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I won't continue tax breaks for the rich -- Obama

US president Barack Obama has launched his battle to avoid the looming "fiscal cliff" of a debt crisis by insisting there will be no extension of tax cuts for those making over $250,000 dollars (€197,000) a year.

Mr Obama's brief public comments were his first since his re-election as US President.

They set the tone for upcoming tense talks with congressional Republicans on avoiding a combination of deep spending cuts and the expiration of Bush-era tax cuts that automatically take effect on January 1 and which total $800bn (€630bn) next year alone.


Republicans want fiscal cliff avoidance tactics to rely on spending cuts, but Mr Obama insists higher taxes for the wealthy must be part of the solution.

"We can't just cut our way to prosperity," the president said.

Mr Obama reminded his audience that if no deal is struck with a still-divided Congress, "everybody's taxes will automatically go up on January 1.

"Everybody's ... That makes no sense. That would be bad for the economy".

He also invited Congressional leaders of both parties to the White House next week for talks on how to avoid the fiscal cliff.

Mr Obama had been silent since his victory speech on Wednesday, and leading Republicans have filled the vacuum with promises to stand resolutely against any effort to raise tax rates on the country's richest people.

The president's position is that tax rates on family income over $250,000 should jump back up to Clinton-era levels.

All sides say that they want a deal, and that now that the election is over, everyone can show more flexibility than in the heat of the campaign. Congress returns to work on Tuesday.

But Republicans warn that a fight could hurt efforts for future compromise in a bitterly divided Capitol and threaten Mr Obama's second-term agenda.

"Raising tax rates will slow down our ability to create the jobs that everyone says they want," John Boehner, the speaker of the Republican-controlled House of Representatives, told a press conference yesterday shortly before the president spoke.


Mr Boehner has warned that such a plan might not even pass the Senate, where Democrats hold control.

A lot is at stake, as a new Congressional Budget Office report predicted that the economy would fall into recession if there is a protracted impasse in Washington and the US government falls off the fiscal cliff for the entire year.

Though most Capitol-watchers think that a long deadlock is unlikely, analysts say such a scenario would cause a spike in the jobless rate to 9.1pc by next autumn. The rate is now at 7.9pc.