Senior senators say they believe a deal can be reached as US markets nervously await news from 3pm Washington meeting
Dominic Rushe in New York
guardian.co.uk, Friday 28 December 2012 13.00 EST
Stock markets in the US were on track for their fifth straight day of losses. Photograph: Seth Wenig/AP
Washington geared up for a final effort to avert the fiscal cliff budget crisis on Friday as Barack Obama arranged crisis talks with congressional leaders and legislators cut short holiday plans to return to Capitol Hill.
After a day of bitter recriminations on Thursday, there were small signs of hope, as senior senators said they believed a deal could be brokered. "I am hopeful there will be a deal that avoids the worst parts of the fiscal cliff – namely taxes going up on middle-class people,'' Democrat Chuck Schumer told NBC's Today show. "I think there can be, and I think the odds are better than people think there could be."
"I think in the end we'll get a deal,'' said Republican John Thune. "The question is the timing of that. It is encouraging that sides are sitting down. They continue to have lines of communication there, and I view that as optimistic."
At 3pm today Obama will meet with House speaker John Boehner and Senate minority leader Mitch McConnell, as well as Democrat colleagues Nancy Pelosi and Harry Reid in the hopes of thrashing out a deal.
But scepticism remained. Tennessee Republican Bob Corker told reporters that while he expected a new offer from Obama, "it's feeling very much like an optical meeting, not a substantive meeting."
In the US, stock markets were on track for their fifth straight day of losses as investors waited nervously for the latest twists in the slow-moving drama. The Congressional Budget Office has warned that going over the fiscal cliff will push the US back into recession, and drive unemployment up to 9.1% from its current rate of 7.9%.
Following a flurry of activity before Christmas, there has been no sign of a breakthrough in recent days. On Thursday, the White House scotched rumours that a new bill was set to be presented to Congress. Without a compromise, 88% of Americans will see their taxes rise on January 1, a wave of deep spending cuts will start to take effect, and 2 million long-term unemployed people will lose their benefits.
With such little time left, most analysts now expect a patch solution. Obama is reportedly planning a compromise that would include restricting tax hikes to those earning more than $400,000, extending unemployment payments, and stopping a cut in Medicare reimbursements to doctors while a permanent solution is found.
Schumer and Thune's comments came after a day of fierce rhetoric in Washington. Reid, the Senate majority leader, lambasted Boehner and his Republican colleagues, and said the speaker was operating a "dictatorship" and had delayed compromise ahead of a vote on his role on January 3.
"Members of the House of Representatives are out watching movies, and watching their kids play soccer and basketball, and doing all kinds of things," Reid said as the Senate sat for the first time since Christmas. "They should be here."
Boehner has now called back the House of Representatives, whose members will get back to work on Sunday. He warned colleagues to be prepared to work through the New Year.
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