President Barack Obama warns Senate leaders to find compromise on taxation or lose input on rescue package
America teetered on the fiscal cliff on Saturday as Senate leaders continued to haggle over a tax deal to avert a looming US economic crisis.
Leaders from both sides huddled on Capitol Hill in a last-ditch effort to agree a bill by Sunday which could be sent to both chambers of Congress before the clock runs out on Monday night. With voters, stock markets and foreign governments holding their breath, willing Republicans and Democrats to compromise, Washington was in febrile mood and veered between despair, hope and fatalism.
President Barack Obama gave Senate leaders an ultimatum to make a bipartisan deal by Sunday or face a vote based solely on his own measures.
“The American people are watching what we do here. Obviously their patience is already thin,” he warned on Friday night after meeting Harry Reid, the Democrat majority leader, and Mitch McConnell, the Republican minority leader. “The hour for immediate action is here. It is now,” said the president, adding he was modestly optimistic about a deal.
The lower chamber, the House of Representatives, which has a Republican majority, was due to convene on Sunday. Speaker John Boehner told colleagues to be ready to work through the new year and signalled that the house would vote on a deal that emerged from the Senate.
If no deal is done, 88% of Americans will see their taxes rise on 1 January, when Bush-era tax cuts expire. In addition, deep spending cuts will bite and two million long-term unemployed people will lose their benefits.
The Congressional Budget Office has warned that tumbling over the cliff will push the US back into recession and drive unemployment up to 9.1% from its current rate of 7.9%. US stock markets fell for the fifth consecutive day on Friday as investors waited anxiously for a resolution to the slow-moving drama.
Consumer confidence deflated, with ordinary Americans expressing alarm and anger. “I hate you Congress, get your God damn act together,” seethed one typical tweet on #fiscalcliff.
Both sides are already preparing to deflect blame in the event of a debacle. Obama was due to make his case on NBC’s Meet the Press, a scoop for the host David Gregory who is under police investigation for showing an empty gun magazine clip on air during a recent interview about gun control.
Obama’s 11th-hour instruction to the Senate to seek a deal followed toxic rhetoric from both sides. Reid, the senate majority leader, accused Boehner of operating a “dictatorship” in the house and putting his job as speaker – which hangs in the balance – ahead of the national interest.
Ideological polarisation over how to tackle the federal deficit – Democrats wish to raise taxes, Republicans wish to cut spending – lies at the heart of Washington’s gridlock.
With its Tea Party faction opposing even Republican-sponsored compromises, the GOP fears it will receive the most blame if the US falls off the cliff. However, economic crisis could also wreck Obama’s second term and his quest for a legacy.
If no Senate deal is reached the president said he would propose a scaled-down package to cushion the fiscal fall by extending tax cuts for the middle-class and maintaining unemployment benefits. “If an agreement isn’t reached in time between Senator Reid and Senator McConnell, then I will urge Senator Reid to bring to the floor a basic package for an up-or-down vote,” he said.
Obama said his plan to let taxes rise for families who earn more than $250,000 would win a majority vote in both chambers, but that does not seem certain. Republicans wish to raise that ceiling to spare wealthier families tax rises.
Senate leaders pledged to try to hammer out a proposal to present to their caucuses by Sunday. “Whatever we come up with is going to be imperfect,” said Reid. “Some people aren’t going to like it, some people will like it less. But that’s where we are. We have an obligation to do the best we can.”
McConnell, speaking late on Friday, said a deal was feasible. “I am hopeful and optimistic,” he said. Senator Chuck Schumer, a Democrat from New York, echoed that to NBC. “Sometimes it’s darkest before the dawn,” he said.
However, Senator Bob Corker, a Republican from Tennessee, was bleaker in an interview with CBS, saying the last-minute talks were merely cosmetic ploys to give the impression politicians were doing something. “This is a total dereliction of duty at every level. I’ve been very surprised that the president has not laid out a very specific plan to deal with this, but candidly Congress could have done the same. And I think the American people should be disgusted,” he said.