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You can avoid the cliff, Obama tells Congress

Monday, 31 December 2012 - 10:45am IST | Place: Washington, DC | Agency: The Daily Telegraph
While Democrat leader Harry Reid said the parties remained 'apart on some pretty big issues', his Republican counterpart Mitch McConnell claimed to be speaking directly to vice-president Joe Biden, in an effort to 'jump-start' the stalled talks.

President Barack Obama made an urgent final appeal on Sunday to a bitterly divided Congress to steer America away from the "fiscal cliff" as Democrats and Republicans remained locked in tense 11th-hour negotiations. At midnight on Monday, the world's largest economy will topple over the so-called cliff - $607billion (pounds 390billion) in tax rises and government spending cuts that economists fear could trigger a new recession - unless politicians can agree to a deal.

As the Senate and the House of Representatives convened for emergency sessions last night, hopes of a deal in the upper house appeared to be fading. Harry Reid, the Democrat leader, said the parties remained "apart on some pretty big issues". His Republican counterpart, Mitch McConnell, said he was speaking directly to Joe Biden, the vice-president, in an effort to "jump-start" the stalled talks.

Earlier, Obama made a rare appearance on Sunday television to call for immediate action. "What Congress needs to do, first and foremost, is to prevent taxes from going up for the vast majority of Americans," he said on NBC's Meet the Press. Failure to strike a deal would "obviously have an adverse reaction on the markets", he said. "I think business and investors are going to feel more negative about the economy."

Although he claimed to be "optimistic" that Washington would act in time to stop the politically created economic crisis, Obama said "certain factions" on the Right of the Republican Party were to blame for the gridlock.

The president said that Republicans' "overriding, unifying theme" was preventing tax rises on the wealthy, even at the expense of a compromise that would help the middle class. "The fact that [a deal] is not happening is an indication of how far certain factions inside the Republican Party have gone that they can't even accept what used to be centrist, mainstream positions on these issues," he said.

John Boehner, the Republican speaker of the house, retorted: "Americans elected President Obama to lead, not cast blame."

As night fell, no breakthrough had been reached, though some senior figures expressed optimism. Senator Lindsey Graham, a South Carolina Republican, cautioned his own side that they would be blamed for failing to reach a deal. "President Obama is going to get tax rate increases [on the rich]. The president won," he tweeted.

If a compromise is agreed by Senate leaders, it would have to be voted on this morning and approved by the end of the day by the House, where the vote could go either way. The deepest divide between the two sides is over how many Americans should face higher tax rates when cuts originally introduced by George W Bush in 2003 expire at 11.59pm on Monday night.

Republicans insist that only households earning more than $1?million (pounds 620,000) a year should see their rate go up. Democrats are instead seeking a threshold of between $250,000 and $400,000.

The last-minute meetings come more than a year after Democrats and Republicans agreed to design the "fiscal cliff" as a way of forcing both sides to compromise on a plan to reduce the $16.4trillion debt. As well as raising taxes for nearly nine in 10 Americans, the cliff would trigger the end of unemployment benefits for two million people and swingeing cuts to the military budget and domestic spending programmes.

Obama said that if no agreement was reached, the Democrat-controlled Senate would pass emergency legislation to protect unemployment benefits and prevent tax rises on families making less than $250,000 (pounds 155,000) a year. House Republicans could also reject that, but would face public wrath for allowing taxes to rise. On the other hand the Right would be furious if they capitulated.

Obama added that if "all else fails", then the new Congress that meets from January 4 would have to act to undo the economic damage caused.


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