Obama back for fiscal cliff talks

27 December 2012 Last updated at 02:56 GMT President Obama is expected to meet Republican leaders to try to find a compromise US President Barack Obama has cut short his holidays in Hawaii and is flying to Washington to try to reach a deal to avoid the so-called "fiscal cliff".

Unless a compromise is found, tax increases and huge spending cuts come into force on 1 January, threatening to tip the US back into recession.

However, Democrats and Republicans are still at loggerheads over the issue.

Meanwhile, the US Treasury is to take extraordinary measures to delay reaching a 31 December borrowing limit.

In a letter to Congress, Treasury Secretary Timothy Geithner said it would take accounting measures to save about $200bn to prevent reaching the $16.4tn borrowing limit.

He said this would prevent the government from reaching the borrowing limit for about another two months.

This $16.4tn is the amount the government is allowed to borrow to finance its operations.

'Silent corridors' Continue reading the main story On 1 January 2013, tax increases and huge spending cuts are due to come into force - the so-called fiscal cliff Deadline was put in place in 2011 to force president and Congress to agree ways to save money over the next 10 yearsFear is that raising taxes while massively cutting spending will have huge impact on households and businessesExperts believe it could push the US into recession, and have a global impact on growthMr Obama is expected to meet Republican leaders again to try to negotiate a solution, although no new date has been announced.

Failure to do so could damage the US and global markets, and threatens to send the US economy into recession.

The two sides remain far apart on the fiscal cliff's $600bn in tax rises and spending cuts, but analysts say a short-term deal may be agreed that will postpone the cuts until spring.

On Wednesday, the Republican House of Representatives Speaker John Boehner called on the Democrat-led Senate to come up with legislation on how it would avoid the cliff, and pass it to the House for consideration.

However, a senior administration official said it was up to Republican leaders not to stand in the way of an agreement.

Despite this, there is little sense of urgency in the capital - the corridors of Congress are silent, the BBC's Zoe Conway in Washington reports.

Tax year 1993-2000 2001 2002 2003-2008 2009-2012 2012 tax brackets 2013 scenarios

Source: Tax Foundation, IRS

Tax brackets shown for unmarried individuals

Bill Clinton

George W Bush

Barack Obama

Tax cuts expire for top incomes

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Final push towards US fiscal deal

31 December 2012 Last updated at 04:17 GMT Senator Reid said there were still significant differences between the two sides US Congressional leaders have one more day to stop the threat of steep tax rises and spending cuts, known as the "fiscal cliff", after talks ended with no deal.

Senators will continue to seek a compromise deal on Monday to send to the House of Representatives.

Failure to reach agreement by 1 January could push the US back into recession.

Earlier, President Obama increased pressure on Republicans to accept a deal, blaming them for the deadlock.

He said their "overriding theme" was protecting tax breaks for the rich.

Fallback plan Continue reading the main story Adam Blenford BBC News, Washington

Few in the US capital could talk of anything but who would win Sunday's must-win showdown. For most, that meant an NFL game between the Washington Redskins and the Dallas Cowboys; on Capitol Hill the stakes were somewhat higher.

Cliches and aphorisms abounded in the Senate corridors as reports spread of a breakdown in deal-making. "The fat lady hasn't sung yet," one Republican declared, obscured by the pack of reporters following him down the hallway. "These things always happen at the end," said Chuck Schumer, a senior Democrat.

But it was the retiring senators, three days away from their final goodbyes, who spoke the most openly. Failure would "send a message worldwide that we don't have the capacity to work across political aisles on critical issues", said Olympia Snowe, Maine's outgoing Republican.

"The world has gotten used to this so they are no longer shocked," Ben Nelson, a retiring Nebraska Democrat said. "They see this as just more of the same and hope that one of these days maybe Congress will get its act together."

Talks ended on Sunday with no deal after a day that saw Republican and Democratic senators wrestle over detail and seek to shape a final bill.

Sticking points included the fate of expiring Bush-era tax cuts, an estate tax and steep cuts in spending known as the sequester.

If no agreement is reached on Monday, senators are expected to be given the chance to vote on a fallback plan proposed by President Obama.

That would renew tax cuts on earnings under $250,000 (£154,000) and extend unemployment benefits, but does not address the steep spending cuts.

The current stand-off has its roots in a failed 2011 attempt to tackle the government debt limit and budget deficit. Republicans and Democrats agreed then to postpone difficult decisions on spending until the end of 2012, and imposed a threat of compulsory cuts if no deal was reached by 31 December.

Analysts say that even if a deal is reached on the fiscal cliff, it will do little to reduce the original problem of the deficit and the government debt limit, raising the prospect of further political in-fighting early in the new year.

Parties divided

Senate Democratic leader Harry Reid and his Republican counterpart Mitch McConnell were locked in negotiations over the weekend.

The two senators appeared to admit not long before the 15:00 deadline (20:00 GMT) that negotiations were at a standstill, with their two parties still divided over core ideological issues about tax and government funding.

Senator Reid said the Democrats were as yet unable to make a counter-offer to an apparent Republican proposal to slow cost-of-living increases for social security recipients, known as "chained CPI".

Continue reading the main story On 1 January 2013, tax increases and huge spending cuts are due to come into force - the so-called fiscal cliff Deadline was put in place in 2011 to force president and Congress to agree ways to save money over the next 10 yearsDate coincides with expiry of Bush-era tax cuts, which would affect all income groups and many businessesFear is that raising taxes while massively cutting spending will have a huge impact on households and businessesExperts believe it could push the US into recession, and have a global impact on growthMeanwhile Senator McConnell said he had asked Vice-President Joe Biden for help in breaking the deadlock.

"I'm concerned with the lack of urgency here. There's far too much at stake," he said. "There is no single issue that remains an impossible sticking point - the sticking point appears to be a willingness, an interest or courage to close the deal."

In his interview with NBC's Meet the Press, broadcast on Sunday, Mr Obama said the priority was to ensure taxes do not rise for middle-class families, saying that would "hurt our economy badly".

"That's something we all agree on. If we can get that done, that takes a big bite out of the 'fiscal cliff'," he said.

There is also debate over where to set the threshold for tax rises. Democrats say the Bush-era tax cuts should be extended for all Americans except the richest - those with annual earnings of more than $250,000 (£155,000).

Republicans - some of whom have pledged never to vote for increased taxes - say the deficit is a consequence of excessive government spending.

They want the tax threshold set higher, at around $400,000, and for revenue to be raised by economic growth and cuts in social security and other services states are legally bound to provide.

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Fiscal cliff negotiations pick up

17 December 2012 Last updated at 21:36 GMT The pace of negotiations between John Boehner and Barack Obama has picked up in recent days US President Barack Obama and House of Representatives Speaker John Boehner have met at the White House as talks on avoiding the "fiscal cliff" gather pace

Mr Boehner has signalled he would agree to raising tax rates for those earning more than $1m (£620,000) per year.

The 45-minute meeting follows face-to-face discussions on Thursday and a phone call between the two on Friday.

A deal must be reached by 1 January, or a combination of steep tax rises and sharp spending cuts will take effect.

Mr Boehner has reportedly also said he would accept as much as $1tn in new tax revenue over 10 years and would raise the debt ceiling to ensure the government is funded for a year.

In exchange, it is reported that he would like the White House to agree to $1tn of spending cuts.

"Our position has not changed. Any debt limit increase would require cuts and reforms of a greater amount," Boehner spokesman Brendan Buck told the Associated Press.

Neither side has released details from Monday's meeting.

'Necessary balance'

White House Press Secretary Jay Carney acknowledged on Monday that there had been a "change in tone, and in some cases, a change in position from different Republicans" on the issue of tax increases.

Continue reading the main story Under a deal reached last year between President Obama and the Republican-controlled Congress, existing stimulus measures - mostly tax cuts - will expire on 1 January 2013Cuts to defence, education and other government spending will then automatically come into force - the "fiscal cliff" - unless Congress actsThe economy does not have the momentum to absorb the shock from going over the fiscal cliff without going into recessionBut he added: "Thus far the president's proposal is the only proposal that we have seen that achieves the balance that's so necessary."

The president's proposal to avoid the fiscal cliff had called for $1.6tn in new tax revenue over 10 years. Mr Obama has previously insisted that he will not sign a deal that does not raise tax rates on earnings over $250,000.

More recently, the White House has suggested it would agree to a deal that generates less new tax revenue. Many Republicans are philosophically opposed to raising taxes.

As the parameters of a possible deal begin to take shape, correspondents say there may now be renewed focus on whether Democrats agree to changes to popular entitlement programmes.

Harry Reid, the top Democrat in the Senate, has indicated that it is likely lawmakers will need to return to Washington between Christmas and New Year to vote on a deal to avert the fiscal cliff.

"We will see if anything changes, but it appears that we're going to be coming back the day after Christmas to complete work on the fiscal cliff," Mr Reid said on Monday.

Details of a deal

Correspondents say about $450bn from Mr Boehner's offer of $1tn in new tax revenue would be generated by increasing the tax rate to 39.6% from 35% for income over $1m.

The remainder would come from closing loopholes and limiting tax deductions, and by slowing inflation adjustments to tax brackets.

IMF chief Christine Lagarde said the fiscal cliff could affect the rest of the world

The $1tn in spending cuts that Mr Boehner is said to have asked for are expected to come primarily from healthcare programmes for the elderly, they say.

But some Democrats have indicated they are not prepared to consider such changes to major government provisions.

Economists have warned that the "fiscal cliff" would suck about $600bn out of the economy, possibly sending the US, which is experiencing a tepid economic recovery, back into recession.

The measures were partly put in place within a 2011 deal to curb the yawning US budget deficit.

Along with the tax rises and spending cuts due to take effect on 1 January, extended benefits for the long-term unemployed and a temporary cut to payroll taxes are also scheduled to expire at the end of the year.

Business leaders and Ben Bernanke, chairman of the US Federal Reserve, have warned that uncertainty over the fiscal cliff is already having a negative effect on the economy.

International observers, including Christine Lagarde, head of the International Monetary Fund, have warned that effects of going over the fiscal cliff would ripple out to the rest of the world.

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