President Barack Obama was to cut his holiday short and head back to Washington on Wednesday to try to address the “fiscal cliff,” a set of tax hikes and spending cuts to take effect next year.
Despite weeks of negotiations, Obama has been unable to reach a budget deal with congressional Republicans to slash the deficit and avert the mandatory austerity measures, which could pitch the economy back into recession.
The White House said Tuesday that Obama would fly back from his native Hawaii on Wednesday, cutting short his Christmas break and raising the possibility of renewed negotiations in Washington as early as Thursday.
Democratic and Republican leaders traded blame last week over the failure to reach a deal before the holidays to prevent most Americans from seeing their taxes go up next year.
The so-called fiscal cliff is the result of a poison pill agreement reached earlier this year that would require major spending reductions as tax cuts passed under former president George W. Bush expire at the end of the year — should Democrats and Republicans fail to reach a deal to cut the deficit.
The White House has offered a deal with $1.2 trillion in revenues — by fulfilling an Obama campaign promise to allow the Bush tax cuts to expire for the wealthy — and nearly $1 trillion in spending cuts.
Republicans are opposed to raising taxes in principle and have questioned whether the spending cuts proposed by the White House are real.
They have instead offered a deal that would raise $1 trillion in tax revenue — mainly by closing loopholes and ending deductions — and another $1 trillion in spending cuts, including cuts to Medicare and other social programs.
Venting frustration with Republicans, Obama on Friday urged lawmakers to pass scaled-down legislation that would at least prevent taxes from going up on the vast majority of Americans, those making $250,000 or less per year.
The move would satisfy Obama’s demand to raise taxes on the richest Americans, as all Bush-era taxes will go up on January 1, and Obama only envisions extending the lower rates for middle class earners.
House Republicans led by Speaker John Boehner have meanwhile punted to the Democratically-led Senate, asking Obama and Senate Majority Leader Harry Reid to write up legislation that can pass both houses.
Obama’s suggestion would extend tax breaks to 98 percent of Americans — those earning below $250,000 a year. In talks on a larger compromise, the president had offered to raise that threshold to $400,000.