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US 'fiscal cliff' deal more elusive than ever

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US 'fiscal cliff' deal more elusive than ever
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The ideological stalemate over spending cuts and tax increases for the rich continues in Washington.

If Democrat President Barak Obama and the Republicans who control the lower house of Congress cannot agree a deal by the end of year, emergency measures come in which many fear could drag the US back into recession.

John Boehner, the Republic leader of the lower house of Congress, did not outline a clear path forward on negotiations. He said: “We see a situation where – because of the political divide in the country, because of the divide here in Washington – trying to bridge these differences has been difficult: if it were easy, I guarantee you this would have been done decades before.”

It was “not the outcome I wanted,” Boehner said after he was unable to muster enough Republican support for a plan that would have limited income-tax increases to only the wealthiest sliver of the population – those earning $1 million and more.

Boehner’s problem is his party’s hard-liners will not accept any taxes hikes, without bigger government spending cuts, which the White House says would hit the poorest Americans.

So what happens now? David Kelly, Chief Global Strategist with JP Morgan thinks we should not worry.

Kelly said: “There will be incredible pressure put upon them by the American people, by every business, and every tax payer in the United States and because of that I think they will come up with a deal. Now the reason its important to recognise that at the outset is – people shouldn’t prepare for the worst case scenario of them not coming up with a deal.”

But as America prepared for Christmas, the politicians were running out of time. After the holidays they return to Washington on December 27th. The deadline is the 31st.

The uncertainty is overshadowing the slowly recovering US economy and the best hope now is that Democrats in Congress may be able to reach a compromise with moderate Republicans.

Hard stance

Underlining Boehner’s dilemma Republican Representative Tim Huelskamp criticised his handling of the negotiations, saying the house speaker had “caved” to Obama opening the door to tax hikes.

Huelskamp, a dissident first-term congressman, said he was not willing to compromise on taxes even if they are coupled with cuts to government spending sought by conservatives.

Conservatives “are so frustrated that the leader in the House right now, the speaker, has been talking about tax increases. That’s all he’s been talking about,” Huelskamp said on MSNBC on Friday morning.

“There’s been very little outreach by this leadership team to conservatives. … Do not ask for tax increases. We’re not going to give them,” Huelskamp said, added: “We can still get this done.”

Obama and his fellow Democrats in Congress are insisting that the wealthiest Americans pay more in taxes in order to help reduce high federal budget deficits and avoid deep spending cuts.


Wall Street and numerous chief executives have expressed frustration with Washington and the wrangling over a deal that has persisted for weeks with little progress.

Aetna’s Chief Executive Officer Mark Bertolini said he feels negotiations seem like they are falling apart, calling the back-and-forth among politicians “pitiful and embarrassing” in the Wall Street Journal on Friday.