‘All lines are open’ as the US hurtles towards fiscal cliff

By RICHARD LUSCOMBE
Published on 28/12/2012 00:01

BARACK Obama arrived back in Washington yesterday, cutting short his Christmas holiday to and try to breathe new life into the stalled process of resolving the so-called fiscal cliff crisis in the US before New Year’s Day.

With a $600 billion (£370bn) package of spending cuts and tax rises due to take effect next week unless a compromise is found, the US president urged senior Republicans and Democrats in the capital to resume talks and break their impasse over their conditions for a deal.

However, last night, despite Mr Obama’s early return from Hawaii and with economists warning that the country is speeding back towards recession, office doors in Congress appeared to remain closed.

Senate Majority leader Harry Reid, a Democrat, launched an attack on the Republican speaker of the House of Representatives, John Boehner, saying: “He seems to care more about his speakership” than negotiating a fix.

Accusing his political rival of running Congress like “a dictatorship”, Mr Reid said he thought it likely that no agreement would be reached in time.

Mr Boehner, meanwhile, said the emphasis was on the Senate to act on two financial bills already passed by the House that, he said, “would avert the entire fiscal cliff if enacted”.

Adding to the air of gloom was an announcement by Timothy Geithner, secretary of the treasury, on Wednesday that the country would reach its borrowing ceiling on 31 December, forcing him to take “extraordinary measures as authorised by law” to avoid the government defaulting on its debts. Such an eventuality would have far-reaching implications for the still-fragile global economic recovery.

Effectively, the politicians have only two more days to agree on a deal because members of the US Senate and House of Representatives were promised at least 48 hours notice if they were required to return to Washington for a vote.

Mr Obama, who was back at his desk after the long flight from Hawaii, knows his popularity hangs on the consequences of the talks, with even low-earning families facing tax rises costing thousands of dollars.

However, his own discussions with Mr Boehner collapsed last week and he has little real influence in the direction of any discussions, leading to accusations from opponents that his high-profile return from his holiday was little more than a cosmetic exercise.

“Obama wants to avoid any perception that he isn’t doing everything he can to cut a deal,” Tobe Berkovitz, professor of communications at Boston University, said.

“It does not look good to be out there on the golf course or surfing when the average American is about to watch their financial status go down the drain,” he added.

The president can, however, take some comfort from a recent poll that showed 48 per cent of Americans would blame Republicans for the failure to reach a deal compared to 37 per cent who would hold Mr Obama personally responsible.

While both sides say they are committed to solving the looming crisis and reducing the country’s $16.4 trillion national debt, they seem further apart than ever.

Democrats want to increase taxes on the wealthiest Americans, a condition fiercely opposed by Republicans, who insist that spending on social security and other welfare programmes must be cut.

No new direct negotiations were planned as of last night, lessening the possibility of even a temporary fix by the New Year deadline.

A statement from Mr Boehner and other senior House Republicans said “lines of communication remain open” but discussions between the parties yesterday, such as they were, were at staff level and described by Democrats as “routine”.