White House, Republicans eye middle ground on tax cuts

WASHINGTON - President Barack Obama said Sunday that he's committed to extending tax cuts for middle-class Americans by the end of the year and indicated he's willing to negotiate with Republicans an extension for the country's highest earners.

"I believe it is a mistake for us to borrow $700 billion to make tax cuts permanent for millionaires and billionaires," Obama told reporters aboard Air Force One on his way back from a 10-day trip to Asia. "It won't significantly boost the economy and it's hugely expensive, so we can't afford it."

Obama meets this week with congressional leaders from both parties at the White House for the first time since the Democrats' midterm election losses, in which Republicans took control of the House of Representatives and gained Senate seats.

Obama said he expects the Thursday meeting, to be a constructive conversation to map out the legislative agenda for the lame duck session of Congress, which begins Monday.

"There may be some need for compromise, but we should be able at least to get through the lame-duck making sure that taxes don't go up for middle class families starting Jan 1, that some of the key business provisions that can assure economic growth get done," Obama said.

Republicans want to continue income tax cuts enacted when George W. Bush was president for households at all income levels. Obama and congressional Democrats support keeping the cuts only for the first $200,000 of income for individuals and $250,000 for married couples.

Sustaining tax cuts for those with higher incomes would add $700 billion to the debt over the next decade, Treasury Secretary Timothy Geithner has said.

"I want to hear from them how strongly they feel about it, particularly given that they're also saying they want to control the deficit and debt," Obama said of Republicans. "If they feel very strongly about it, then I want to get a sense of how they intend to pay for it."

Senate Minority Leader Mitch McConnell of Kentucky has introduced legislation that would extend the current tax rates permanently, but Sunday he signaled an openness to negotiate.

"I'm willing to listen to what the president has in mind for protecting Americans from tax increases," he said in a statement.

Two prominent Republicans conceded Sunday that the best Congress might be able to accomplish in the coming weeks is a short-term continuation of the current tax rates.

"If the president wants to compromise on a two- or three-year extension . . . if that's all we can get out of the president, and he is the president, so we'll work with him on that," said Sen. Jim DeMint, a South Carolina Republican and a leader of his party's conservative wing.

Sen. John McCain (R-Ariz.), who voted against the Bush cuts, said he could fathom a short-term extension of all the cuts.

"They should be extended until we are out of this recession," he said. " . . when we're in a serious recession I cannot believe that raising taxes is a good thing on anybody."