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US Congress in final push to reach 'fiscal cliff' deal US Congress in final push to reach 'fiscal cliff' deal
(about 4 hours later)
US Congressional leaders are mounting a last-ditch attempt to stop the threat of steep tax rises and spending cuts, known as the "fiscal cliff". US Congressional leaders have one more day to stop the threat of steep tax rises and spending cuts, known as the "fiscal cliff", after talks ended with no deal.
Both the Senate and House of Representatives are primed to vote on a compromise measure if one is agreed. Senators will continue to seek a compromise deal on Monday to send to the House of Representatives.
Failure to reach agreement by a 1 January deadline could push the US back into recession. Failure to reach agreement by 1 January could push the US back into recession.
Earlier, President Obama increased pressure on Republicans to accept a deal, blaming them for the deadlock.Earlier, President Obama increased pressure on Republicans to accept a deal, blaming them for the deadlock.
He said their "overriding theme" was protecting tax breaks for the rich.He said their "overriding theme" was protecting tax breaks for the rich.
Deadline extended Fallback plan
Efforts to reach a deal suffered a setback on Sunday as Senate leaders missed their own 15:00 (20:00 GMT) deadline to reach a compromise. Few in the US capital could talk of anything but who would win Sunday's must-win showdown. For most, that meant an NFL game between the Washington Redskins and the Dallas Cowboys; on Capitol Hill the stakes were somewhat higher.
Few in the US capital could talk of anything but who would win Sunday's must-win showdown. For most, that meant an NFL game between the Washington Redskins and the Dallas Cowboys; on Capitol Hill the stakes were somewhat higher. Cliches and aphorisms abounded in the Senate corridors as reports spread of a breakdown in deal-making. "The fat lady hasn't sung yet," one Republican declared, obscured by the pack of reporters following him down the hallway. "These things always happen at the end," said Chuck Schumer, a senior Democrat. Cliches and aphorisms abounded in the Senate corridors as reports spread of a breakdown in deal-making. "The fat lady hasn't sung yet," one Republican declared, obscured by the pack of reporters following him down the hallway. "These things always happen at the end," said Chuck Schumer, a senior Democrat.
The biggest draw was Democratic leader Harry Reid, who edged through a thick crowd as he left a party meeting, complaining as he went that Republicans were "still trying to protect the wealthy and not the middle class". But even as he spoke out, party aides and Republican rivals all stressed there was no appetite to see taxes rise on all Americans, and that a deal would be done - just not on Sunday. But it was the retiring senators, three days away from their final goodbyes, who spoke the most openly. Failure would "send a message worldwide that we don't have the capacity to work across political aisles on critical issues", said Olympia Snowe, Maine's outgoing Republican.
But it was the retiring senators, three days away from their final goodbyes, who spoke the most openly. Failure would "send a message worldwide that we don't have the capacity to work across political aisles on critical issues", said Olympia Snowe, Maine's outgoing Republican. "The world has gotten used to this so they are no longer shocked," Ben Nelson, a retiring Nebraska Democrat said. "They see this as just more of the same and hope that one of these days maybe Congress will get its act together." "The world has gotten used to this so they are no longer shocked," Ben Nelson, a retiring Nebraska Democrat said. "They see this as just more of the same and hope that one of these days maybe Congress will get its act together."
Talks ended on Sunday with no deal after a day that saw Republican and Democratic senators wrestle over detail and seek to shape a final bill.
Sticking points included the fate of expiring Bush-era tax cuts, an estate tax and steep cuts in spending known as the sequester.
If no agreement is reached on Monday, senators are expected to be given the chance to vote on a fallback plan proposed by President Obama.
That would renew tax cuts on earnings under $250,000 (£154,000) and extend unemployment benefits, but does not address the steep spending cuts.
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.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.
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 the government debt limit, raising the prospect of further political in-fighting early in the new year.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 the government debt limit, raising the prospect of further political in-fighting early in the new year.
No counter-offer Parties divided
Senate Democratic leader Harry Reid and his Republican counterpart Mitch McConnell were locked in negotiations over the weekend.Senate Democratic leader Harry Reid and his Republican counterpart Mitch McConnell were locked in negotiations over the weekend.
The two senators appeared to admit not long before the 15:00 deadline that negotiations were at a standstill, with their two parties still divided over core ideological issues about tax and government funding. The two senators appeared to admit not long before the 15:00 deadline (20:00 GMT) that negotiations were at a standstill, with their two parties still divided over core ideological issues about tax and government funding.
Senator Reid said the Democrats were as yet unable to make a counter-offer to an apparent Republican proposal to slow cost-of-living increases for social security recipients, known as "chained CPI".Senator Reid said the Democrats were as yet unable to make a counter-offer to an apparent Republican proposal to slow cost-of-living increases for social security recipients, known as "chained CPI".
Meanwhile Senator McConnell said he had asked Vice-President Joe Biden for help in breaking the deadlock.Meanwhile Senator McConnell said he had asked Vice-President Joe Biden for help in breaking the deadlock.
"I'm concerned with the lack of urgency here. There's far too much at stake," he said. "There is no single issue that remains an impossible sticking point - the sticking point appears to be a willingness, an interest or courage to close the deal.""I'm concerned with the lack of urgency here. There's far too much at stake," he said. "There is no single issue that remains an impossible sticking point - the sticking point appears to be a willingness, an interest or courage to close the deal."
In his interview with NBC's Meet the Press, recorded on Saturday 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". In his interview with NBC's Meet the Press, 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.
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).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 - some of whom have pledged never to vote for increased taxes - say the deficit is a consequence of excessive government spending.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.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 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.
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.
'Ironic comments'
But House Speaker John Boehner hit back, insisting that Republicans had made every effort to reach a deal.
"Americans elected President Obama to lead, not cast blame," he said in a statement. "The president's comments today are ironic, as a recurring theme of our negotiations was his unwillingness to agree to anything that would require him to stand up to his own party."
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.
The changes include:
• A 2010 payroll tax cut, the expiration of which would prompt immediate wage-packet cuts
• Some 25m people could move to a different tax band, potentially increasing individual tax bills by more than $3,000
• Cuts to benefits for the long-term unemployed, which could mean more than two million Americans immediately stopped receiving payments
• Cuts to compensation for doctors treating patients on federal healthcare programmes
• 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
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.