Obama's new term priorities: tax the rich and avoid 'fiscal cliff'

First speech after election triumph calls on Congress to take action

Barack Obama at the White House last night (Getty Images)

Fresh from an electoral triumph, President Obama began to spend some of his newly-accumulated political capital last night with a public call for Congress to avert the looming “fiscal cliff” by raising taxes on the wealthiest Americans while ensuring that the burden on the middle class doesn't rise.

From The White House, the President said: "Now that those of us on the campaign trail have had a chance to get a little sleep, it's time to get back to work... The American people vote for action, not for politics as usual."

He added: "I've put forward a detailed plan that allows us to make... investments while reducing our deficit by $4 trillion over the next decade."

While he went on to signal his openness to compromise, Mr Obama, well aware of election exit polls that showed most Americans agreed with the imposition of a greater burden on the better-off, dealt head-on with the Republican opposition to higher taxes on those earning more than $250,000-a-year.

"I'm not gonna ask students and seniors and middle-class families to pay down the entire deficit, while people like me making over $250,000 aren't asked to pay a dime more in taxes," he said, laying out his stall as he invited Congressional leaders – in particular the Republicans who control the House of Representatives – for talks next week to steer clear of the "fiscal cliff". This comprises $700bn in expiring Bush-era tax cuts and automatic spending reductions that kick in at the beginning of 2013.

The Democrats this week retained control of the Senate, and the divided legislature has rekindled fears of partisan gridlock, something the President is attempting to avoid.

The night before the President's address, the independent Congressional Budget Office (CBO) said that going off the cliff in January would push the US economy back into recession next year and drive the unemployment rate to more than nine per cent.

The President also called for a freeze on taxes for the middle class, which would also go up if January's changes aren't averted. "That one step could give millions of families, 98 per cent of Americans and 97 per cent of small businesses, the certainty that they need going into the new year," he said.

But in a sign that the Republicans aren't about to give in easily, the Republican Speaker of the House, John Boehner, reiterated his opposition to tax hikes for the wealthy just two hours before the President's address. "The problem with raising tax rates on the wealthiest Americans is that more than half of them are small business owners," Mr Boehner said in remarks ahead of the President's address.

He proposed putting off a fully-fledged deal until the new Congressional intake is installed come January. "I'm proposing that we avert the fiscal cliff together in a manner that ensures that 2013 is finally the year that our government comes to grips with the major problems that are facing us," he said.

Though he didn't offer any specifics – it was unclear whether, under this scenario, the cuts would be put off partially or entirely until a firmer deal is reached – Mr Boehner said if new revenues had to be raised, the focus should be on an overhaul of the tax code, not higher taxes.