Obama says 'tough compromises' needed in fiscal cliff talks

President Barack Obama called Friday on both Democrats and Republicans to make "tough compromises" in order to overcome divisions over deficit reduction and avoid the fiscal cliff.

Opening talks aimed at avoiding a year-end tax and spending crunch that could send the economy back to recession, Obama welcomed congressional leaders from both parties at the White House, saying Americans want action from them.

Neither Obama nor his Republican opposite John Boehner, Speaker of the House of Representatives, repeated any of the demands they laid out earlier in the week on whether taxes should go up for the wealthy.

Following the initial meeting, Boehner said that the framework was consistent with "a fair and balanced approach."

"To show our seriousness, we've put revenue on the table. As long as it's accompanied by significant spending cuts," he said.

Obama opened the discussions, saying the American people "want to see that we are focused on them, not on the politics here in Washington."

"Our challenge is to make sure that we're able to cooperate together, work together, find some common ground, make some tough compromises, build some consensus to do the people's business."

The first priority was reversing the so-called fiscal cliff, which involves a series of steep across-the-board budget cuts and tax hikes slated to hit on January 1 that could suck more than $500 billion out of the economy.

The talks also are aimed at laying the groundwork for a long-term deficit reduction plan involving both a revamp of the US tax code to bring in more revenues, and some major changes to contain spending on Social Security and Medicare.

Also taking part in the talks were Senate Democratic leader Harry Reid, his Republican counterpart Mitch McConnell, and Nancy Pelosi, the leader of the minority Democrats in the House.

Obama stressed they need to make sure the tax hikes do not hit middle class Americans.

But he did not repeat his call for tax increases on the richest two percent of Americans -- an approach that Republicans have rejected repeatedly in the past.

"We have to make sure that taxes don't go up on middle class families and that our economy remains strong and creating jobs, and that's an agenda that Democrats and Republicans and Independents, people all across the country share," he said.

Even if the fiscal cliff is avoided, the government still will be confronted with a massive debt load of $16.2 trillion and a deficit that has topped $1 trillion a year for four years running.

Debt rating agencies like Standard & Poor's and Moody's have warned that the US faces a possible downgrade this year if it does not get the deficit under control.

Both sides have said they are willing to shake up the tax system to eliminate loopholes and deductions, and Obama has signaled that he is ready to engage Republicans on the sensitive issue of "entitlement" spending on social programs.

Some Republicans have proposed raising the age for Social Security beneficiaries from 65 to 67 to strengthen the retirement program's finances over the long term.

"My hope is this is going to be the beginning of a fruitful process, that we're able to come to agreement that will reduce our deficit in a balanced way, that we will deal with some of these long-term impediments to growth," Obama said.

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