Obama holds last-minute budget talks

US President Barack Obama and legislators have launched a last-chance round of budget talks, days before a New Year’s deadline to reach a deal or watch the economy go off a “fiscal cliff”.

Obama and Vice President Joe Biden met congressional leaders from both the Democratic and Republican parties at the White House on Friday to try to revive negotiations to avoid tax hikes and spending cuts – together worth $600bn – that will begin to take effect on January 1.

The president described the discussions as “good and constructive” and said that “Congress can prevent [the cliff] from happening if they act right now.”

Members were divided on the odds of success, with a few expressing hope and some talking as if they had abandoned it – and a small but growing number suggesting Congress might try to stretch the deadline into the first two days of January.

“We have a lot of paths forward,” Senate Majority Leader Harry Reid told reporters after the meeting. “Just have to find out which one we can take.”

Senate leaders aim to craft “fiscal cliff” legislation by Sunday, the top Republican Senator Mitch McConnell said.

McConnell characterized the meeting with Obama as “good” and said: “We are engaged in discussions, the majority leader, and myself and the White House, in the hopes that we can come forward as early as Sunday and have a recommendation that I can make to my conference.”

In order to be ready to legislate if an agreement takes shape, the Republican-dominated House of Representatives also convened a session for Sunday.

House Majority Leader Eric Cantor advised members to be prepared to meet through January 2, the final day before the swearing-in of the new Congress, which was elected on November 6.

“[It] doesn’t feel like anything that’s very constructive is going to happen” as a result of the meeting with Obama, said Tennessee Republican Senator Bob Corker. “It feels more like optics than anything that’s real.”

The two political parties remained far apart, particularly over plans to increase taxes on the wealthiest Americans to help close the US budget deficit. But one veteran Republican, Jeff Flake of Arizona, held out the prospect that if Obama came through with significant spending cuts, Republicans in the House might compromise on taxes.

The coming days are likely to see either intense bargaining over numbers, or political theatre as each side attempts to avoid blame if a deal looks unlikely.

Divergent positions

Obama arrived back at the White House on Thursday from a brief holiday in Hawaii that he cut short to restart stalled negotiations with Congress.

“Republicans are quick to admit the president has better cards in this tactical game, simply by refusing to make changes necessary to keep tax cuts from expiring,” said Al Jazeera’s Tom Ackerman, reporting from Wsahington.

“But whether they meet the deadline or not is still very much an open question,” our correspondent said about changes which would cause the US economy to shrink by four percent.

“This January 1 deadline is a little artificial. We can do everything retroactively. We have to get it right, not get it quickly,” said Republican Representative Andy Harris.

One component of the “fiscal cliff” – $109bn in automatic spending cuts to military and domestic programmes – is set to kick in on January 2.

The House and Senate passed bills months ago that reflect their own sharply divergent positions on the expiring low tax rates, which went into effect during the administration of former Republican President George W Bush.

Democrats want to allow the tax cuts to expire on the wealthiest Americans and leave them in place for everyone else. Republicans want to extend the tax cuts for everyone.

When asked who they held more responsible for the “fiscal cliff” situation, 27 percent of Americans blamed Republicans in Congress, 16 percent blamed Obama and six percent pointed to Democrats in Congress. The largest percentage – 31 percent – blamed “all of the above”.