With hours to go to ‘fiscal cliff’, the US still has no deal
Published 31/12/2012 | 09:14
AMERICA’S politicians will today make a desperate last-ditch attempt to reach a deal to avert the "fiscal cliff" with less than 24 hours until the deadline.
At midnight tonight (7pm GMT) the world's largest economy will topple over the "cliff" - triggering more than half a trillion dollars worth of tax rises and government spending cuts - unless an agreement can be forged.
Dwindling hopes for a last-minute deal lie in the Senate, where leaders of both the Democrats and Republicans have said they will continue to seek a compromise despite the gulf between their negotiating positions.
The Senate held an emergency session yesterday that ended without a deal but members will reconvene this morning in the hope of reaching an eleventh-hour agreement.
The impasse in Congress has cast a cloud of uncertainty across the US economy, as businesses and workers wait to learn whether taxes will rise on nearly nine in 10 people.
The "cliff", which was designed by both parties in order to force a compromise on deficit reduction, would also trigger swingeing cuts to the military budget and domestic programmes as well as cutting unemployment benefits for two million people.
Earlier on Sunday, President Barack Obama issued an urgent final appeal to Congress to reach a compromise and steer the US away from the politically-created economic crisis.
“What congress needs to do, first and foremost, is to prevent taxes from going up for the vast majority of Americans," he said in an interview with NBC's Meet the Press.
However, the president said that if no agreement was reached he would call on his Democratic allies in the Senate to today move forward with emergency legislation to protect unemployment benefits and prevent tax rises on families making less than $250,000 (£160,000) a year.
Passing the emergency bill would throw down a political gauntlet to the Republican leaders in the House: they could reject it and face blame for allowing taxes to rise or else accept it and risk a backlash from the Right.
The White House announced that Mr Obama's own schedule for Monday had been cleared, giving him the flexibility to respond in the event of a breakthrough or intervene if talks collapse.
While the two sides spent Sunday sparring over a range of issues, the deepest divide is over how many Americans should face higher tax rates when cuts originally introduced by George W Bush in 2003 expire at 11.59pm tonight.
Republicans insist that only households earning more than $1 million (£645,000) a year should see their rate go up. Democrats are instead seeking a threshold of somewhere between $250,000 and $400,000.
As the hours passed by on Sunday with no sign of a deal, previously optimistic senators begin to strike a note of despair.