Just one more day for US to seal 'fiscal cliff' deal
Rush to replace expired laws and stop economy tipping back into recession before markets open
Nikhil Kumar is The Independent's New York correspondent. He was formerly assistant editor on the foreign desk and has also done a variety of jobs on the city desk, where he wrote about markets, commodities and other business and economics topics.
Sunday 30 December 2012
Frantic negotiations to find a way to protect the American economy from the worst effects of the looming "fiscal cliff" were under way in Washington DC last night, with Democratic and Republican leaders rushing to cobble together proposals that could be put before lawmakers as early as today.
President Barack Obama, who reiterated the case for a bipartisan deal that protects middle-class Americans from imminent tax hikes and extends unemployment benefits for the more than two million people who would otherwise lose federal aid, continued to press the argument in his weekly address to the country yesterday. Echoing his remarks following an Oval Office meeting with congressional leaders on Friday, Mr Obama said: "We cannot let Washington politics get in the way of America's progress. We've got to do what it takes to protect the middle class, grow this economy and move our country forward."
Without new laws, expiring legislation will automatically trigger steep tax hikes for almost all Americans, while at the same time robbing government departments of billions in spending. The unemployed who have been depending on federal help for more than six months will be stripped of any future cheques. Taken together, the changes are worth more than half a trillion dollars – and would almost certainly tip the weak American economy back into recession.
Although lawmakers could in theory delay an agreement until early or mid-January, and then return to repeal the most damaging measures, the fragile economy needs a deal before the end of 2012. Risks are also mounting of a stock market panic.
The ball is in the court of the Senate, with Harry Reid, the Democratic leader of the upper chamber of Congress, working with Mitch McConnell, who leads the Republican minority, to forge a pact that could find favour in Congress. Their efforts come after John Boehner, the Speaker of the Republican-controlled House of Representatives, failed to strike an accord with the White House.
Mr Boehner has resolutely opposed the President's push for higher taxes on the wealthy. Mr Obama wants taxes to be protected for those earning less than $250,000 a year, implying higher rates for those whose earnings surpass that level.The President did, however, offer to raise that threshold to $400,000 before negotiations with Mr Boehner broke down.
Mr Reid is due to hold a meeting with his Democratic colleagues in the Senate this afternoon, where he hopes to discuss a plan agreed with Mr McConnell. The Republican has promised to do the same with his party colleagues. Later in the day, the House will return to consider the plan, and potentially vote on it before stock markets open tomorrow.
Although Mr Obama has given Mr Reid and Mr McConnell time to formulate an agreement within Congress, he has also drawn a line in the sand: if they fail to agree on a deal that can pass through the Senate and also find passage in the House, he has called for a vote on his basic proposals that would, for the time being, protect middle-class incomes and long-term unemployment benefits while a more comprehensive deal is worked out.
- 1 Finland schools: Subjects scrapped and replaced with 'topics' as country reforms its education system
- 2 The West has it totally wrong on Lee Kuan Yew
- 3 Watch: Man takes selfie every mile of 2,600 mile hike, creates amazing timelapse video
- 4 The day I starred in Only Fools and Horses
- 5 Scientists have discovered a simple way to cook rice that dramatically cuts the calories
Germanwings plane crash: Co-pilot Andreas Lubitz 'sought treatment for eyesight problems'
Saudi Arabia says it won't rule out building nuclear weapons
The battle for the Middle East's future begins in Yemen as Saudi Arabia jumps into the abyss
#FreeTheNipple: Women in Iceland bare breasts in solidarity with trolled student
Yemen crisis: Saudi Arabia ready for long campaign against Houthi rebels across the border
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
Revealed: Putin's army of pro-Kremlin bloggers
Germanwings plane crash: Co-pilot Andreas Lubitz wanted to 'do something people would remember him for'
The West has it totally wrong on Lee Kuan Yew
£6 per hour: Recruitment Genius: This is an exciting opportunity to join a gro...
Negotiable: Recruitment Genius: A Service Delivery Manager is required to join...
£12000 - £24000 per annum: Recruitment Genius: A opportunity has arisen for a ...
£32000 - £38000 per annum: Ashdown Group: A successful accountancy practice in...