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| US faces crucial day of 'fiscal cliff' talks | US faces crucial day of 'fiscal cliff' talks |
| (about 1 hour later) | |
| US politicians are facing a crucial day of talks aimed at preventing the economy falling over a "fiscal cliff". | |
| Congress must reach a deal by the end of the year to avert steep spending cuts and tax rises due to take effect. | Congress must reach a deal by the end of the year to avert steep spending cuts and tax rises due to take effect. |
| President Barack Obama has said he is "modestly optimistic" that Senate leaders can craft a bill that could win approval in both chambers of Congress. | President Barack Obama has said he is "modestly optimistic" that Senate leaders can craft a bill that could win approval in both chambers of Congress. |
| If they fail, taxes will significantly rise for most Americans, raising fears of a US economic slowdown. | If they fail, taxes will significantly rise for most Americans, raising fears of a US economic slowdown. |
| Republicans and Democrats tried to resolve the looming crisis in 2011 but failed, instead signing temporary agreements which postponed the deadlock until the end of 2012. | Republicans and Democrats tried to resolve the looming crisis in 2011 but failed, instead signing temporary agreements which postponed the deadlock until the end of 2012. |
| Democrat Senate leader Harry Reid and his Republican counterpart Mitch McConnell have been locked in negotiations over the weekend, in an otherwise closed-down Capitol. | Democrat Senate leader Harry Reid and his Republican counterpart Mitch McConnell have been locked in negotiations over the weekend, in an otherwise closed-down Capitol. |
| According to the Washington Post, they have set themselves a deadline of 15:00 local time (20:00 GMT) to reach a compromise agreement, after which they will convene caucus meetings of their members and decide whether the measure has enough support to be put to a vote. | According to the Washington Post, they have set themselves a deadline of 15:00 local time (20:00 GMT) to reach a compromise agreement, after which they will convene caucus meetings of their members and decide whether the measure has enough support to be put to a vote. |
| The Senate could then vote on the measure and allow the House of Representatives enough time on Monday to consider it, said the paper. | The Senate could then vote on the measure and allow the House of Representatives enough time on Monday to consider it, said the paper. |
| But Republican and Democratic leaders remain divided over core ideological issues about tax and government funding. | But Republican and Democratic leaders remain divided over core ideological issues about tax and government funding. |
| There is also debate over where to set the threshold for tax rises. Democrats say tax cuts introduced by former President George W Bush and now due to expire should be extended for all Americans except the richest, those with annual earnings of more than $250,000 (£155,000), who should pay more. | |
| Republicans want the tax threshold set higher, at around $400,000, and for revenue to be raised by economic growth and cuts in social security and mandatory spending programmes. | Republicans want the tax threshold set higher, at around $400,000, and for revenue to be raised by economic growth and cuts in social security and mandatory spending programmes. |
| President Obama is scheduled to make a rare appearance on NBC's Meet the Press on Sunday. | President Obama is scheduled to make a rare appearance on NBC's Meet the Press on Sunday. |
| He has urged negotiators to reach a deal, even if the resulting legislation is an unhappy compromise for both sides which defers resolution of some elements under discussion. | He has urged negotiators to reach a deal, even if the resulting legislation is an unhappy compromise for both sides which defers resolution of some elements under discussion. |
| The country "just can't afford a politically self-inflicted wound to our economy," he said, warning that if they fail, "every American's paycheck will get a lot smaller". | The country "just can't afford a politically self-inflicted wound to our economy," he said, warning that if they fail, "every American's paycheck will get a lot smaller". |
| "Congress can prevent it from happening, if they act now," he said. | "Congress can prevent it from happening, if they act now," he said. |
| Some Republicans have pledged never to vote for increased taxes. There are some indications they could oppose any deal which included higher taxes. | Some Republicans have pledged never to vote for increased taxes. There are some indications they could oppose any deal which included higher taxes. |
| If Mr Reid and Mr McConnell cannot reach a deal by the end of the year, Mr Obama has said he will seek a vote to prevent tax rises on incomes up to $250,000 and ensure unemployment insurance is continued. | If Mr Reid and Mr McConnell cannot reach a deal by the end of the year, Mr Obama has said he will seek a vote to prevent tax rises on incomes up to $250,000 and ensure unemployment insurance is continued. |
| That, he says, is the "bare minimum" Congress should get done before 1 January. | That, he says, is the "bare minimum" Congress should get done before 1 January. |
| End to benefits | End to benefits |
| The term fiscal cliff refers to the combination of almost $600bn (£370bn) of tax rises and spending cuts due to come into force on 1 January if Congress fails to pass new legislation. | The term fiscal cliff refers to the combination of almost $600bn (£370bn) of tax rises and spending cuts due to come into force on 1 January if Congress fails to pass new legislation. |
| Sweeping Bush-era tax cuts will expire, eventually affecting people of all income levels, and many businesses. | |
| While some of the impact would be felt almost immediately, other effects would take longer to filter through. This could damage America's recent fragile economic recovery and alarm global markets. | |
| In addition, the US Treasury will hit its legal borrowing limit on 31 December of $16.4tn. | |
| Last week, Treasury Secretary Timothy Geithner won a reprieve of about two months of time, but the debate on the borrowing ceiling will also need to be properly addressed in the new year. | |
| The tax cuts and benefits set to expire include: | |
| • A 2010 payroll tax cut, the expiration of which would prompt immediate wage-packet cuts | • A 2010 payroll tax cut, the expiration of which would prompt immediate wage-packet cuts |
| • Benefits for the long-term unemployed, which could mean more than two million Americans immediately stopped receiving payments | • Benefits for the long-term unemployed, which could mean more than two million Americans immediately stopped receiving payments |
| • Compensation for doctors treating patients on federal healthcare programmes | • Compensation for doctors treating patients on federal healthcare programmes |
| • Inheritance taxes are also likely to be affected if no deal is reached. | • Inheritance taxes are also likely to be affected if no deal is reached. |
| In addition, spending cuts mandated by a law passed to break a previous fiscal impasse in Congress will come into force, affecting both military and domestic budgets. | In addition, spending cuts mandated by a law passed to break a previous fiscal impasse in Congress will come into force, affecting both military and domestic budgets. |
| The cuts are expected to affect federal government departments and the defence sector, as well as hitting unemployment insurance and veterans' support. | The cuts are expected to affect federal government departments and the defence sector, as well as hitting unemployment insurance and veterans' support. |