A deal is in sight but it is not yet done – that was the message from US President Barack Obama who appeared on prime time television to reassure the American public.
Although a gave few details he did say the talks were progressing and both sides seem to be getting closer over extending unemployment insurance, continuing numerous child and elderly benefits and a plan that would continue expiring tax cuts for household incomes of up to $450,000.
With the hours ticking away both Republican and Democratic parties are still arguing over budget reform but they hope to reach an agreement before a midnight Washington time deadline.
If there’s no deal by then an enormous package of tax increases and government spending cuts worth more than 424 billion euros – will come into effect. Bush-era tax cuts will also expire immediately, hitting more than 90% of Americans.
The effect of the package has been described as something like falling over a ‘fiscal cliff’ with the potential to pull the US back into recession.
The main sticking point has been raising income taxes on households earning more than $250,000 a year. Obama wants these households to pay more, but many Republicans have said they will vote against any increase in tax.
However Obama stressed any reforms agreed upon must be a balanced package of tax rises and spending cuts in order to reduce the US public deficit.