Obama hails tax bill, warns GOP not to pick fight on debt ceiling

President Obama hailed the sweeping bipartisan tax deal Tuesday night as "one step in a broader effort" to strengthen the nation's economy, saying it prevented a middle-class tax hike that could have sent the economy back into recession.

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The president, taking a victory lap after fulfilling a campaign promise to raise taxes on the wealthy, spoke less than an hour after the House approved the tax deal, 257-167, in a rare New Year's Day vote. 

“A simple premise of my campaign for president was to change the tax code that was too skewed toward the wealthy at the expense of working middle-class Americans. Tonight, we’ve done that, ” Obama said, standing beside Vice President Biden in the White House briefing room just before 11:30 p.m.

“Thanks to the votes of Democrats and Republicans in Congress, I will sign a law that raises taxes on the wealthiest 2 percent of Americans while preventing a middle-class tax hike that could have sent the economy back in a recession and obviously had a severe impact on families all across America,” he said.

In remarks that ran just over seven minutes, Obama commended the work that was done to seal the deal by Biden along with Senate Majority Leader Harry Reid (D-Nev.), Senate Minority Leader Mitch McConnell (R-Ky.), Speaker John Boehner (R-Ohio), who voted for the legislation, and House Minority Leader Nancy Pelosi (D-Calif.).  

For the second day in a row, Obama conceded that he had hoped for a larger deal but said there “just wasn’t enough support or time” for a grand bargain on the deficit. 

And he warned that the “failure comes with a cost, as the messy nature of the process over the past several weeks has made business more uncertain and consumers less confident.”

"We are continuing to chip away at this problem, step by step," he said. And in a nod to GOP lawmakers, he added “there’s further unnecessary spending that we can cut.”

But even as Obama struck a conciliatory tone on spending, he issued a stern warning to Republicans about the approaching fight over raising the nation's debt ceiling. 

“While I will negotiate over many things, I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed,” he said. “Let me repeat: We can't not pay bills that we've already incurred. If Congress refuses to give the United States government the ability to pay these bills on time, the consequences for the entire global economy would be catastrophic — far worse than the impact of a fiscal cliff.”

He reminded the nation about the debt crisis in 2011, during which, he said, “our entire recovery was put at risk.”

The House vote ended a dramatic turn of events on Tuesday in which Republican leaders considered and then quickly pivoted from a plan to amend legislation approved by the Senate in the early hours on Tuesday morning.

The legislation, which will now be signed by Obama, will extend current tax rates on annual family income up to $450,000. It will lift the top capital gains and dividends rates to 20 percent while extending unemployment insurance to 2 million Americans.

But Obama said the legislation is part of a larger effort.

“The fact is the deficit is still too high and we’re still investing too little in the things that we need for the economy to grow as fast as we should,” he said.

While the legislation passed by both chambers delays automatic spending cuts for two months, it also sets up another showdown in the coming months over replacing those cuts when Congress must deal with the debt ceiling and funding the federal government.

Obama said the country could not afford a repeat of the debt-ceiling drama. 

“Consumer confidence plunged,” he said. “Business investment plunged. Growth dropped. We can't go down that path again.”