US set to head over fiscal cliff as talks go down to the wire
Date January 1, 2013 – 10:30AM 643 reading now
Read later
inShare.
Pin It
Email article
Print
.
.
Will the Fiscal Cliff affect Australia?
Senior business writer Paddy Manning explains the American ‘Fiscal Cliff’ and its impact on Australia.
Autoplay OnOff
Video feedback
Video settings
House expected to reconvene overnight
Senate could vote today
What is the fiscal cliff?
The United States looked on track to tumble over the “fiscal cliff”, at least for a day, as lawmakers remained reluctant to back last-minute efforts by Senate leaders to avert severe tax increases and spending cuts.
The US House of Representatives might not vote on any “fiscal cliff” plan before midnight (4pm AEST), possibly pushing a legislative decision into New Year’s Day, when financial markets will be closed, said a Republican aide.
President Barack Obama addresses the media at the White House as fiscal cliff talks continue in Washington. Photo: AP
The House was expected to reconvene at noon on Tuesday (4am AEST on Wednesday), Republican Representative Steven LaTourette said.
Advertisement
Republican Senator Bob Corker said it was “highly likely” the US Senate will vote on Monday night.
The Senate plan was heavy on tax increases and light on spending cuts, raising concerns that it would repel rank-and-file lawmakers, particularly in the Republican-controlled House.
On a day of political drama and ill feeling, US President Barack Obama said a deal was close though not done and the top Senate Republican, Mitch McConnell, agreed.
“It appears that an agreement to prevent this New Year’s tax hike is within sight. It’s not done. There are still issues left to resolve, but we’re hopeful that Congress can get it done,” Obama said at the White House.
McConnell added: “We are very, very close.”
A possible deal between Mr McConnell and Vice President Joe Biden to avert the “fiscal cliff” would include a two-month delay in automatic federal spending cuts that were due to begin this week, Republican Senator John McCain said.
Mr McCain said the deal would include $US 24 billion in other spending cuts to cover the cost of the delay, and would also include a one-year extension of unemployment benefits. But it was unclear if such a deal would go up for a vote in the Democratic-controlled Senate before midnight. It also faces an uncertain future in the Republican-controlled House of Representatives.
As Mr McConnell and Mr Biden kept working on unresolved parts of the deal, there was deep discontent among Senate Democrats.
“The caucus as a whole is not sold” on the proposal, said a Senate Democratic aide. “We just don’t have the votes for it.”
If Congress fails to act, about $US600 billion in tax increases and government-wide spending cuts will begin taking effect after midnight, harsh measures that could push the US economy into recession.
But lawmakers could still vote for any deal on New Year’s Day and prevent the worst of the fiscal cliff effect.
Under the Senate plan, those with household income above $US450,000 or individual income above $US400,000 would be taxed at 39.6 per cent, up from 35 per cent. Those with lower income would be taxed at the current, reduced tax rates put in place under former President George W. Bush.
The aide said Democrats did not like the $US450,000 threshold for raising taxes on the rich – they wanted $US250,000 – or the higher threshold for raising estate taxes. Democrats also are upset that there is no agreement yet to put off the first round of $US1.2 trillion in automatic spending cuts.
Republicans already are pushing for switching those across-the-board cuts to savings in Medicare and Social Security and threatening to block a debt limit increase in February unless they get their way. But that is a fight that would most likely play out in January and February.
A group of liberal senators met with Senate Majority Leader Harry Reid to register anger with the deal being negotiated by Biden, and some aides were dispirited that the vice president, a fellow Democrat, had gone further than they wanted, just as he did in December 2010 when all Bush tax cuts were extended for two years.
Shortly after the plan emerged, President Barack Obama said agreement was within sight, but he sounded a cautious note.
“There are still issues to resolve, but we’re hopeful that Congress can get it done, but it’s not done,” Obama, a Democrat, said at a White House event.
US stocks rose on the day, with the market closing before the latest news broke about the House not voting. The benchmark Dow Jones industrial average closed up 1.3 per cent at 13,104.
Reuters with AFP
Read more: http://www.smh.com.au/business/world-business/us-set-to-head-over-fiscal-cliff-as-talks-go-down-to-the-wire-20130101-2c3f2.html#ixzz2Gg1W0ndX