Obama breaks off vacation to deal with fiscal cliff

With President Barack Obama heading back to Washington, US lawmakers were under increased pressure Wednesday to hammer out an 11th-hour deal that prevents taxes from rising for all Americans.

The president cut short his Christmas vacation in Hawaii and was set to fly back to the US capital late Wednesday, five days after calling on Congress to end their bitter deadlock over how to avoid the so-called "fiscal cliff."

But members of the US House and Senate -- not to mention the White House -- have shown no outward signs of narrowing their differences over how to avoid looming tax hikes for all Americans and deep, mandated spending cuts that kick in from January 1 if Congress does not act.

"I don't yet know what Senator Reid has planned," Don Stewart, deputy chief of staff to Republican Minority Leader Mitch McConnell, said Wednesday, referring to Senate Majority Leader Harry Reid.

"The White House hasn't reached out to us, nor have Senate Dems. They seem to be working on this on their own," Stewart told AFP.

After Democrats and Republicans traded blame last week over the failure to reach a deal before the holidays, House Republicans led by Speaker John Boehner punted to the Democratically-led Senate, asking Obama and Reid to write up legislation that can pass both houses.

Senators and representatives are expected back in Washington on Thursday, giving them less than a week to work out a deal that avoids the fiscal cliff, which economists say could send the US economy tumbling back into recession.

With the deadline rapidly approaching, Obama pared back his hopes for a year-end grand bargain that addresses taxes as well as substantial spending cuts as part of a 10-year deficit-cutting bill, saying Congress should at least work out a stop-gap measure to protect middle-class taxpayers.

Obama successfully campaigned for re-election on his support for an extension of the Bush-era tax breaks to 98 percent of Americans -- those in households earning up to $250,000 a year.

In talks with Boehner on a larger compromise, the president had offered to raise that threshold to $400,000.

But with Republicans in the majority in the House of Representatives, even if all 192 Democrats in the chamber voted for an Obama-backed plan, it would still need support from at least two dozen Republicans.

Most Republicans in Congress have signed a no-new-taxes pledge, however, and it remained unclear just how many would violate that oath in order to strike a deal.

Staunch conservatives last week revolted against Boehner's surprise bid to ram through an alternative proposal which aimed to prevent a 2013 tax hike on anyone making under $1 million per year.

Democrats have insisted that any deal that passes Congress must have support from both parties.

Boehner "should bring a bipartisan bill to the floor and let the House work its will," Chris Van Hollen, the ranking Democrat on the House Budget Committee, told Bloomberg TV on Friday.

"This House will say yes to a bipartisan bill."

Obama appeared keen for congressional leaders to produce a package that at a minimum prevents a tax hike on the middle class, extends unemployment insurance and lays the groundwork for further deficit reduction next year.

But Republicans could balk at voting on such a plan until after January 1.

Going over the cliff would force all tax rates to rise. Instead of actively voting to hike rates on the wealthy, Republicans could then turn around and vote on a bill that reduces middle-class taxes to their pre-2013 rate.

The fiscal cliff is the result of a poison pill agreement reached last year that would require major spending reductions as tax cuts passed under former president George W. Bush expire at the end of the year -- should Democrats and Republicans fail to reach a deal to cut the deficit.

The White House has offered a deal with $1.2 trillion in revenues -- by fulfilling an Obama campaign promise to allow the tax cuts to expire for the wealthy -- and nearly $1 trillion in spending cuts.

--

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