Fiscal cliff rattles markets as Obama, lawmakers urge fix

US President Barack Obama on Wednesday called for a pre-Christmas deal with Republicans to avert a tax and deficit crunch, as pressure mounted from the business world and Europe and stock markets fluttered.

US lawmakers from both sides of the political aisle demanded urgent action to keep America from falling off the so-called "fiscal cliff," and Treasury Secretary Timothy Geithner was to drive the point home Thursday when he meets members of Congress to discuss "a balanced approach to reduce our deficit," his office said.

With the Thanksgiving holiday now a memory, consensus has swelled that a deal -- either a full-blown grand bargain or part one of a multi-stage agreement -- ought to be reached before tax rates rise for millions of American families and deep spending cuts bite on the first day of 2013.

Economists have said the $500-billion amalgam of tax hikes and spending cuts required by last year's debt-ceiling deal could could pitch the US economy back towards recession next year.

The president gathered middle class families at the White House to dramatize and boost his campaign for Republicans to join Democrats in Congress to pass an extension to tax cuts for most Americans, while bowing to his pressure to raise rates on top earners.

"I want to make sure everybody understands this debate is not just about numbers. It's a set of major decisions that are going to affect millions of families all across this country in very significant ways," Obama said.

"Our ultimate goal is an agreement that gets our long-term deficit under control in a way that is fair and balanced.

"I believe that both parties can agree on a framework that does that in the coming weeks," he said. "In fact, my hope is to get this done before Christmas."

Obama, fresh from re-election, met with the Democratic and Republican leaders of the House and Senate earlier this month and expressed optimism that an agreement could be reached. Republicans acknowledged they were willing to put the issue of revenue on the table, perhaps in the form of higher taxes for the wealthiest Americans.

That optimism has appeared to wobble, however, and the uncertainty led markets to sink in Asia on Wednesday, then close mixed in Europe.

US stocks dropped on Tuesday and fell again at the opening bell Wednesday with traders fretting over a fiscal resolution, but US markets rebounded to close in positive territory.

Democrat Nancy Pelosi, the House minority leader, was blunt about the need to negotiate.

"There has to be a deal," she told reporters. "I believe everybody knows what the possibilities are, so let's just do it."

But her Republican counterpart, House Speaker John Boehner, signaled no wavering in the standoff over taxes, even after fellow Republican congressman Tom Cole pitched taking the Democratic deal to prevent taxes from rising on the middle class while suggesting rates for the wealthiest be worked out later.

Cole had argued that extending the Bush-era tax cuts for all families making less than $250,000 per year would give Republicans leverage in their bid to extend the tax cuts to the wealthy, as Democrats will still need to negotiate with Republicans on raising the debt ceiling by February.

"I told Tom earlier in our conference meeting that I disagreed with him," Boehner said.

"He's a wonderful friend of mine and a great supporter of mine, but raising taxes on the so-called top two percent -- half of those taxpayers are small-business owners that pay their taxes through their personal income tax filing every year.

"The goal here is to grow the economy and control spending. You're not going to grow the economy if you raise tax rates on the top two (percent). It'll hurt small businesses, it'll hurt our economy."

Several Republicans back Boehner's position, but defections from the party's "no tax increase" ideology have begun.

They include Senators Lindsey Graham and Saxby Chambliss, who say they are willing to look beyond the party line towards raising taxes on the wealthiest if need be.

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