Bloomberg News

Obama Says U.S. Budget Negotiation Deadlock Holding Back Economy

December 05, 2012

President Barack Obama told top business executives the global economy remains “soft” and the deadlock in Washington over taxes and spending is holding the U.S. back from leading a strong recovery.

Speaking today in Washington at the quarterly meeting of the Business Roundtable, an association of chief executive officers, Obama reiterated his stance that any plan to shrink the nation’s budget deficit and give certainty to businesses must include more tax revenue from the top 2 percent of earners as well as measured cuts in federal spending.

“Nobody wants to get this done more than me,” Obama said, referring to an agreement with congressional Republicans to come up with a plan to avert more than $600 billion in automatic spending cuts and across-the-board income tax increases set to begin in January. “We could probably solve this in about a week. It’s not that tough.”

He also said he would reject any attempt to tie an agreement to raising the federal debt ceiling. The U.S. will hit the $16.4 trillion limit sometime in the next few months. A showdown over the limit last year brought the U.S. to the brink of default.

“We can’t afford to go there again,” Obama said.

The organization, whose executive committee includes Boeing Co. (BA:US) CEO James McNerney and JPMorgan Chase & Co. (JPM:US) CEO Jamie Dimon, is urging the White House and Congress to strike a deal. The combination of higher taxes and reduced government spending threatens to tip the U.S. into a recession.

Economic Growth

An agreement must “promote long-term sustainable economic growth and accelerate job creation for American workers,” McNerney, who also is head of Obama’s export council, said in a statement.

Treasuries rose as Obama and Republican lawmakers held their ground in the negotiations. Ten-year U.S. note yields lost two basis point to 1.58 percent at 11:02 a.m. in New York, the lowest in more than two weeks.

The president’s public remarks were followed by a closed question-and-answer session with the executives. It follows Obama’s statement in a Bloomberg Television interview yesterday that he won’t make a deal on the country’s fiscal future unless congressional leaders first accept tax-rate increases on top earners.

Making Concessions

“We have the potential of getting a deal done,” he said in his first interview since winning re-election. “We’re going to have to see the rates on the top 2 percent go up, and we’re not going to be able to get a deal without it.”

Obama paired his ultimatum on taxes with signals he is ready to make concessions to Republican House Speaker John Boehner’s calls for cuts to entitlement programs such as Medicare health insurance for the elderly.

Obama is seeking to raise income tax rates on individuals earning $200,000 or more a year and married couples earning $250,000 and more annually. The president contends the Republican plan -- that any increase in tax revenues must come only from limiting deductions and other breaks -- can’t raise enough money without adding to the tax burden of middle-class families.

Boehner, an Ohio Republican, sent a letter to the White House laying out a proposal to avert the automatic spending cuts and tax increases. The proposal included $2.2 trillion in cuts and new tax revenue without raising rates. Obama has rejected that plan.

Boehner said today that Republicans, who control the House of Representatives, want to resolve the debt standoff and that he’ll be “available at any moment to sit down with the president.”

The address to the Business Roundtable, Obama’s second this year, is part of an administration outreach to corporate executives to keep up pressure on congressional Republicans to reach a deal. He’s had at least three White House meetings over the past three weeks with business and financial industry chief executives.

To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net

To contact the editor responsible for this story: Steve Komarow at skomarow1@bloomberg.net


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