Obama hosts fiscal cliff talks at White House

US President Barack Obama is meeting congressional leaders in talks at the White House to try to stop the US falling over the "fiscal cliff".

Reports say Mr Obama will offer a new deal in a bid to stave off tax rises.

Republicans and Democrats have only four days to reach an agreement before hundreds of billions of dollars of tax rises and spending cuts take effect.

Analysts say sliding over the "cliff" could tip the US into recession and set back the global economic recovery.

President Obama cut short his holiday in Hawaii to resume the negotiations.

New optimism?

Reports ahead of the meeting suggested the president would propose a limited package including the renewal of most expiring tax cuts, and a delay or replacement of some spending cuts.

There was no word on whether Republican House Speaker John Boehner and Senate minority leader Mitch McConnell would agree to a bipartisan deal.

Democratic Senate majority leader Harry Reid and senior House figure Nancy Pelosi were also at the White House.

Earlier, unconfirmed details of Mr Obama's plan were accompanied by newly upbeat rhetoric from some senators.

"I'm getting a little more optimistic today. Sometimes it's darkest before the dawn and there are two good signs for optimism today," senior Democrat Chuck Schumer told NBC's Today show.

Republican Jon Kyl told Bloomberg News: "Everybody recognises we're either going to get something in the next few hours or not. There's no more posturing time left."

Mr Obama's plans to increase taxes on the wealthiest Americans have remained a point of division between the two parties since he won re-election in November.tinue reading the main story

What is the fiscal cliff?

• On 1 January 2013, tax increases and huge spending cuts are due to come into force - the so-called fiscal cliff
• Deadline was put in place in 2011 to force president and Congress to agree ways to save money over the next 10 years
• Fear is that raising taxes while massively cutting spending will have huge impact on households and businesses
• Experts believe it could push the US into recession, and have a global impact on growth

The president wants tax cuts renewed for those earning under $400,000 (£250,000), with tax rises on the richest 2% in order to rein in deficit spending. But many Republicans oppose new taxes as a matter of principle, and are demanding cuts to what they see as deficit-inflating public spending, putting at risk healthcare and welfare benefit schemes popular with Democrats. An alternative plan proposed by House Speaker John Mr Boehner - which would have seen taxes rise only on those earning over $1m - failed in the House of Representatives late last week.

Speaking on Thursday, the Democratic majority leader in the Senate, Harry Reid, said he thought a deal was unlikely. Later, Senate Republican leader Mitch McConnell said his colleagues were unwilling to sign a "blank cheque".

"Hopefully there is still time for an agreement of some kind that saves the taxpayers from a wholly preventable economic crisis."

In the Senate chamber on Thursday, Mr Reid said the requirement to get at least 60 of 100 votes to move to a vote on any legislation almost certainly doomed any new plan unless Republicans gave it strong backing.

"It looks like that [the fiscal cliff] is where we're headed," Mr Reid said.

Cuts and benefits

The term fiscal cliff refers to the combination of almost $600bn (£370bn) of tax rises and spending cuts due to come into force on 1 January if Congress does not pass new legislation.

Sweeping tax cuts passed during the presidency of George W Bush will expire, eventually affecting people of all income levels, and many businesses.

Other tax cuts and benefits to expire include:

• A 2010 payroll tax cut, the expiration of which would prompt immediate wage-packet cuts
• Benefits for the long-term unemployed
• Compensation for doctors treating patients on federal healthcare programmes
• Inheritance taxes are also likely to be affected if no deal is reached.

In addition, spending cuts mandated by a law passed to break a previous fiscal impasse in Congress will come into force, affecting both military and domestic budgets.

The cuts are expected to affect federal government departments and the defence sector, as well as hitting unemployment insurance and veterans' support.

How the Bush tax cuts were brought in
Tax year	1993-2000	2001	2002	2003-2008	2009-2012	2012 tax brackets	2013 scenarios
							Tax cuts expire	Tax cuts expire for top incomes
SOURCE: TAX FOUNDATION, IRS. TAX BRACKETS SHOWN FOR UNMARRIED INDIVIDUALS
President	Bill Clinton	George W Bush			Barack Obama
Bottom rate	15%	10%	10%	10%	10%	Up to $8,700	15%	10%
		15%	15%	15%	15%	$8,700-$35,350		15%
	28%	27.5%	27%	25%	25%	$35,350- $85,650	28%	25%
	31%	30.5%	30%	28%	28%	$85,650- $178,650	31%	28%
	36%	35.5%	35%	33%	33%	$178,650-$388,350	36%	33% or 36%*
Top rate	39.6%	39.1%	38.6%	35%	35%	Over $388,350	39.6%	39.6%
*President Obama has previously called for the tax cut to expire for those earning over $250,000