The president's remarks were his first extended public discussion of the issue that is dominating the postelection session of Congress. Known as "fiscal cliff," it is a convergence of mandatory spending cuts and the expiration of tax cuts that are all scheduled to take effect Jan. 1.
"A modest tax increase on the wealthy is not going to break their backs," Obama said of the nation's top income earners. "They'll still be wealthy," he said at his first news conference since winning a second term.
At the same time, the president stressed he was amenable to compromise on other approaches from Republicans who say they will refuse to raise tax rates. "I believe this is solvable," he said during the news conference.
At a news conference of his own a short while later, Republican House Speaker John Boehner agreed that a bipartisan "spirit of co-operation" has been evident since the election that augurs well for talks expected to begin Friday at the White House.
However, he said of the president's proposal, "We are not going to hurt our economy and make job creation more difficult which is exactly what that plan would do."
Obama seemed eager to avoid issuing any ultimatums. Asked if it would be a deal-breaker for Republicans to refuse to allow the top tax rate to revert to 39.6 per cent from the current 35 per cent, he sidestepped. "I just want to emphasize I am open to new ideas if the Republican counterparts or some Democrats have a great idea for us to raise revenue, maintain progressivity, make sure the middle class isn't getting hit, reduces our deficit."
Wall Street wasn't encouraged that agreement was becoming more likely. The Dow Jones industrial average dropped 185 points for the day.
Boehner and Mitch McConnell, the Senate Republican leader, have said they, too, want a compromise and are willing to support additional tax revenues as part of a deal that includes tax reform and measures to recast the government's largest benefit programs. But they appear to rule out any legislation that raises tax rates.
McConnell issued a statement calling on Obama to "propose a specific plan that includes meaningful entitlement reforms to strengthen and protect these programs for future generations." He referred to government-sponsored health insurance for the elderly, the poor, and the pension plan.
The president has moved aggressively this week to lay down markers for any negotiations, first meeting with labour leaders and representatives of liberal groups at the White House, then welcoming a delegation of corporate chief executives for a private session moments after wrapping up his news conference.
Aides said the president is prepared to go to the public in the coming days to enlist support for his position. He said Wednesday, "The American people understood what they were getting" when they voted for him after a campaign that focused heavily on taxes.
Obama is expected to welcome the top leaders of both political parties to the White House on Friday for their first postelection face-to-face discussion of the fiscal cliff, which will take effect as 2012 gives way to the new year unless Congress intervenes.
Economists in both parties have cautioned that, given the sluggish state of the economy, a return to recession is likely unless lawmakers and the president reach a compromise on legislation.
At his news conference, Obama laid out bleak prospects if he and lawmakers can't reach agreement.
"Everybody's taxes will automatically go up, including the 98 per cent of Americans who make less than $250,000 a year, and the 97 per cent of small businesses who earn less than $250,000 a year. ... Our economy can't afford that right now," he said.
As an alternative, the president suggested that Congress pass legislation immediately to "prevent any tax hike whatsoever on the first $250,000 of everybody's income," a measure that he noted has passed the Senate and that Democrats in the House are ready to embrace.
He said enactment of legislation along those lines would eliminate half of the fiscal cliff.
White House Press Secretary Jay Carney said the president would bring to the table a proposal for $1.6 trillion in new taxes on business and the wealthy when he begins discussions with congressional Republicans, a figure that Obama outlined in his most recent budget plan. The targeted revenue is twice the amount Obama discussed with Republican leaders during debt talks during the summer of 2011.
Carney said the figure, combined with $1.1 trillion in spending cuts already signed into law, would reduce deficits by $4 trillion.