Barack Obama. Photo by Reuters
Efforts to prevent the U.S. economy from tumbling over a
"fiscal cliff" have stalled as Democrats and Republicans remain
at loggerheads over a deal that would prevent taxes for all
Americans from rising on New Year's Day.
One hour before they had hoped to present a plan, Democratic
and Republican leaders said were still unable to reach a
compromise that would stop the automatic tax hikes and
spending cuts that could push the economy into recession.
"There are still serious differences between the two sides,"
Senate Democratic Leader Harry Reid said.
A sticking point appeared to be a Republican proposal,
floated late on Saturday (local time), which would slow the
growth of Social Security retirement benefits in an effort to
narrow trillion-dollar budget deficits. Many Democrats,
including Reid, have said Social Security should not be
With negotiations at an apparent standstill on Capitol Hill,
Senate Republican Leader Mitch McConnell said he would now
try to hammer out an agreement with Vice President Joe Biden.
"I'm willing to get this done, but I need a dance partner,"
Any agreement needs to be rushed through both chambers of
Congress before midnight on Monday. Even if the two sides
reach an agreement, procedural barriers in the Senate and the
House of Representatives make quick action difficult.
If the politicians cannot agree, then tax increases and
across-the-board government spending cuts will begin on
January 1. That would take $US600 billion out of the economy,
push unemployment up and curb federal spending.
Another major disagreement was over tax hikes on the wealthy,
an increase sought by President Barack Obama but opposed by
Republicans, particularly fiscal conservatives in the House
Republicans aim to pair any tax increase with spending cuts
to benefit programmess that are projected to grow ever more
expensive as the population ages in coming decades.
But their proposal to slow the growth of Social Security
benefits by changing the way they are measured against
inflation met fierce resistance from Democrats. Obama
included the proposal, known as "chained CPI," in an earlier
proposal, but many of his fellow Democrats remain opposed.
"We consider it a poison pill - they know we can't accept it.
It is a big step back from where we were on Friday," a Senate
Democratic aide said.
Obama made a rare appearance on NBC's Meet the Press
to pressure lawmakers into forging a deal.
Senators appearing on other Sunday morning shows expressed
optimism that an agreement could be reached.
Republican Senator Lindsey Graham conceded that an agreement
would end up raising income taxes on the wealthy, thus
sparing the rest of the country from the looming income tax
"President Obama is going to get tax rate increases. The
president won," Graham tweeted, echoing earlier comments he
made on Fox News Sunday. He told the show that the
chances of a bipartisan deal before the New Year's deadline
were "exceedingly good."
Obama has alternatively offered Republicans a deal to
increase income taxes for households earning over $US250,000
a year, and over $US400,000 a year.
A White House aide said the president and his staff had been
in touch with congressional leaders through the weekend.
Any deal on taxes in the Senate might meet resistance in the
House from conservative Republicans.
On NBC, Obama warned of the fallout in financial markets if
the two sides did not reach an agreement.
"If people start seeing that on January 1st this problem
still hasn't been solved, that we haven't seen the kind of
deficit reduction that we could have, had the Republicans
been willing to take the deal that I gave them ... then
obviously that's going to have an adverse reaction in the
markets," Obama said, adding that he had offered Republicans
significant compromises that had been rejected repeatedly.
He said he would avoid tax increases for most Americans, even
if the talks fall apart.
"If Republicans do in fact decide to block it, so that taxes
on middle class families do in fact go up on January 1st,
then we'll come back with a new Congress on January 4th and
the first bill that will be introduced on the floor will be
to cut taxes on middle class families," Obama said.
John Boehner, the speaker of the House of Representatives,
rejected Obama's accusations that Republicans were not being
amenable to compromise.
"The president's comments today are ironic, as a recurring
theme of our negotiations was his unwillingness to agree to
anything that would require him to stand up to his own
party," Boehner, who has had trouble convincing his
Republican colleagues to support his own proposals, said in a