US President Barack Obama. Picture: REUTERS
US President Barack Obama. Picture: REUTERS

WASHINGTON — BARACK Obama has invoked his re-election mandate to reiterate his demand for a rise in taxes on the US’s wealthiest citizens, saying the country could suffer a "rude shock" if there were "too much stubbornness" in Congress over the policy.

At his first press conference in the White House since March last year, the president signalled some willingness to compromise with congressional Republicans over how to raise new revenue to bring down the budget deficit.

However, he said the party needed to accept that the top tax rate of 35% brought in by George Bush had to go up for the highest earners. The president said that his victory last week had given him a clear mandate to help middle-class families. "When it comes to the top 2%, what I’m not going to do is to extend further a tax cut for folks who don’t need it, which would cost close to $1-trillion," Mr Obama said.

Without a deal by the end of the year, the US will be hit by a combination of tax increases and spending cuts that threaten to tip the world’s largest economy back into recession. Formal talks are due to begin tomorrow between Mr Obama and congressional leaders.

Senior Democrats have suggested they are willing to allow the US at least temporarily to fall off the fiscal cliff if the Republicans do not agree to tax rises. Mr Obama said much of the danger of going over the fiscal cliff would be removed if Congress were to pass a bill extending tax cuts for Americans earning less than $250,000 a year — a compromise Republicans have resisted.

Republicans argue that lifting taxes on the wealthy would damage the drivers of job creation in the economy — including successful small business owners — and have said they would not accept a deal involving higher tax rates.

Mr Obama has not made any concessions to Republicans ahead of the first round of negotiations and continues to push a budget proposal that contains $1.6-trillion of higher taxes, double the figure Republicans offered in closed-door talks last year.

The president has also promised to find more spending cuts and reductions in health spending, with the ultimate aim of cutting the deficit by $4-trillion over the next decade.

Mr Obama also mounted a strong defence of Susan Rice, his ambassador to the United Nations, reacting angrily to a question over the threat by two senior Republican senators to block her possible nomination as secretary of state. "If Senator (John) McCain and Senator (Lindsey) Graham and others want to go after somebody, they should go after me," he said. "To besmirch her reputation is outrageous."

Financial Times