Obama challenges Congress on taxes, debt limit

WASHINGTON  President Obama sternly warned Congress Wednesday about "significant and unpredictable" economic consequences if lawmakers fail to raise the nation's $14.3 trillion debt limit.

"I am not engaging in scare tactics," Obama said of the Aug. 2 deadline, which the Treasury Department has said might change by a few days. "The consequences for the U.S. economy will be significant and unpredictable. We don't know how capital markets will react."

Without a higher debt limit, Obama said, decisions would have to be made about "which bills are we going to decide to pay."

He said that if Chinese and other investors must be paid to avoid default, it could mean not paying Social Security recipients or disabled veterans.

In a news conference notable for its defiant tone, Obama defended his leadership on the national debt and his insistence that taxes be included among the trillions of dollars all sides want to cut from future deficits. Lawmakers, he said, "need to do their job."

He mentioned a few pet peeves repeatedly, such as tax breaks for corporate jet owners (worth about $3 billion over 10 years), hedge fund managers ($21 billion) and oil and gas companies ($40 billion) that he wants to eliminate. That's less than 1% of the projected 10-year, $7.2 trillion budget deficit.

"The tax cuts I'm proposing we get rid of are tax breaks for millionaires and billionaires," he said.

Senate Republican leader Mitch McConnell of Kentucky said Obama seeks tax increases that would stall the economy and kill jobs.

"The Democrats' spending spree has brought us to the brink of an economic calamity," McConnell said. "Now they're telling taxpayers they won't do anything to prevent it unless the taxpayers hand over more money in the form of tax hikes."

House Speaker John Boehner of Ohio said Republicans, not the White House, have led the effort to rein in federal spending. "The president has been AWOL from that debate," he said.

The president's 14th full news conference since taking office 29 months ago was his first since March.

He called for deficit reduction and job creation, insisting they could go hand in hand.

Obama said a payroll tax cut for workers that was enacted in December should be extended for another year.

He called on Congress to approve free-trade agreements with South Korea, Colombia and Panama as well as legislation that would create loans for infrastructure and make it easier to get patents.

Unemployment is at 9.1%, and "the American people need to know we're also focused on jobs, and not just on deficit reduction," he said.

During the hour-long session with reporters, Obama declined once again to endorse gay marriage, but he made clear he approved of New York's action last week in becoming the largest state to let gays and lesbians tie the knot.

The state Legislature's vote "was a good thing," the president said. He said gays "have got to be treated like every other American."

"I think that principle will win out," Obama said. "I think we're moving in a direction of greater equality, and I think that's a good thing."

The president also addressed U.S. actions overseas, from Afghanistan to Libya:

•He said progress in Afghanistan was one reason for his decision to remove 10,000 troops this year and 23,000 more by September 2012.

•He said his decision to participate in NATO's action against Libya was necessary to protect the Libyan people, and he predicted dictator Moammar Gadhafi would be ousted eventually. "He needs to go," Obama said.

Noting many lawmakers have questioned whether he has the right to continue military action against Libya, Obama called Gadhafi "one of the worst tyrants in the world."

"This suddenly becomes the cause célèbre for some folks in Congress? Come on," Obama scoffed. "A lot of this fuss is politics."

Brent Jones. For publication consideration in the newspaper, send comments to For more information about reprints & permissions , visit our FAQ's. To report corrections and clarifications, contact Standards Editor. For publication consideration in the newspaper, send comments to letters@usatoday.com . Include name, phone number, city and state for verification. To view our corrections, go to corrections.usatoday.com