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Obama to host fiscal cliff talks at White House | Obama to host fiscal cliff talks at White House |
(about 2 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. |
Reports say Mr Obama will propose a smaller deal aiming to avert disaster. | |
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). | 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). |
New optimism? | |
Reports ahead of the meeting suggested the president would propose a limited package including the renewal of most expiring tax cuts, and a delay or replacement of some spending cuts. | |
Unconfirmed details of the plan were accompanied by newly upbeat rhetoric from some senators. | |
"I'm getting a little more optimistic today. Sometimes it's darkest before the dawn and there are two good signs for optimism today," senior Democrat Chuck Schumer told NBC's Today show. | |
Republican Jon Kyl told Bloomberg News: "Everybody recognises we're either going to get something in the next few hours or not. There's no more posturing time left." | |
Mr Obama's plans to increase taxes on the wealthiest Americans have remained a point of division between the two parties since he won re-election in November. | |
The president was tax cuts renewed for those earning under $400,000 (£250,000), with tax rises on the richest 2% in order to rein in deficit spending. | |
But many Republicans oppose new taxes as a matter of principle, and are demanding cuts to what they see as deficit-inflating public spending, putting at risk healthcare and welfare benefit schemes popular with Democrats. | |
An alternative plan proposed by House Speaker John Mr Boehner - which would have seen taxes rise only on those earning over $1m - failed in the House of Representatives late last week. | |
Speaking on Thursday, the Democratic majority leader in the Senate, Harry Reid, said he thought a deal was unlikely. Later, Senate Republican leader Mitch McConnell said his colleagues were unwilling to sign a "blank cheque". | |
"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. |
Cuts and benefits | 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. |