have still held back from investing, and we're still a considerable way off from full employment. Supporters of the Bush tax cuts for the top 2 percent say that it would punish small businesses who file as individuals. And fiscal conservatives like Grover Norquist are predicting that the president will cave and extend all the tax cuts once again.
2:02 pm: When asked whether he'd draw a line in the sand on the Bush tax cuts, the president tried to sound conciliatory. If members of Congress come up with an alternative that raises revenue without hurting middle-class families. "I'm not just going to slam the door in their face. I want to hear ideas from everyone," he said, adding that he was "less concerned about red lines, per se."
But despite his softer rhetoric, Obama made no concessions on his demand for higher taxes on the top 2 percent. He argued that the majority of the American voters supported his position on taxes, which he campaigned strongly on. "I'm concerned about not finding us in a situation where the wealthy aren't paying more or aren't paying as much as they should," he said.
He added, moreover, it would be "very difficult to see how we make up that trillion dollars" of revenue that would be lost if the Bush tax cuts on the wealthy were extended. Outside economists have confirmed as much: It's not easy to use deductions and exemptions for the wealthy to generate much tax revenue without hitting the middle class or going after tax breaks like the employer deduction for health care that many lawmakers believe are off-limits.
1:55 pm: Obama said that dealing with the Bush tax cuts by making sure that middle-class taxes don't rise would make major headway in dealing with the threat of the fiscal cliff. "Half of the danger to our economy is removed by that single step," he said.
In reality, the Bush tax cuts make up only about one-quarter of the major fiscal contraction that we would face in 2013. The rest comes from the sequester cuts, payroll tax cuts, and other parts of the austerity crisis. Here's the Bank of America's breakdown:
1:47 pm: President Obama led off his press conference by outlining his goals for the fiscal cliff, reiterating his pledge to hold the middle-class harmless.
He argued, however, that doing so would mean that all Americans would see their taxes go down: Passing a law that prevents the Bush tax cuts from taking effect on those below the $250,000 threshold would "mea[n] every American, including the wealthiest Americans, get a tax cut," Obama said. That's because they're marginal tax rates: the wealthiest Americans would still get a tax break on the first $250,000 on their income, even if the taxes on income above that threshold would go up.