Obama deal to end budget crisis goes to the wire
EFFORTS to avoid economic catastrophe in the United States were mired in confusion last night as talks came down to the wire.
Lawmakers in the Republicancontrolled House of Representatives said an agreement to avoid the sharp tax hikes and spending cuts, known as the ‘ fiscal cliff ’, would not be reached before the New Year’s Eve midnight deadline.
However, the Senate, controlled by the Democrats, continued talks in a bid to broker a deal.
The House Republicans notified lawmakers that the chamber will vote this evening on other bills. But Congress could pass later legislation retroactively blocking the tax hikes and spending cuts, due to come into force today.
Earlier, President Barack Obama said a deal to avoid the fiscal cliff was ‘in sight’, although no deal had been done.
The President said Congress was close to reaching an agreement to stop sharp tax hikes for 98 per cent of Americans.
But he admitted that the economy still faces deep cuts to government spending – the other side of the so- called ‘fiscal cliff’ – meaning the threat of recession had not entirely dissipated because a ‘grand bargain’ could not be reached.
Mr Obama said: ‘With this Congress that was a little too much to hope for at this time. We still have much work to do. It may be that we can do it in stages.’
The two political parties have been locked in an ill-tempered race against time to agree a new budget before yesterday’s midnight deadline.
Failure to reach an agreement would trigger £370billion of automatic tax rises and spending cuts in the US – starting today. It was feared that swingeing cuts to departmental budgets and across the board tax rises would plunge the world’s biggest economy back into recession – and drag the rest of the world down with it.
But it was far from clear that any apparent compromise, which would see many tax hikes avoided, would be enough to prevent another economic slump.
Mr Obama said he hoped tax hikes would be avoided for the vast majority of Americans, with sources suggesting only those earning more than $450,000 (£277,000) would be forced to pay more.
Mr Obama said: ‘It appears that an agreement to prevent these New Year tax hikes is in sight but it is not done.’
The President hit out at Republicans who have argued against tax hikes and called for deep cuts to public spending to tackle the deficit.
‘If Republicans think I will finish the job of deficit reduction through spending cuts alone then they’ve got another think
‘Axe instead of scalpel’
coming,’ he said. Mr Obama said the economy now faces cuts with an ‘axe instead of a scalpel’ as it struggles to deal with an annual deficit of $1trillion.
The President’s confrontational language sparked outrage among Republicans.
On the Senate floor, former Republican presidential candidate John McCain said the comments on the fiscal cliff ‘clearly will antagonise members of the House’, adding: ‘It’s time for presidential leadership. It’s time to govern.’