Well ahead of US President Barack Obama’s January 20th re-inauguration there is no time to waste in talks with Congress.
Lawmakers and the White House need to agree on a sustainable fiscal path, to tackle the budget deficit.
The Treasury said this had increased last month to $120 billion, up from $98 billion 12 months ago.
The country is perched on what is described as a ‘fiscal cliff’. This is the feared effect of Bush-era tax cuts expiring, combined with across-the-board spending cuts.
These factors together are projected to suck 600 billion dollars out of the economy starting early in 2013.
If there is no deal, the country’s GDP could contract by half a percent, rather than grow by two percent as forecast otherwise. The jobless rate it’s feared could rise above nine percent from below eight percent now.
The president has reportedly repeated a campaign promise to raise taxes on the wealthiest and hold tax rates down for those earning under $250,000 per year.
The Republicans don’t want the taxes of the rich to go up.
Both sides have sounded conciliatory notes but are still far from an agreement.
Republican Senator Mitch McConnell said: “The country has an extraordinary difficult set of challenges facing us over the next couple of months. The election is behind us and we are ready to get started.”
Yet significant uncertainty remains over the form and timing of a fiscal cliff deal.
Republican Congresswoman Marsha Blackburn said: “I think that what we want to make certain is that we do not seek a tax hike on individuals. And history has proven if you clean up that (tax) code a little bit, get rid of some of those loopholes, flatten it out, make it a little bit fairer, then you are going to see revenues increase.”
House of Representatives Speaker John Boehner has said the Republicans are willing to accept new revenue under the right conditions.
Our correspondent Stefan Grobe, in Washington DC, said: “Whether the Republicans are serious about a compromise deal with the Democrats, we’ll find out on Friday. That’s when President Obama meets Congressional leaders in the White House. Failing to act will likely push the United States into recession. And this has serious repercussions for Europe as well.”