UPDATE 4-U.S. Republican Boehner says spending cuts No. 1

* Boehner says Americans want lower spending

* Republican leader won’t say what cuts he will seek

* Obama says open to talks with Republicans on taxes
(Adds comments from Obama, Reid on Bush tax cuts)

By Richard Cowan and Kim Dixon

WASHINGTON, Nov 3 (BestGrowthStock) – U.S. House of Representatives
Republican leader John Boehner put lower government spending at
the top of Congress’ agenda next year, a day after his party
took control of the House.

“It’s pretty clear the American people want us to do
something about cutting spending here in Washington and helping
to create an environment where we’ll get jobs back,” Boehner
told reporters on Wednesday.

Republicans picked up at least 60 seats in Tuesday’s
elections to hold a solid majority in next year’s House.
Boehner is expected to get the top job of House speaker,
supplanting Democrat Nancy Pelosi. [ID:nN03266983]

With last year’s U.S. budget deficit at a whopping $1.29
trillion, equal to 8.9 percent of gross domestic product,
voters have been clamoring for smaller, less expensive
government.

Some economists fear that politicians could pare spending
too much and wind up stifling economic growth, while others
have called for more stimulus spending to boost tepid economic
growth that has failed to significantly reduce an unemployment
rate stuck near 10 percent.

Embracing the small government theme, House Republicans
have promised to rein in government. In September, they said
their first step would be to cut Washington’s spending back to
2008 levels, achieving $100 billion in savings immediately — a
move that would do little to sop up the red ink on the ledger.

Republicans have also been pushing for bigger tax cuts than
President Barack Obama wants, which would add more to the
federal debt than would Democratic tax-cut proposals.

Obama on Wednesday said there is a potential for compromise
on the tax issue.

“How that negotiation works itself out I think it’s too
early to say,” he said at a Wednesday news conference.

During remarks to reporters earlier, Boehner refused to go
into detail on the spending cuts he would seek. Asked for the
No. 1 spending cut on his list, the Ohio Republican would only
say: “We’ll make a lot of decisions over the coming months.”

He later repeated his call to freeze spending at 2008
levels.

The first fight in Congress on spending priorities will be
over the fiscal 2011 funding for across-the-board government
activities. The debate over priorities for the fiscal year,
which began on Oct. 1, could resume as early as Nov. 15, when
the current Congress holds a post-election work session.

But if the outgoing Congress cannot reach a deal, spending
priorities for the rest of the fiscal year will be fought out
in January or February, after Republicans take control of the
House from Democrats and a larger bloc of Republicans joins a
Senate still under Democratic control.

BUSH TAX CUTS

The second major fight will be over the broad tax cuts won
by Republican President George W. Bush that will expire at the
end of this year if Congress does not act.

Republicans favor fully extending the lower rates for all
Americans, while Obama and most Democrats back renewing them
only for individual annual income up to $200,000 and family
income up to $250,000.

“The single most important thing I think we need to do
economically — and this is something that has to be done
during the lame-duck session — is making sure that taxes don’t
go up on middle-class families next year,” Obama said on
Wednesday.

A potential compromise would be permanent extension of the
lower rates for the so-called middle class, and a temporary
extension of lower rates for wealthier Americans.

Obama said he hopes to meet with Boehner and other
congressional leaders in coming weeks to work on a deal and
avoid “brinkmanship.”

At a news conference on Wednesday, Boehner said: “We
continue to believe that extending all of the current tax rates
for all Americans is the right policy for our economy at this
time.” He did not elaborate, when asked, whether he would
consider any compromise.

On the Senate side, where Democrats still retain power,
albeit with a slimmer majority, Senate Majority Leader Harry
Reid said a permanent extension of all the tax cuts “won’t
happen.”

Reid won re-election after a tough race on Tuesday, fending
off a popular candidate of the anti-tax Tea Party movement.

Because taxes are levied marginally, an individual making
$250,000 would only pay the highest rate on income above the
$200,000 threshold.

Lower tax rates on dividends and capital gains for high
earners also would expire at year’s end unless Congress
extends them. [ID:nN1545673]

“It comes down fundamentally to a question of: Are
Republicans willing to cut a deal on tax issues with Democrats
to get them off the table temporarily, or whether they think
they can get a better deal in January and February,” said Clint
Stretch, tax principal at Deloitte Tax and a former
congressional staffer.

UPDATE 4-U.S. Republican Boehner says spending cuts No. 1