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Monday 1 September 2014

Obama edges nearer to 'fiscal cliff' deal with Republicans

Richard Cowan and Mark Felsenthal

Published 19/12/2012 | 05:00

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Senate majority leader Harry Reid, addressing the media on the 'fiscal cliff' on Capitol Hill yesterday, said House Speaker John Boehner's backup plan 'cannot pass both houses of Congress'

A deal to avert a "fiscal cliff" of US tax hikes and spending cuts looks closer after House of Representatives Speaker John Boehner kept the support of his Republican colleagues for compromises in talks with President Barack Obama.

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Despite concerns of a revolt by Republicans in the House, Boehner emerged unscathed from a meeting with his members and pledged to press forward on negotiations with the White House.

Boehner's concession last week to consider higher tax rates on the wealthiest Americans – an idea long fought by his party – signalled that a deal was possible ahead of an end-of-year deadline.

Republican Darrell Issa, a key committee chairman, said House Republicans "were supportive of the speaker".

Boehner is the top Republican in Congress.

Boehner told reporters after meeting his caucus – which includes a core of fiscal conservatives aligned with the Tea Party movement opposed to tax hikes – that Obama's latest offer on taxing the wealthiest Americans is "not there yet", but he remained hopeful of a deal.

In a major concession, Obama offered on Monday to set a $400,000 (€300,000) threshold for incomes that would face tax increases with the expiration at the end of the year of low tax rates enacted under former President George W Bush.

Obama had insisted on setting the threshold at $250,000. Boehner has been seeking $1m, but analysts said the two may compromise on $500,000.

Obama and Boehner are working to avert steep tax hikes and deep spending cuts set to begin taking effect next month. Known as the "fiscal cliff", the measures could trigger another recession, economists warn.

Markets

As negotiations have largely overcome ideological differences and turned to increasingly narrow disagreements over numbers, markets turned upwards on hopes of a deal. World shares moved towards a three-month high yesterday and weakened appetite for safe-haven bonds and the dollar.

For weeks Republicans have feared a public backlash against them if tax rates rise on January 1. Boehner said a vote on a Republican bill along these lines could come as early as this week in the House.

Obama also moved closer to Boehner on the proportion of a 10-year deficit reduction package that should come from increased revenue, as opposed to cuts in government spending. Obama is now willing to accept a revenue figure of $1.2 trillion, down from his $1.4tn proposal.

Boehner's latest proposal calls for $1tn in new tax revenue from higher tax rates and the curbing of some tax deductions taken by high-income Americans.

Missing from Obama's latest offer was any extension of the so-called "payroll tax holiday" that ends on January 1, bringing an immediate tax increase on wage earners.

Boehner is also ready to give Obama a year of relative immunity from conservative strife over the raising of the nation's debt ceiling, while Obama is pushing for two years. (Reuters)

Irish Independent

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