In a foreshadowing of more budget battles to come, Obama said he would insist that taxes be raised by closing loopholes that benefit the wealthy, as a way to raise money for spending projects. The rest of the way moving forward, we can do some additional reforms, and make our health care programs work better, and make them more efficient, and we can cut out programs that we dont need, he said. But it also means that weve got to be able to close some tax loopholes that the average American cannot take advantage of, to raise the revenue to actually do the job in a way that allows us to continue to grow, he told House Democrats.
The months following Obamas re-election in November have been dominated by confrontations with congressional Republicans over budget and fiscal issues. While the two sides were able to avoid steep cuts and tax hikes from going into effect at year end and have for now put off the immediate risk of a US debt default, Washington will again face the prospect of painful across-the-board spending cuts March 1 if it doesnt act.
Congress also must grapple with how to continue funding government operations after a stopgap funding measure expires March 27.
Obama has asked Republicans for a short-term budget package to avoid the deepest of the automatic spending cuts, but has said it needs to be balanced, that is, include some increases in revenue from closing tax loopholes. House Speaker John Boehner has said he would block any delay in those cuts unless other spending cuts and reforms are agreed to.
The White House has attacked congressional Republicans for suggesting they may be willing to let the harsh cuts referred to as sequestration go into effect automatically. Uncertainty over the year-end fiscal cliff led to steep reductions in defense spending, contributing to a contraction in the worlds largest economys output at the end of last year.