Fri, Dec 28, 2012 - Page 7 News List

Obama returns to looming fiscal cliff

DIVIDED:Despite warnings that wrangling over the debt ceiling will increase uncertainty, members of the US House and Senate have so far shown no sign of nearing any accord


US President Barack Obama was to return yesterday to a sharply divided Washington under pressure to forge a year-end deal with Republicans to avoid the tax hikes and spending cuts of the “fiscal cliff.”

Obama cut his Hawaiian Christmas vacation short to contend with the looming Jan. 1 crisis, as Republicans and Democrats traded blame and the White House reportedly lashed out at the “congressional stupidity” gripping the capital.

Six days earlier, Obama had urged Congress to end a deadlock over how to avoid the hundreds of billions of dollars in tax hikes and spending cuts that kick in at the start of the year if Congress fails to act.

The situation has spooked US and global markets, left Americans wondering whether they will pay thousands more in taxes next year, and worried the Pentagon, which fears defense cuts could seriously undermine the military.

Complicating efforts to avoid fiscal disaster, US Treasury Secretary Timothy Geithner said that his department will need to take “extraordinary measures” to postpone the day the government could default on its liabilities.

Geithner said in a letter to US Senate Majority Leader Harry Reid that the nation will reach its statutory US$16.39 trillion debt limit on Monday.

His measures would create about US$200 billion in headroom that under normal circumstances would last about two months, to the end of February.

“However, given the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures,” Geithner said.

Experts say a failure to strike a fiscal cliff compromise by New Year’s Eve could plunge the world’s biggest economy into recession, and wrangling over the debt ceiling will only exacerbate the uncertainty.

However, members of the House and Senate have shown no signs of nearing any accord.

“The White House hasn’t reached out to us, nor have Senate [Democrats,]” said Don Stewart, deputy chief of staff to Republican Minority Leader Mitch McConnell, on Wednesday.

“They seem to be working on this on their own,” he said.

Both parties traded blame last week over the failure to reach a deal and Republican House Speaker John Boehner punted to the Democrat-led Senate, asking Obama and Reid to draft legislation that could pass both houses.

Boehner said on Wednesday that “lines of communication remain open,” but held firm that the Senate must make the next move.

He suggested the chamber take up bills already passed by the House, notably a bill extending all tax breaks and another that replaces automatic spending cuts with ones that do not affect national security.

“If the Senate will not approve and send them to the president to be signed into law in their current form, they must be amended and returned to the House” for consideration, Boehner said in a statement.

A White House official offered a different, blunter view.

“What we need is for [McConnell] not to block a vote and for Boehner to allow a vote,” the official told ABC News.

The Senate was to be back in session yesterday, while Boehner has promised to give House members 48 hours notice before recalling them.

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