U.S. President Barack Obama Friday called on
leaders in the Senate to hammer out a last-minute deal to avert the
fiscal cliff of harsh austerity measures due to hit the US economy in
Obama said he was "modestly optimistic" that a deal could be reached by Tuesday to spare the US and global economies the shock of the so-called fiscal cliff, and charged Senate Majority Leader Harry Reid, a Democrat, and his Republican counterpart Mitch McConnell with coming together to craft a plan.
The men said they would try to have a recommendation within 48 hours, by Sunday, one day ahead of the deadline.
If the leaders cannot reach a compromise on their own, Obama called for an "up-or-down vote" on his proposal that would allow taxes to rise only on Americans earning more than 250,000 dollars a year, extend unemployment benefits and halt some of the most drastic spending cuts.
"We're now at the last minute. The American people are not going to have any patience for a politically self-inflicted wound to our economy," Obama said.
Obama met earlier Friday with congressional leaders from both parties at the White House for more than an hour, described as "constructive" by the senators and president.
If Democrats and Republicans cannot come to an agreement to replace the looming austerity and tax measures with a more measured approach, taxes would increase on most Americans and severe government spending cuts would take effect at the new year in what economists have said would be a major blow to the US economy.
Obama and Speaker of the House John Boehner have been in talks for weeks to hammer out a deal. The discussions came to an impasse over taxes, with Obama seeking an increased levy on the wealthiest Americans and Boehner refusing to raise taxes on those earning less than 1 million dollars per year - a proposal he could not even find support for among his fellow Republicans. If they fail to act, tax rates would rise on most Americans.
It is now up to the Senate leaders to forge a compromise.
"We have an obligation to do the best we can, and I've made it very clear to the White House we're going to do the best we can," Reid said, describing the next 24 hours as crucial.
"Whatever we come up with is going to be imperfect," Reid said in the Senate after the White House meeting.
Reid had predicted Thursday no deal would be reached, saying "it looks like" the US would head off the fiscal cliff next week.
The fiscal cliff refers to the expiration of all tax cuts implemented under former president George W Bush coupled with across-the-board spending cuts. Approved in August 2011 during a bitter partisan standoff on raising the debt ceiling, it was designed to force both sides to reach agreement on deficit reduction measures.
If this deal were to take effect on Tuesday, government economists say the economy would suffer a 600-billion-dollar blow in 2013 and be pushed back into recession.
The gridlock has already begun to weigh on the US economy, with monthly consumer confidence figures plunging in December at the height of the holiday shopping season as negotiations stalled. Stock markets have also fallen on the uncertainty, with the Dow Jones Industrial Average and the Standard & Poor's 500 Index both off more than 1 per cent Friday.
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