US goes to brink over 'fiscal cliff'
Published 29/12/2012 | 05:00
PRESIDENT Barack Obama has cut short his holiday and returned to Washington as a senior Democrat warns that the US appears to be heading over the year-end 'fiscal cliff' of higher taxes and deep spending cuts that could spin the economy back into a recession.
Meanwhile, the treasury secretary has warned that the government will hit its borrowing limit on Monday – the final day of the year.
Treasury Secretary Timothy Geithner (pictured) has told Congress that he will take "extraordinary measures as authorised by law" to postpone a government default.
But he said uncertainty over the outcome of the fiscal-cliff negotiations made it difficult to determine how much time those measures would buy.
At stake are tax cuts that expire on December 31 and revert to the higher rates in place during the administration of President Bill Clinton in the 1990s. That means $536bn (€405bn) in tax rises.
The changes are part of a long-delayed need for the government to address its chronic deficit spending.
While economists have warned about the impact of such a massive and abrupt shift, both the Obama administration and Congress appear to be proceeding as if they have more than just four days left.
Mr Geithner's news on the government about to hit its $16.4 trillion (€12.4 trillion) borrowing limit has brought more pressure to the process.
Mr Obama wants an increase in the borrowing limit as part of any agreement to avoid the fiscal cliff, but Republicans want concessions in return.
Irish IndependentFollow @Independent_ie