US LAWMAKERS WILL work on New Year’s Eve for the first time in more than 40 years in a last-ditch attempt to save the United States from a fiscal calamity that will result in stiff tax hikes and drastic spending cuts.
Senate Democratic Majority Leader Harry Reid has ordered the Senate back into session at 11.00 am (1600 GMT) today, the last day before the deadline know as the ‘fiscal cliff’.
Two days of last-gasp talks produced no deal Sunday between US political leaders struggling for a compromise to head off a punishing package of spending cuts and tax hikes due to come into force on January 1 that could roil global markets and plunge the United States back into a punishing recession.
“There is still time left to reach an agreement, and we intend to continue negotiations,” Reid said.
But “there is still significant distance between the two sides,” he told the Senate, after huddling for nearly two hours with his Democratic caucus.
Reid said Democrats were unwilling to brook talk of social security cuts.
“This morning, we have been trying to come up with some counteroffer to my friend’s proposal,” Reid told the Senate. “We have been unable to do that.”
Fall back plan
If leaders fail to find agreement, President Barack Obama has demanded a vote on his fall back plan that would preserve lower tax rates for families earning less than $250,000 a year and extend unemployment insurance for two million people.
Republicans admitted such an option could emerge today.
The already tense mood on Capitol Hill soured during Sunday’s confusing hours, when some lawmakers tossed out varying versions of what may or may not be in Democratic and Republican offers.
Earlier, Obama accused Republicans of causing the mess, saying they had refused to move on what he said were genuine offers of compromise from his Democrats.
In an interview with NBC’s “Meet the Press” that was recorded on Saturday, Obama said it had been “very hard” for top Republican leaders to accept that “taxes on the wealthiest Americans should go up a little bit, as part of an overall deficit reduction package.”
If no deal is reached, a package of tax cuts for all Americans that was first passed by then-president George W. Bush will expire on 1 January.
All American workers will see their paycheck hit, and the broader economy will suffer from massive automatic spending cuts across the government.
The overall package being discussed would not stop $109 billion in federal government spending cuts set to start after January 1, or extend a two-percentage-point cut in the payroll tax, set to expire with the tax cuts passed under former president George W. Bush.
It also would not increase the government’s debt limit.
Experts expect the US economy to slide into recession if the stand off is prolonged, in a scenario that could cause turmoil in stock markets and hit prospects for global growth in 2013.