Fiscal Cliff

The fiscal cliff involves US$600 billion in automatic tax hikes and spending cuts effective in early 2013 if US lawmakers fail to agree on reducing the budget deficit.

 

NewsWorld

US lawmakers rush to find fiscal solutions

PUBLISHED : Saturday, 10 November, 2012, 12:00am
UPDATED : Saturday, 10 November, 2012, 3:47am
 

Senior US lawmakers said they were moving quickly to take advantage of the post-election political atmosphere to try to strike an agreement that would avert a fiscal crisis early next year.

This is when trillions of dollars in tax increases and automatic spending cuts begin take effect.

Republican senator, Bob Corker, said he had begun circulating a draft plan to overhaul the tax code and entitlements. He met 25 senators from both parties and had "been on the phone non-stop since the election".

Senator Olympia Snowe, a Republican who will retire at the end of the year, made it clear that she intended to press for a deal to avoid the so-called fiscal cliff and get serious on the deficit, lame duck or not.

"The message and signals we send in the coming days could bear serious consequences for this country," she said. "It could trigger another downgrade. It could trigger a global financial crisis. This is a very consequential moment."

Senator Charles Schumer of New York, the No 3 Senate Democrat, extended an olive branch to Republicans, suggesting he could accept a plan that leaves the top tax rate at 35 per cent, provided loophole closings hit the rich, not the middle class. He previously said he would accept nothing short of a return to the top tax rate of Bill Clinton's presidency, 39.6 per cent.

"If you kept them at 35, it's still much harder to do," Schumer said. "But obviously there is push and pull, and there are going to be compromises."

A budget report said if automatic spending cuts go into force and Bush-era tax cuts expire, the nation would slip into recession and unemployment would rise to 9.1 per cent, from October's rate of 7.9 per cent. But simply cancelling those deficit-reduction measures would risk a financial crisis that would make matters worse, the report said.

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