PRESIDENT Barack Obama made an urgent final appeal yesterday to a bitterly divided Congress to steer America away from the "fiscal cliff" as Democrats and Republicans remained locked in tense 11th-hour negotiations.
At midnight tonight, the world's largest economy will topple over the so-called cliff – $607bn (€459bn) in tax rises and government spending cuts that economists fear could trigger a new recession – unless politicians can agree to a deal.
As the Senate and the House of Representatives convened for emergency sessions last night, hopes of a deal in the upper house appeared to be fading. Harry Reid, the Democrat leader, said the parties remained "apart on some pretty big issues". His Republican counterpart, Mitch McConnell, said he was speaking directly to Joe Biden, the vice-president, in an effort to "jump-start" the stalled talks.
Earlier, Mr Obama made a rare appearance on Sunday television to call for immediate action. "What Congress needs to do, first and foremost, is to prevent taxes from going up for the vast majority of Americans," he said on NBC.
"Failure to strike a deal would obviously have an adverse reaction on the markets," he said. "I think business and investors are going to feel more negative about the economy."
Although he claimed to be "optimistic" that Washington would act in time to stop the politically created economic crisis, Mr Obama said "certain factions" the Republican Party were to blame for the gridlock.
He said that Republicans' "overriding, unifying theme" was preventing tax rises on the wealthy, even at the expense of a compromise that would help the middle class.
"The fact that (a deal) is not happening is an indication of how far certain factions inside the Republican Party have gone that they can't even accept what used to be centrist, mainstream positions on these issues," he said.
As night fell, no breakthrough had been reached, though some senior figures expressed optimism. Senator Lindsey Graham, a South Carolina Republican, cautioned his own side that they would be blamed for failing to reach a deal. "President Obama is going to get tax rate increases (on the rich). The president won," he tweeted.
If a compromise is agreed by Senate leaders, it would have to be voted on this morning and approved by the end of the day by the House, where the vote could go either way.
The deepest divide between the two sides is over how many Americans should face higher tax rates when cuts originally introduced by George W Bush in 2003 expire at 11.59 tonight.
Republicans insist that only households earning more than $1m (€757m) a year should see their rate go up. Democrats are instead seeking a threshold of between $250,000 and $400,000. (© Daily Telegraph, London)