No deal yet as US on edge of fiscal cliff | News | DW | 22.12.2012
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No deal yet as US on edge of fiscal cliff

US president Barack Obama has throttled back his ambitions for a sweeping budget bargain with Republicans, after failing to negotiate a deal to avoid the "fiscal cliff" before Congress adjourned for the Christmas break.

U.S. President Barack Obama speaks about the fiscal cliff to members of the media in the White House Briefing Room December 19, 2012. REUTERS/Kevin Lamarque (UNITED STATES - Tags: POLITICS)

USA Obama und Biden Erklärung zum Waffenrecht

"Everybody can cool off, everybody can drink some eggnog, have some Christmas cookies, sing some Christmas carols," US President Barack Obama said after the tough week of negotiations.

Obama said he still wanted a comprehensive and large deficit-cutting bill to put the US economy on the path to long-term prosperity, but that effort stalled when talks broke down between the White House and House Republicans.

"There is absolutely no reason, none, not to protect these Americans from a tax hike," the president said. "At the very least, let's agree right now on what we already agree on. Let's get that done."

He left shortly afterward to spend Christmas with family in his native Hawaii, and told reporters he would be back in Washington next week. "Call me a hopeless optimist, but I actually still think that we can get it done," he said.

Obama's suggestion would extend tax breaks on 98 percent of Americans - those earning below $250,000 (190,000 euros) a year. In talks with Boehner on a larger compromise, the president had offered to raise that threshold to $400,000.

The President also called on Congress to extend jobless benefits for the long-term unemployed that would otherwise be cut off for two million people at the turn of the year.

The White House announcement suggested that any chance for a smaller deal may rest in the Senate, particularly after the collapse of a plan by House Speaker John Boehner of Ohio to permit tax rates to rise on million-dollar-plus incomes.

No Plan B

Had there been a vote on Republican House Speaker John Boehner's "Plan B" to avert the so-called US fiscal cliff on Thursday night, it would not have been close. He was probably 40 to 50 votes short of the number he needed to avoid a humiliating defeat at the hands of his own party, according to rough estimates from Republican members of Congress and staff members.

It was not for lack of effort. Boehner and his two top deputies, Eric Cantor and Kevin McCarthy, along with other House Republican leaders, tried for three days to muster support for the measure, which would have cut government spending and raised taxes on millionaires to head off across-the-board tax hikes and spending cuts set for January.

They failed for a variety of reasons, according to interviews, but chief among them was that they were asking anti-tax conservatives to take a big risk for no discernable reward. Plan B, as Boehner named his alternative to Obama's proposal to raise taxes on earnings of $400,000 (300,00 euros) a year and above, would never become law because the Democratic-controlled Senate would not pass it.

In the search for a comprehensive bill, Boehner has made an offer to Obama that would raise $1 trillion in tax revenue - mostly through closing loopholes and ending certain deductions - and another $1 trillion in spending cuts, including in some social programs like Medicare.

"I told the president on Monday these were my bottom lines," Boehner said.

The White House has described its offer as $1.2 trillion in tax revenues and nearly $1 trillion in spending cuts, although Republicans dispute whether all of the austerity measures are real.

One way to make a tax hike on the wealthy more palatable for Republicans is to not make them vote for one at all.

Should the new year arrive with no deal, taxes rise on everyone. Congress could then technically vote to lower taxes on the middle class, something conservatives might be more willing to do.

bk/jr (AP, AFP, Reuters)

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