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Obama: U.S. must extend tax cuts for middle class, can't do same for wealthy

U.S. President Barack Obama said 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 ahead of next week's meeting on the issue with Republicans.
/ Source: Reuters

U.S. President Barack Obama said 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 ahead of 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 said during a visit to an auto plant that benefited from his government-rescue of the U.S. car industry.

Obama welcomed news that the U.S. economy had grown at a faster than initially thought 2.5 percent annual pace in the third quarter. He warned it still had a way to go before it was completely out of the woods and government could not afford to take money from families that were 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 Jan. 1 to a tax increase of $3,000 per year."

The president meets Republican and Democratic congressional leaders on Nov. 30 to work out what to do about the Bush-era tax cuts and other pressing legislation to complete before a new Congress — with a House of Representative dominated by Republicans — begins in January.

"The last thing we can afford to do right now is raise taxes on middle-class families," Obama said.

Republicans, who won control of the House in the Nov. 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.

Obama says they should rise for families making more than $250,000 a year but he has made extending them 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."