A last-minute deal by lawmakers is “in sight” to avert the so-called “fiscal cliff” of $500 billion in automatic tax increases and spending cuts set to take effect on January 1, US President Barack Obama said on Monday.
But hours ahead of a midnight (0500 GMT) deadline, that deal still had not been clinched, Obama said, as US lawmakers remained locked in last-minute negotiations to find a compromise that would avert tax increases for most Americans and significant cuts to budgets for federal agencies and programs.
“Today it appears an agreement to prevent this New Year’s tax hike is in sight,” Obama told a receptive crowd at the White House as a group of taxpayers stood behind him. “But it’s not done. There are still issues left to be resolved. But we’re hopeful that Congress can get it done.”
Economists have warned that the combination of budget cuts and tax hikes set to kick in if no deal is struck could plunge the United States into recession – a scenario that would also have massive repercussions for fragile economies around the world.
Obama and his fellow Democrats in the US Congress have insisted that any deal must require wealthier Americans to pay more taxes, a condition Republicans have fiercely resisted.
Republicans have argued that such a tax hike would stymie economic growth. They contend that the key to resolving US financial woes is in reining in colossal government spending – not levying more taxes.
Obama’s comments came amid reports on Monday that a deal between Democrats and Republicans was taking shape as the day inched ever closer toward 2013.
Citing a source with direct details of the negotiations, The Huffington Post reported that Vice President Joseph Biden and Senate Republican minority leader Mitch McConnell had hammered out a preliminary deal that would secure up to $790 billion in revenue over the next decade, resulting in an estimated $715 billion in debt reduction.
The deal would raise taxes permanently on individuals earning more than $400,000 and households making more than $450,000, The Huffington Post reported.
Negotiations between Biden and McConnell went deep into the night on Sunday, McConnell’s office said.
The Obama administration has pushed to raise taxes permanently on households making more than $250,000.
The reported plan to raise that threshold to $450,000 prompted sharp criticism on the Senate floor Monday. Sen. Tom Harkin, a liberal Democrat from Iowa, called the plan “grossly unfair.”
“We’re going to lock in forever the idea that $450,000 a year is middle class in America?” Harkin said. “Need I remind people that at $250,000 a year, that’s the top 2 percent income earners in America?”
Obama expressed confidence over the weekend that the country would persevere regardless of whether Congress strikes a deal by midnight.
If talks fall through, “then we’ll come back with a new Congress on Jan. 4, and the first bill that will be introduced on the floor will be to cut taxes on middle class families,” Obama said in an interview on Sunday with NBC.
