Obama to Republican: raise taxes on rich or no deal

President Barack Obama warned Republicans Tuesday there would be no deal on averting a potentially disastrous fiscal crisis without them caving in to his demand to raise tax rates on the rich. But in an interview with Bloomberg TV, Obama offered a hint of wiggle room, declining to specify that the top income tax rate on the wealthy must go up all the way to the 39.6 percent seen under the Clinton administration. "We have the potential of getting a deal done," Obama said, adding that Republican proposals to close loopholes and cap deductions would not produce sufficient revenue to make a serious cut in the deficit. "We're going to have to see the rates on the top two percent go up and we're not going to be able to get a deal without it," Obama said. If Obama and Republicans cannot get a deal, George W. Bush-era tax cuts on all Americans will expire on January 1, at the same time as huge automatic spending cuts come into force, likely throwing the economy into recession. Obama wants to extend tax cuts for most people, but raise rates on the richest two percent of Americans but Republicans want to extend all tax cuts for a year, then discuss spending cuts and tax reform to produce more revenues. The president campaigned for re-election on the basis of raising taxes on the wealthiest Americans, while Republicans, though open to raising more revenue, refuse to do so by raising marginal tax rates. "Let's let the tax rates on the upper income folks go up," Obama told Bloomberg, arguing that there was no time before the deadline to work out comprehensive reform on taxes and social programs that Republicans want. "Then let's set up a process with a time certain at the end of 2013 or the fall of 2013 where we work on tax reform (where) we look at what loopholes and deductions both Democrats and Republicans are willing to close. "It's possible we may be able to lower rates by broadening the base at that point." Obama noticeably did not commit himself to a specific top tax rate for the wealthiest Americans -- which he defines as individuals earning $200,000 or families making $250,000 a year -- either this year, or next. Some analysts believe that the crisis over the so-called "fiscal cliff" could be defused by Republicans agreeing to raise the top tax rate, but to a point some way short of the Clinton-era rate. Obama in return could offer cuts in entitlement spending and allow the closure of some tax loopholes to raise further revenue.