Obama & Tax Cuts: Can We Afford to Borrow $700B?

President Barack Obama's next big challenge working with the Republicans will begin in two weeks when he meets with the Congressional leadership. The Bush-era tax cuts automatically expire at the end of the year unless Congress renews them.

Mr. Obama wants to keep the tax breaks for middle class families earning less than $250,000 a year. He would let them expire for wealthier taxpayers; the Republicans want the tax cuts extended for everyone to keep the economy moving.

When asked if he was ready to compromise with the Republicans on the Bush tax breaks, the president told "60 Minutes" correspondent Steve Kroft he expected a serious conversation on it.

But he added that extending the Bush tax cuts for people making over $250,000 a year over the next ten years would require borrowing $700 billion.

Steve Kroft: One of the first chances you're gonna get to show a spirit of cooperation is on the Bush tax cuts, which are set to expire at the end of the year. You've said that you want to keep 'em in place for the middle class. You want them to expire for the wealthier Americans. The Republicans want to keep them for everybody. Are you ready to compromise on the Bush tax breaks?

President Obama: I think we're gonna have to have a serious conversation about it. Here's an example where I'd like to think we could at least settle on those things we agree on. I think both Democrats and Republicans agree that for people making $250,000 a year or less, the last thing we want right now is to see their taxes go up. Not only would it be bad for them, but it'd be bad for the economy as a whole. Because those are the folks who are most likely to spend. And a lot of them are having trouble paying the bills. So, we don't want to make it harder on them. We want to make it easier on them to be able to participate effectively in the economy. For folks who are making more than $250,000 a year, you and me, Steve you know, the question is, can we afford to borrow $700 billion.

Kroft: That's what it is?

Obama: That's how much it would cost over the course of ten years. To give us an extra tax break. Or does it make sense to say to us, "You know what? After the first $250,000, your tax rates are gonna go back to what they were under Bill Clinton." When, by the way, rich people were doing pretty well.

Sometimes I think this debate gets framed as if I think rich people, folks who are doing well, should be punished.

Kroft: Well, I . . .

Obama: Part of what America's all about is going out there and getting rich. And, you know, if you make a good product, you provide a good service, God bless you. I want you to do well. Then you can plow that money back into creating jobs. And building your businesses. That's terrific. What I don't think makes sense is for us to borrow $700 billion to pay for that. And we don't have the money. I mean, everybody's already talking about our debt and our deficit. Why would we want to add to it? Now, having said all that . . .

Kroft: The Republicans want everybody . . .

Obama: I understand the Republicans have a different view. And so, we are going to have to have a negotiation. And I am open to, you know, finding a way in which, you know, they can meet their, you know, principles and I can meet mine. But in order to do that, I think we do have to answer the question of how we pay for it. If in fact we're gonna extend these tax cuts, then we've got to figure out what does that mean for our debt and our deficit. Because there's no gettin' getting' around it. It's gonna cost $700 billion to extend those . . .

Kroft: Over 10 years.

Obama: Over 10 years. Yeah.

Kroft: Congressman Boehner is the next Speaker of the House, most likely, offered you a compromise back in September. He suggested extending the tax break for the wealthiest for two more years. And rolling back discretionary government spending to levels before the bailout in 2008. Is that something that you could live with?

Obama: I think that when we start getting specific like that, there's a basis for a conversation. I think that what that means is that, you know, we can look at what the budget projections are. We can think about what the economy needs right now. Given that it's still weak. And hopefully, we can agree on a set of facts that leads to a compromise. But my number one priority coming into this is making sure that middle class families don't see their tax rates go up January 1st.

Kroft: Do you want to make a counter proposal to him right now?

Obama: I've already invited them over to the White House. And you know, there're gonna be a bunch of discussions. But I think we can make progress on this. It's not, by the way, just tax cuts for individuals that we're concerned about. There are also a bunch of provisions for businesses in terms of how business investment is treated. If they're investing in research and development here in the United States and what kind of tax breaks do they get on that. We need to provide businesses certainty on that. We've got to do before the end of the year. And my hope and expectation is that we can solve this problem.

Kroft: The point of view of a lot of people is, why would you want to raise taxes on the people who have money to spend? Not necessarily the wealthiest people in America. You're not talking about Goldman Sachs here. You're talking about small business people who maybe make $250,000 a year.

Obama: Well . . .

Kroft: Why would you want to take that money back, when they've got money to spend to put it into the economy?

Obama: Well, well, keep in mind, first of all, that under the proposal we put forward, folks who make $300,000 a year, would still get tax breaks up to $250,000. So, the majority of their taxes would still be low. It'd just be the amount over $250,000, where they'd go back to the Clinton tax rates.

The truth is that the way this thing works out, it's folks who are millionaires and billionaires who get the biggest breaks. And, you know, if you talk to Warren Buffett, he'll tell you, "I'm not gonna buy somethin' because of a tax break, because whatever it is I need, I can already afford." And the same is true for me. And the same is true for you.

And it turns out that actually the people who are most likely to use that money and spend that money are actually people of more modest means, and if what we're concerned about is how we can grow the economy, there are more efficient ways to recirculate dollars out there and get people to spend.

I mean unemployment insurance, most economists will tell you, is probably the single most important thing we can do to improve the economy, because if you're unemployed, you're out there looking for work, that unemployment insurance is gonna make a difference as to whether or not you can pay your bills.