Congress finds itself in the throes of a tense final countdown on Monday, with just hours to reach a deficit reduction deal before widespread tax increases and federal spending cuts go into effect in the new year.
A tense countdown was in full effect on Monday, as the US Congress was left with mere hours to come up with a deal to prevent the country from going over the “fiscal cliff” -- and therefore facing widespread tax increases and federal spending cuts at the start of the new year.
The combination of tax hikes and cuts in domestic programmes could send the slowly improving US economy sliding back into recession, some economists argue.
If no deal is reached before Tuesday, taxes will go up for nearly every taxpayer and a significant number of businesses, and the 2% payroll tax cut Obama signed in 2010 (credited with increasing the average employee’s annual take-home salary by $1,000) will expire.
Among the federal programmes to expire if no agreement is forged will be emergency unemployment payments for millions who remain out of work but no longer qualify for state subsidies.
To help avoid such dire consequences, Vice President Joe Biden - following President Barack Obama’s lead - cut his Christmas holiday short, rushing to Washington DC on Sunday night to meet with Senate leaders in the hopes of finding a last-minute compromise.
What is a ‘wealthy American’?
Obama and Speaker of the House John Boehner (the top Congressional Republican) have been embroiled in largely deadlocked talks for weeks, with taxes as the main sticking point. Republicans want to renew the existing tax rates for everyone, and reduce the deficit primarily through cuts to “entitlement” programmes (like Medicare, government-funded healthcare for the elderly). Democrats want to raise tax revenue by imposing higher rates on the wealthiest Americans, while trimming federal programmes more sparingly.
The threshold for what income qualifies one as belonging to the category of “wealthiest” Americans has shifted over the course of talks. Obama has stuck to $250,000 as the minimum annual salary to be taxed at a higher rate, though many Congressional Democrats have expressed willingness to raise that number to $400,000.
Republicans in the House of Representatives have insisted that the cut-off needs to be higher, even rejecting Boehner’s proposal to raise taxes only on individuals earning more than $1 million annually as too much of a compromise.
With both President Obama - boosted by his decisive re-election victory in November - and House Republicans refusing to bend on the tax issue, Boehner has urged the Democrat-controlled Senate to try to reach a deal (which would, of course, then have to pass the House).
Senate Republicans have indicated that they are more willing to compromise on the tax issue than their counterparts in the other chamber, proposing to allow rates to rise on individuals earning more than $450,000 a year.
But if the Senate fails to reach a deal on Monday, it could vote instead on a temporary measure, proposed by Obama, which would postpone the question of raising taxes on the wealthy, but prevent tax hikes on incomes lower than $250,000 and extend unemployment benefits.
On Sunday, Obama appeared on popular TV programme “Meet the Press”, adopting a firm tone when addressing Congress. “We have been talking to the Republicans ever since the election was over,” he said. “Now the pressure’s on Congress to produce.”
Recent opinion polls have consistently shown that Americans agree with Obama’s assessment, with the majority finding fault with Congressional Republicans - and not the president - for the stalled talks and whatever damage may ensue.
Date created : 2012-12-31