Tax hike has to come first: Barack Obama

President Barack Obama said on Wednesday that Republicans would have to agree to raise taxes on the wealthy as the first step in a budget deal that would prevent a dysfunctional Washington from pushing the economy into recession.

In his first news conference since winning re-election last week, Obama said he would be open to considering Republican priorities like entitlement reform and other ways to raise tax revenue as part of a broad-based deal to set the nation's finances on a sustainable course.

But he said Republicans in Congress would first have to agree to his top priority in the complex negotiations aimed at preventing $600 billion in tax increases and spending cuts from kicking in at the beginning of next year, a toxic combination known as the fiscal cliff that could strangle the weak economic recovery.

What I'm not going to do is to extend further a tax cut for folks who don't need it, Obama said, shortly before meeting with a dozen corporate executives who are pushing for a quick resolution.

Despite all the post-election talk about cooperation between Democrats and Republicans, the two sides seemed to be hardening their positions and Washington girded for a round of brinkmanship that could cast a pall of uncertainty over the economy through the Christmas holidays.

Republican leaders said Obama's stance had little chance of becoming law, while Democrats said a bill that passed the Senate a few months ago that would raise taxes on the wealthy should serve as the starting point. It's our bill or bust, a Democratic Senate aide said.

Both Republicans and Democrats want to keep low income tax rates in place for middle-income and low-income households, but Democrats say the wealthiest 2 percent should revert to the higher rates that were in place in the 1990s.

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