The nonpartisan Congressional Budget Office has warned that if Obama and Congress cannot find a solution to avert the so-called fiscal cliff, the U.S. risks a recession and the unemployment rate may rise from the current 7.9 to 9.1 percent.
Therefore, the president and lawmakers now have to make some big decisions on taxes and the more than $16 trillion deficit.
Though all parties present at the table indicate they are ready to do bipartisan work that benefits the American public, things may not go so smoothly, because there are some big differences in how to tackle the problem, mainly on higher taxes and whether new revenue can be found without such an increase.
Obama, who has said working together is the only way to solve the problem, will be bringing to the table his request to raise taxes on incomes higher than $250,000 (or $200,000 for single taxpayers) to get $1.6 trillion over the next 10 years.
In his first press conference since reelection, Obama said what lawmakers can do now is give the middle class more certainty in the weeks ahead by passing a law preventing any tax hike on the first $250,000 of everybody’s income.
“That means every American, including the wealthiest Americans, gets a tax cut,” Obama said. “It means that 98 percent of all Americans and 97 percent of all small businesses won’t see their taxes go up a single dime.”
But Republicans are leaning toward tax and entitlement reform and closing some loopholes in order to get the revenue needed to go along with the spending cuts.
Talks have failed between Democrats and Republicans last year, when they had to seek a compromise over the nation's debt ceiling. Those failures are what resulted in the fiscal cliff that's fast approaching.
But both sides are optismistic for a better outcome this time around. Obama comes to the table with a large-margin election win over Republican challenger Mitt Romney. He has, on more than one occasion, reminded Republicans that Americans agree that the wealthy must pay more.
"It’s very difficult to see how you make up that trillion dollars -- if we’re serious about deficit reduction -- just by closing loopholes and deductions," Obama said at the press conference. "The math tends not to work. And I think it’s important to establish a basic principle that was debated extensively during the course of this campaign. I mean, this shouldn’t be a surprise to anybody. If there was one thing that everybody understood was a big difference between myself and Mr. Romney, it was when it comes to how we reduce our deficit, I argued for a balanced, responsible approach, and part of that included making sure that the wealthiest Americans pay a little bit more.
"I think every voter out there understood that that was an important debate, and the majority of voters agreed with me," he continued. "By the way, more voters agreed with me on this issue than voted for me. So we’ve got a clear majority of the American people who recognize if we’re going to be serious about deficit reduction, we’ve got to do it in a balanced way."