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Obama to host fiscal cliff talks at White House | Obama to host fiscal cliff talks at White House |
(about 3 hours later) | |
US President Barack Obama has called Congressional leaders to talks at the White House to try to stop the US falling over the "fiscal cliff". | US President Barack Obama has called Congressional leaders to talks at the White House to try to stop the US falling over the "fiscal cliff". |
Republicans and Democrats have only four days to reach an agreement before hundreds of billions of dollars of tax rises and spending cuts take effect. | Republicans and Democrats have only four days to reach an agreement before hundreds of billions of dollars of tax rises and spending cuts take effect. |
Over time the loss of income would have a deleterious effect on the US economy. | |
Analysts say sliding over the "cliff" could tip the US into recession and set back the global economic recovery. | Analysts say sliding over the "cliff" could tip the US into recession and set back the global economic recovery. |
President Obama cut short his holiday in Hawaii to resume the negotiations, and is due to host the White House talks at 15:00 EST (20:00 GMT). | |
Congressional divisions | |
The priority for Democrats is retaining tax cuts for households earning less than $400,000 (£250,000) while raising taxes for the richest 2% of Americans in order to rein in deficit spending. | |
Republican congressmen feel they were re-elected with a mandate to block new taxes - certainly for those earning less than $1m. They are also demanding cuts in some popular healthcare and welfare benefit schemes. | |
Analysts say the two political parties remain far apart, particularly over plans to increase taxes on the wealthiest Americans. | |
Divisions in the two chambers of congress - with Republicans having a majority in the House of Representatives while Democrats control the Senate - are also making it hard to reach consensus: Any potential deal must pass votes in both chambers and be signed by the president. | |
An alternative plan proposed by Republican Speaker John Boehner - which would have seen taxes rise only on those earning over $1m - failed in the House of Representatives late last week. | |
The BBC's Jonny Dymond in Washington says it is very difficult to see how a solution can be reached before the new year. | The BBC's Jonny Dymond in Washington says it is very difficult to see how a solution can be reached before the new year. |
The Democratic majority leader in the Senate, Harry Reid, said he thought a deal was unlikely and Senate Republican leader Mitch McConnell said his colleagues were unwilling to sign a blank cheque. | The Democratic majority leader in the Senate, Harry Reid, said he thought a deal was unlikely and Senate Republican leader Mitch McConnell said his colleagues were unwilling to sign a blank cheque. |
"We'll see what the president has to propose. Members on both sides of the aisle will review it, and then we'll decide how best to proceed," said Mr McConnell. | |
"Hopefully there is still time for an agreement of some kind that saves the taxpayers from a wholly preventable economic crisis." | "Hopefully there is still time for an agreement of some kind that saves the taxpayers from a wholly preventable economic crisis." |
In the Senate chamber on Thursday, Mr Reid said the requirement to get at least 60 of 100 votes to move to a vote on any legislation almost certainly doomed any new plan unless Republicans gave it strong backing. | In the Senate chamber on Thursday, Mr Reid said the requirement to get at least 60 of 100 votes to move to a vote on any legislation almost certainly doomed any new plan unless Republicans gave it strong backing. |
"It looks like that [the fiscal cliff] is where we're headed," Mr Reid said. | "It looks like that [the fiscal cliff] is where we're headed," Mr Reid said. |
Mr McConnell said that while Senate Republicans would consider any proposal sent to them by Democrats, they would not "write a blank cheque" to resolve the fiscal cliff. | Mr McConnell said that while Senate Republicans would consider any proposal sent to them by Democrats, they would not "write a blank cheque" to resolve the fiscal cliff. |
Cuts and benefits | |
The term fiscal cliff refers to the combination of almost $600bn (£370bn) of tax rises and spending cuts due to come into force on 1 January if Congress does not pass new legislation. | The term fiscal cliff refers to the combination of almost $600bn (£370bn) of tax rises and spending cuts due to come into force on 1 January if Congress does not pass new legislation. |
Sweeping tax cuts passed during the presidency of George W Bush will expire, eventually affecting people of all income levels, and many businesses. | Sweeping tax cuts passed during the presidency of George W Bush will expire, eventually affecting people of all income levels, and many businesses. |
Other tax cuts and benefits to expire include: | Other tax cuts and benefits to expire include: |
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In addition, spending cuts mandated by a law passed to break a previous fiscal impasse in Congress will come into force, affecting both military and domestic budgets. | In addition, spending cuts mandated by a law passed to break a previous fiscal impasse in Congress will come into force, affecting both military and domestic budgets. |
The cuts are expected to affect federal government departments and the defence sector, as well as hitting unemployment insurance and veterans' support. | The cuts are expected to affect federal government departments and the defence sector, as well as hitting unemployment insurance and veterans' support. |