Fiscal cliff deal close but Congress to miss deadline
From BBC
The US will miss a midnight deadline and head over the “fiscal cliff”, after the House of Representatives said it would hold no vote on Monday.
Earlier, President Barack Obama said a deal to avoid the steep tax rises and spending cuts is “within sight” – but not yet done.
Senators are said to be “very, very close” to a deal on tax rates but remain divided over spending cuts.
Tuesday is a public holiday in the US, so no immediate effects will be felt.
Lawmakers are expected to return to Capitol Hill on Tuesday for final talks and possible votes on a compromise bill. The Senate could still vote on Monday evening.
Analysts say if the effects of the fiscal cliff are allowed to take hold, they could spark a new US recession.
Speaking just hours ahead of the midnight deadline, Mr Obama said: “There are still issues left to resolve but we’re hopeful Congress can get it done.”
Mr Obama said he would had preferred to resolve the fiscal cliff in the “context of a larger agreement, a bigger deal, a grand bargain, whatever you want to call it,” that dealt with both spending and taxes rises.
“But with this Congress, that was obviously a little too much to hope for at this time,” he said.
A smaller deal would focus on keeping tax rates low for most US taxpayers, raising rates on those earning over $400,000.
“But it’s not done,” the president warned
Tax cuts passed during the presidency of George W Bush are due to expire at midnight, with rates set to increase for all Americans if no deal is passed.
According to an analysis by the Tax Policy Center, a family of four making $75,000 would see their taxes rise about $3,300.
Mr Obama campaigned for re-election on a platform of raising taxes on the wealthiest Americans.
Mr Obama’s pointed remarks about Congress provoked an angry reaction from several Republican senators even as he talked up hoped of a deal.
Arizona Senator John McCain took to the Senate floor to berate the president, saying he had been “cheerleading” against Republicans.
But his party leader in the upper chamber Mitch McConnell, quickly calmed proceedings, backing the president’s assessment of the talks and insisting that deal should be done – even without agreement on what to do about imminent spending cuts.
“Let’s pass the tax relief portion now,” said Mr McConnell, who spent Sunday evening and Monday negotiating with Vice-President Joe Biden.
“Let’s take what’s been agreed to and get moving. We’ll continue to work on finding smarter ways to cut spending.”
A series of automatic spending cuts imposed in the wake of a previous fiscal showdown and known as the sequester are due to kick in on 1 January.
They are estimated to save some $1.2tn over 10 years, with particularly steep cuts in the defence sector. While few in Congress back the current cuts, many do want to see spending reined in, and want targeted cuts to be part of a deal to raised taxes.
At the White House, Mr Obama said he would push for further revenue changes if the automatic cuts were dealt with later.
“That means the revenues have to be part of the equation in turning off the sequester and eliminating these automatic spending cuts,” Mr Obama said. ” The same is true for any future deficit agreement.”
Agreeing to a $450,000 tax threshold ($400,000 for couples) would be a notable compromise by Democrats, analysts say.
The party previously only wanted tax rate extensions for earnings under $200,000 (£123,000) for individuals and $250,000 (£154,000) for couples.
But after weeks of increasingly desperate horse trading and public pronouncements, the “contours” of a deal were said to be emerging just hours before the midnight deadline.
Other key points of the potential deal:
Tax rates would rise on estate inheritances from 35% to 40% after the first $5m for an individual and $10m for a couple
Capital gains taxes – affecting certain income from investments – would rise from 15% to 20%, but less than the 39.5% it would rise under after 1 January.
Unemployment benefits would be extended for year, affecting an estimated 2 million people
Extending tax credits that help poorer and middle-class families for five years, including one credit that helps people pay for university.
Any deal needs to pass the 100-member Senate, which is controlled by Democrats, before heading to the House of Representatives, where Republicans hold the majority.
But no votes have yet been scheduled in either chamber.
For more on this story go to:
