STEVE INSKEEP, host:
It's MORNING EDITION from NPR News. I'm Steve Inskeep.
RENEE MONTAGNE, host:
And I'm Renee Montagne. Good morning.
President Obama plans to spend a lot of the next year talking about taxes. In an interview with NPR, the president says he will push to overhaul the tax code in 2011, changing rates and closing loopholes. That will be the follow-up to this week's bitter compromise over tax cuts.
INSKEEP: The president struck a deal with Republicans to extend President Bush's tax cuts, including cuts for the wealthy. House Democrats were so furious, they voted yesterday to block the plan in its present form.
MONTAGNE: The president tells NPR he's willing to talk, but the framework of the deal will not change.
President BARACK OBAMA: What I suspect is that there are going to be some discussions, both between the House and the Senate. My understanding is that the Senate's going to vote on the package over the next several days and that at the end of the day, people are going to conclude we don't want 2 million people suddenly without unemployment insurance and not able to pay their rent, not able to pay their mortgage.
INSKEEP: If no bill is passed by the end of the year, everybody's taxes go up, and provisions Democrats favor, like extended jobless benefits and the payroll tax cut, would not become law. We talked about all this in the Oval Office.
When you negotiated with Republicans - or after you finished, you compared the situation to negotiating with hostage-takers. Now that your fellow Democrats, some of them, seem to be the hostage-takers, are you going to be able to give some ground to them?
President OBAMA: The bottom line is for everybody to act responsibly, and to think not in terms of abstract political fights here in Washing - here on Capitol Hill, but to think about those families that in the middle of the holiday season are trying to figure out, are they still going to have unemployment benefits at the end of this month?
INSKEEP: But can you accept some changes to this plan, or is it the kind of deal you cannot change?
President OBAMA: I think...
INSKEEP: Or will not change?
President OBAMA: My sense is, is that there are going to be discussions between both House and Senate leadership about all the final elements of the package. Keep in mind, we didn't actually write a bill. We put forward a framework. I'm confident that the framework is going to look like the one that we put forward.
INSKEEP: Meaning maybe you could add something to it, but not subtract. That's what I'm hearing you say.
President OBAMA: No, that's - that's not what I said. What I'm saying is, is that I'm confident that we're going to be able to get this resolved by the end of the month.
INSKEEP: Let me ask you about something that we heard from one of our listeners.
We told our listeners we were going to have this conversation today. We got many questions for you. One came from a man named Tom Pluck of Montclair, New Jersey - a man who describes himself as a supporter.
The question that we got was: Please ask him how keeping the tax rate for the richest the same as it has been for a decade creates one single job.
President OBAMA: It doesn't, which is why I was opposed to it - and I'm still opposed to it. The issue here is not whether I think that the tax cuts for the wealthy are a good or smart thing to do. I've said repeatedly that I think they're not a smart thing to do, particularly because we've got to borrow money, essentially, to pay for them.
The problem is, is that this is the single issue that the Republicans are willing to scotch the entire deal for. And in that circumstances - in that circumstance we've got, basically, a very simple choice. Either I allow 2 million people who are currently getting unemployment insurance not to get it, either I allow the recovery that we're on to be endangered, or we make a compromise now, understanding that for the next two years this is going to be a central battle as part of a larger discussion about how do we reform our tax code so that it's fair, and how do we make sure that we actually are dealing with the deficit and debt in an intelligent way?
INSKEEP: You mentioned having to borrow money to do this. Let me ask you about something that both Democrats and Republicans have raised. If you're going to allow these tax cuts to continue, if you're going to approve the other tax cuts, why not make corresponding spending cuts to finance it so they do not add so massively to the deficit?
President OBAMA: Well, we're going to have a long discussion next year about spending.�I put together a fiscal commission - over the resistance, I should note, of a number of Republicans who originally had supported it.
I think that Bowles-Simpson did a good job of sparking a conversation about how we need to move forward to deal with our medium- and long-term deficits. There have been other commissions that have been put forward over the last several weeks.
And I'm going to have to put a budget up that shows how I think we make some -a serious dent in our debt and our deficit. I think every economist - and by the way, the commissions who looked at this as well realize that because we've got a recovery that is still not as strong as we'd like it to be, the vast majority of economists, as well as both the chairman of the Bowles-Simpson commission, as well as other commissions, have suggested that because the recovery is just taking off and is still not producing as many jobs as it needs to, that it actually makes sense for us not do anything that contracts the economy right now, because the single most important thing we can do for deficit reduction is actually expand economic growth. That 1 percent of additional economic growth brings in a whole lot of revenue, even with no changes in the tax code.
INSKEEP: That's what they're saying the payroll tax will do, is 1 percent.
Mr. OBAMA: And so the payroll tax provision that is included in this package is going to help spark economic growth that will help. Now, it doesn't solve our medium- and long-term problems, so we're going to still have to make some very tough decisions. And these, too, are going to be unpopular.
And I promise, I'm going to get criticism from Democrats and Republicans throughout the year, in terms of the choices that I am going to be forcing Congress to take a square look at. Because look, the fact of the matter is that for a decade now, we have had the tendency to think that we can keep on having all the services we want, and we keep them - can keep cutting taxes as much as we want, and that somehow things are going to magically balance out. The American people understand that's not the case.
INSKEEP: Won't Republicans argue - and in fact, won't reality argue - that any cuts will have to be even deeper because this package that you're pushing for now will mean there's even less government revenue?
Mr. OBAMA: Actually, I think that if you talk to economists, both conservative and liberal, what they'll say is the problem is not next year. The problem is, how are we dealing with our medium-term debt and deficit, and how are we dealing with our long-term debt and deficit. And most of that has to do with entitlements, particularly Social Security and Medicaid.
INSKEEP: Let me ask about two or three years out. I'm thinking of the 1990s, when President Clinton famously said the era of big government is over. Because of the medium- and long-term need to restrain or cut spending, are you going to be in a position where the era of big government is going to be over again, there's going to have to be a fundamentally different approach to things?
Mr. OBAMA: I think there's going to have to be a fundamentally different approach to things, and I described earlier what I think that approach has to be. It's not an issue of big government versus small government. It's an issue of smart government.
You know, when families sit around the kitchen table, they say to themselves, what are the things we have to have? College education for our kids, paying our mortgage, getting the roof repaired, new boiler. What are the things that would be nice to have? A vacation, eating out, some new clothes. And if they can afford it, they buy things that they'd like to have. But the first thing they do is take care of the things that we have to have.
And under that category, I'd put things like research and development, education, making sure that we're sending our kids to college, rebuilding our infrastructure to compete on the 21st century, making sure that this country is safe. The other stuff, then we have to debate and figure out - can we get by with a little bit less in some of these other spending categories? And that's going to be a tough discussion, but it's one I'm confident we can have.
When we look at the deficit and the debt, I think it's important to understand this doesn't need to be Armageddon. This is not a situation where we've got to slash and burn everything. It does mean we've got to make choices.
INSKEEP: That's President Barack Obama, speaking yesterday in the Oval Office. We also spoke about a tax battle he expects next year. He says he wants to push to overhaul the whole tax code. We'll hear that discussion elsewhere in today's program, and there's a full transcript online at NPR.org.
It's MORNING EDITION, from NPR News. I'm Steve Inskeep.
RENEE MONTAGNE, host:
And I'm Renee Montagne.
President Obama plans to push for an overhaul of the federal tax code next year. In an interview with NPR, the president is talking of lowering tax rates and eliminating tax loopholes.
INSKEEP: He raises that possibility even as he works to save a tax deal he made with Republicans.
President BARACK OBAMA: The bottom line is for everybody to act responsibly.
MONTAGNE: The president infuriated Democrats when he agreed to extend President Bush's tax cuts for the wealthy, for two more years. It was part of a larger tax deal.
INSKEEP: In our conversation, the president predicted his plan will pass, anyway. He's also been suggesting that the much-criticized tax compromise could be left behind in 2011, as we discussed in the Oval Office.
Because this plan projects extending the Bush tax cuts for two years, it's been widely presumed that in two years or less, you're going to have another big fight over whether to extend these tax cuts.
This week, my colleague Scott Horsley asked you if there was a different possibility here. He asked if you were going to use this two-year window to push for a broader overhaul of the tax code. You said yes. I want you to expand on that yes.
What do you plan to do to the tax code in the next couple of years?
Pres. OBAMA: Well, I think we're going to have to have a conversation over the next year. And if you think about the last time we reformed our tax system, back in 1986 - it didn't happen right away, by the way. It required a lot of conversations among a lot of different parties.
But people of good will came together and realized that if we eliminate what happens to the tax code every decade or so, loopholes get built in, special-interest provisions get built in, the nominal rates end up high. But the actual tax rates that well-connected folks - or people who have good accountants - pay, end up being a lot lower. Ordinary people end up getting squeezed.
So typically, the idea is simplifying the system, hopefully lowering rates, broadening the base. That's something that I think most economists think would help us propel economic growth. But it's a very complicated conversation.
So what I believe is, is that we've got to start that conversation next year. I think we can get some broad bipartisan agreement that it needs to be done. But it's going to require a lot of hard work to actually make it happen.
INSKEEP: So that everybody understands what you're talking about, your deficit commission talked about lowering everybody's tax rate and eliminating deductions, such as changing the home mortgage deduction and many other deductions as well. That's the kind of plan you're talking about.
Pres. OBAMA: Well, I have not specifically endorsed that plan. What I'm saying is, is that the general concept of simplifying - eliminating loopholes, eliminating deductions, eliminating exemptions in certain categories - might make sense if, in exchange, people's rates are lower. That may end up being a more efficient way of doing business.
INSKEEP: Does that completely change this debate over the Bush tax cuts? Everything goes away; the tax code is just completely different than it was before.
Pres. OBAMA: Here's one thing that I don't think will change. And that is that people like myself, who have been incredibly blessed and who have a lot more income and wealth, can afford to pay more than we currently are paying. I strongly believe that. I believed that during the campaign for president. I believed it when I was campaigning during these midterms. I still believe it.
And so the fight about what the top 1 percent or 2 percent of America should be contributing, as part of our contribution to rebuilding America and putting it on a competitive footing, that basic principle is one that I continue to believe in, and I will be fighting for over the next two years.
INSKEEP: That's President Obama, in the Oval Office. We have more of the president's views on taxes and the economy elsewhere in today's program, and at npr.org.
Now, just a moment after he spoke with us, the president stood up, pulled on his coat, and went outside to light the White House Christmas tree. It is near the end of the year; the president is thinking of the conversation he says he wants to start on taxes, next year.
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