Obama: Not Extending Middle Class Tax Cuts Could Hurt Growth
KOKOMO, Indiana: President Barack Obama said on Tuesday the United States must extend tax cuts for the middle class but could not afford to do so for the wealthy, laying out his position before next week's meeting on the issue with Republicans.
Obama, who also told hard-hit Americans the U.S. economy was on the mend, said extending the middle-class tax cuts was critical to keeping the economic recovery on track.
"If we allow these taxes to go up, the result would be that a lot of people most likely would spend less. That means that the economy will grow less," he told workers at an auto plant.
Republicans, who won control of the House of Representatives in November 2 elections as voters punished Obama's Democrats for a sluggish economy and high unemployment, want to make the tax cuts permanent for all Americans.
Touting the success of his government rescue of the U.S. auto industry in a campaign-style rally, Obama welcomed news that U.S. economic growth was picking up.
He warned it had a way to go before it was out of the woods and said that meant government must not take money away from households likely to spend it.
"Next year, taxes are set to go up for middle-class families unless Congress acts," Obama said. "If we don't act by the end of the year, a typical middle-class family will wake up on January 1 to a tax increase of $3,000 per year."
Data released earlier on Tuesday showed that U.S. output grew at a 2.5 percent annual pace in the third quarter, up from a previously estimated 2 percent, reflecting stronger spending and export earnings than initially thought.
MEETING NEXT WEEK WITH REPUBLICANS
The president meets Republican and Democratic congressional leaders on November 30 to work out what to do about the Bush-era tax cuts and other pressing legislation to complete before a new Congress begins in January.
Obama says taxes should rise for families making more than $250,000 a year, but he has made extending cuts for middle-class families a top policy priority.
"This is actually an area where Democrats and Republicans agree," he said. "The only place where we disagree is whether we can afford to also borrow $700 billion to pay for an extra tax cut for the wealthiest Americans -- millionaires and billionaires. I don't think we can afford (that) right now."
Obama used his visit to highlight U.S. jobs saved by his multibillion-dollar taxpayer bailout of the auto industry, after a successful stock float by General Motors last week underscored renewed investor demand.
The bailouts were unpopular with many Americans. Obama wants to persuade the public they were worth the money, and used his visit to the Midwest, critical to his re-election chances in 2012, to sell that message.
"We're coming back. We're on the move. All three American (auto) companies are profitable, and they are growing," he said. "I want everybody to be absolutely clear, we are moving in the right direction."
(Writing by Jeff Mason and Alister Bull; Additional reporting by Deepa Seetharaman; Editing by Peter Cooney)
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