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Obama ups pressure on Republicans over 'fiscal cliff' Obama ups pressure on Republicans over 'fiscal cliff'
(about 1 hour later)
US President Barack Obama has increased pressure on Republicans to accept a deal aimed at stopping the country going over a "fiscal cliff".US President Barack Obama has increased pressure on Republicans to accept a deal aimed at stopping the country going over a "fiscal cliff".
Speaking on NBC's Meet the Press, he said the "overriding, unifying theme" of the Republicans appeared to be protecting tax breaks for the wealthy. Speaking on NBC's Meet the Press, he blamed Republicans for the deadlock, saying their "overriding theme" was protecting tax breaks for the wealthy.
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 stop steep spending cuts and tax rises from taking effect.
If they fail, taxes will significantly rise for most Americans.If they fail, taxes will significantly rise for most Americans.
This has raised fears of reduced consumer spending triggering a US economic slowdown, which in turn would damage the global economy. This has raised fears that their reduced consumer spending could trigger a US economic slowdown, which in turn could damage the global economy.
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. The current stand-off has its roots in a failed 2011 attempt to tackle the government debt limit and budget deficit. Republicans and Democrats agreed then to postpone difficult decisions on spending until the end of 2012, and imposed a threat of compulsory cuts if no deal was reached by 31 December.
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. That is also the date that tax cuts introduced by former President George W Bush are due to expire, though both parties want them extended for most Americans.
Analysts say that even if a deal is reached on the fiscal cliff, it will do little to reduce the original problem of the deficit and government debt limit, raising the prospect of further political in-fighting early next year.
Ideological divide
Democrat Senate leader Harry Reid and his Republican counterpart Mitch McConnell have been locked in negotiations over the weekend.
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.
In an interview recorded on Friday and broadcast on Sunday, Mr Obama said that the priority before then was to ensure taxes will not rise for middle-class families, saying that would "hurt our economy badly". In his interview, recorded on Friday and broadcast on Sunday, Mr Obama said the priority was to ensure taxes do not rise for middle-class families, saying that would "hurt our economy badly".
"That's something we all agree on. If we can get that done, that takes a big bite out of the 'fiscal cliff'," he said."That's something we all agree on. If we can get that done, that takes a big bite out of the 'fiscal cliff'," he said.
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. There is also debate over where to set the threshold for tax rises. Democrats say the Bush era tax cuts should be extended for all Americans except the richest - those with annual earnings of more than $250,000 (£155,000).
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 - some of whom have pledged never to vote for increased taxes - say the deficit is a consequence of excessive government spending.
They 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 other services states are legally bound to provide.
Mr Obama said he had made significant comprises already by offering to cut or reform welfare programmes in exchange for raising taxes for the highest earners and criticised Republicans for not accepting the offer. Mr Obama said he had made significant compromises already by offering to cut or reform welfare programmes in exchange for raising taxes for the highest earners, and criticised Republicans for not accepting the offer.
"They say that their biggest priority is making sure that we deal with the deficit in a serious way, but the way they're behaving is that their only priority is making sure that tax breaks for the wealthiest Americans are protected. That seems to be their only overriding, unifying theme," he said."They say that their biggest priority is making sure that we deal with the deficit in a serious way, but the way they're behaving is that their only priority is making sure that tax breaks for the wealthiest Americans are protected. That seems to be their only overriding, unifying theme," he said.
"The offers that I've made to them have been so fair that a lot of Democrats get mad at me.""The offers that I've made to them have been so fair that a lot of Democrats get mad at me."
Some Republicans have pledged never to vote for increased taxes. There are some indications they could oppose any deal which included higher taxes. He said that that if all else failed and taxes did go up, he would introduce a bill to cut them when Congress reconvenes on 4 January.
The president said that if all else failed and taxes did go up, he would introduce a bill when Congress reconvenes on 4 January to cut them.
End to benefitsEnd 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 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.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. The changes include:
In addition, the US Treasury is set to hit its legal borrowing limit of $16.4tn on 31 December.
Last week, Treasury Secretary Timothy Geithner won a reprieve of about two months. But the debate on the borrowing ceiling will also need to be properly addressed in the new year, raising the prospect of more political gridlock.
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 • Some 25m people could move to a different tax band, potentially increasing individual tax bills by more than $3,000
• Compensation for doctors treating patients on federal healthcare programmes • Cuts to benefits for the long-term unemployed, which could mean more than two million Americans immediately stopped receiving payments
• Inheritance taxes are also likely to be affected if no deal is reached. • Cuts to compensation for doctors treating patients on federal healthcare programmes
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. • Inheritance taxes to rise from 35% to 55% on properties worth more than $1m, a measure opposed by Republicans as well as Democrats from agricultural states who say it would punish farming families
The cuts are expected to affect federal government departments and the defence sector, as well as hitting unemployment insurance and veterans' support. 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 compulsory cuts mandated in 2011 will come into force, affecting about $109bn in military and domestic budgets.