Washington - President Barack Obama was seeking to enlist business leaders on Wednesday in his bid to pressure Republicans in Congress to accept higher taxes as part of a budget deal that would prevent a dysfunctional Washington from pushing the economy into recession.
The White House meeting could be more pep rally than negotiating session. Many of those attending agree with Obama's position that any significant deal to set the country's finances on a stable course must include tax hikes as well as spending cuts.
White House adversaries from Wall Street and the Chamber of Commerce were not invited.
Nevertheless, the photo opportunity could rattle Republicans licking their wounds after last week's election that gave Obama another four years in office and sent more of his Democrats to the House of Representatives and the Senate.
The two sides have roughly six weeks to reach a deal before $600 billion worth of automatic tax increases and spending cuts kick in at the beginning of the year, which could push the sluggish US economy into recession.
More voters would blame Republicans than Obama if the two sides failed to reach a deal to avert this so-called “fiscal cliff”, according to a Pew Research Center/Washington Post poll.
Obama is reaching beyond Washington to ramp up pressure on Republicans. He met with leaders of labour and liberal groups on Tuesday and later urged those who volunteered for his re-election campaign to push for a deal at the grassroots level.
The president has scheduled talks with Republican and Democratic leaders in Congress on Friday.
On Wednesday, Obama will meet with a dozen chief executives. Several in the group, including General Electric Co's Jeff Immelt, Aetna Inc's Mark Bertolini, Honeywell International Inc.'s David Cote and Dow Chemical Co's Andrew Liveris, have launched an ad-hoc lobbying group called “Fix the Debt” that calls for increased tax revenue as well as spending cuts, roughly in line with Obama's position.
Obama is likely to increase the pressure further at a White House press conference.
Republican leaders have indicated some willingness to compromise. While they oppose Obama's plan to raise tax rates on the wealthiest 2 percent of US taxpayers, they have said that they might go along with a deal that would raise additional tax revenue by limiting tax breaks for the wealthy.
The White House has made it clear it is ready to negotiate, but said on Tuesday that any deal must include $1.6 trillion in tax revenues and raise rates on the wealthiest, who have fared better than the rest of the population in the wake of the 2008-2009 recession.
“It's clear that the White House is taking a hard line in its negotiations with Republicans,” wrote analysts at the research firm International Strategy & Investment.
If the two sides do not reach a deal by the end of the year, tax rates on income and investments will rise for all Americans and government programs from the military to education will face deep, across-the-board tax cuts. A broad range of business tax breaks for everything from wind power to research costs would expire as well.
That could cause the economy to shrink by 0.5 percent and push the unemployment rate up to 9.1 percent by the end of next year, according to the Congressional Budget Office.
The deadline comes from years of dysfunction as lawmakers and presidents have postponed tough decisions that would put the nation's finances on a sustainable course.
Reaching a deal by the end of the year will be difficult, due to the sheer number of tax and spending provisions in play. Increased political polarisation also makes consensus elusive.
Obama and Republicans could settle on a temporary deal that would give them more time to reach compromise, or agree to the broad outlines of a far-reaching budget plan that could boost the economy in the short term and rein in the country's growing debt burden over the coming decade.
Or they could fail to reach a deal entirely and plunge off the fiscal cliff.
Some Democrats have suggested that this scenario could give them more leverage when income tax rates automatically rise on Jan. 1 to levels that were in place during the 1990s. By this line of thinking, Republicans might be more willing to agree to a tax deal that would lower rates back to their current levels for the bottom 98 percent.
“Republicans ... need to decide if they're going to stay and protect the wealthiest Americans from participating in this challenge that we have. And if they do that, then we have no other choice but to go into next year when all the Bush tax cuts expire and start over,” Democratic Senator Patty Murray said on CNBC.
That idea clearly spooks corporate America, which is urging policymakers to settle the issue before the end of the year. Some business leaders say failure could prompt them to shift their investments overseas, and others say the uncertainty is already slowing down the economic recovery.
Goldman Sachs chief executive Lloyd Blankfein wrote Wednesday in the Wall Street Journal that a deal could prompt companies to put more than $1 trillion worth of sidelined cash to work if the Obama administration and the business community could rise above their often-strained relationship.
“We are all ready to roll up our sleeves and work with the Obama administration and Congress to help fulfill America's enduring promise,” wrote Blankfein, who has become for many Americans a symbol of Wall Street excess.
Mayors from 163 US cities wrote a letter warning that the scheduled spending cuts could devastate their communities. Several plan to lobby lawmakers in person on Thursday.
The United States is not the only economy at risk.
International Monetary Fund chief Christine Lagarde said in Malaysia there was “nowhere to hide” in the global economy as uncertainty over the fiscal cliff and the European debt crisis spreads to Asia and other emerging regions. - Reuters