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Fiscal cliff: Barack Obama cuts short Christmas holiday to tackle crisis Fiscal cliff: Barack Obama cuts short Christmas holiday to tackle crisis
(35 minutes later)
Barack Obama is preparing to cut short his Christmas holiday to return to Washington to make a final effort to solve the fiscal cliff budget crisis before the year-end deadline. The decision by Barack Obama to cut short his Christmas break and return to Washington to make a final effort to solve the fiscal cliff crisis demonstrates just how significant the issue is for the US – and arguably the rest of the world.
The White House said the president would leave Hawaii, leaving his family behind as he attempts to reanimate stalled negotiations that are being closely watched around the world. The White House said on Wednesday the president would leave his family behind in Hawaii as he attempts to reanimate stalled negotiations that are being closely watched around the world before the year-end deadline. Without a fix – even a quick one – tax rates will rise across the board as $110bn (£68bn) in spending cuts are imposed and 2 million people lose their long-term unemployment benefits. Economists have warned that this could be powerful enough to push the US back into recession – and much of the world with it – in 2013.
With just days to go until the fiscal cliff deadline, US politicians return to work on Thursday with no specific bill on the schedule of either the US Senate or House of Representatives to deal with the crisis. Without a solution tax rates will rise across the board as $110bn in spending cuts are imposed and 2 million people will lose their long-term unemployment benefits. As US politicians prepared to return to work on Thursday Starbucks's chief executive, Howard Schultz, was asking employees in its 120 Washington DC area stores to write "Come Together" on coffee cups when serving customers to highlight the need for a deal which will set the tone for the world's economies next year .
Economists have warned that the US will go back into recession if a deal is not reached, and create a tough backdrop for the rest of the world. For now there is no specific bill on the schedule of either the US Senate or House of Representatives although aides for both the Democrats and the Republicans have said they expect some kind of deal to be brokered by the end of the week. But with so little time left few analysts now expect anything more than a "patch" solution and for the real argument to continue into the new year.
Aides for both parties have said they expect some kind of deal to be brokered by the end of the week. But with so little time left few analysts now expect anything more than a "patch" solution and for the real argument to continue into the new year. Starbucks's chief executive officer, Howard Schultz, asked employees in its 120 Washington DC area stores to write "Come Together" on coffee cups when serving customers to highlight the need for a deal. US stock markets were only marginally higher on Wednesday, cheered by positive news on the housing market, but analysts are expecting a sell-off if a deal is not reached soon. The Federal Reserve chairman, Ben Bernanke, the Congressional Budget Office (CBO), business leaders and economists have all warned that failure to find a resolution threatens the US's fragile economic recovery. The collapse of talks with the Republican House leader, John Boehner, has forced Obama to turn to the Senate in the hopes of passing a deal. The president said last week that he would like a temporary extension of tax cuts for all those earning less than $250,000 a year and an extension on unemployment benefits while Congress continues to debate an end to the impasse.
US stock markets opened marginally higher on Wednesday, cheered by positive news on the housing market. But market analysts are expecting a sell-off if a deal is not reached soon. The Federal Reserve chairman, Ben Bernanke, the Congressional Budget Office (CBO), business leaders and economists have all warned that failure to find a resolution to the debate threatens the US's fragile economic recovery. After the collapse of talks with the Republican leader, John Boehner, the House speaker, the president has turned to the Senate in the hopes of passing a deal. Obama said last week that he would like to see a temporary extension of tax cuts for all those earning less than $250,000 and an extension on unemployment benefits while Congress continues to debate an end to the impasse. Several leading Republican senators including Kay Bailey Hutchinson of Texas and Georgia's Johnny Isakson have called for a compromise. But even in the Democrat-controlled Senate, Obama faces stiff opposition.
Several leading Republican Senators including Kay Bailey Hutchinson of Texas and Georgia's Johnny Isakson have called for a patch solution and compromise. But even in the Democrat-controlled Senate, Obama faces stiff opposition. House Republicans have rejected a plan that would have left tax rates in place for all but those with annual incomes of more than $1m. Boehner's own plan was brought down by a bloc of conservatives ruling out any tax increases whatsoever. To win approval in the Republican-controlled House, Obama would need a rare bipartisan vote with at least 26 Republicans joining all 191 Democrats.
House Republicans have rejected a plan that would have left tax rates in place for all but those with incomes above $1m. Boehner's own plan was brought down by a bloc of conservatives ruling out any tax increases whatsoever. To win approval in the Republican-controlled House, Obama would need a rare bipartisan vote with at least 26 Republicans joining all 191 Democrats in the vote. According to a new Gallop poll Americans' optimism that Congress will reach a budget agreement before 1 January has waned over the past week. Fifty percent now believe a deal will be reached and 48% are doubtful, a change from the previous three weeks, when the solid majority of Americans were generally confident leaders would find a solution. The rest of the world is watching too.
According to a new Gallop poll Americans' optimism that Congress will reach a budget agreement before 1 January has waned over the past week. Fifty percent now believe a deal will be reached and 48% are doubtful, a change from the previous three weeks, when the solid majority of Americans were generally confident leaders would find a solution.