Obama scales down fiscal cliff plan

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Copy of IOL obama REUTERS File photo: US President Barack Obama.

US President Barack Obama Friday told lawmakers to go home and drink some Christmas egg nog before coming back to Washington to pass a scaled-down tax package to avert a year-end fiscal crisis.

Obama said he still wanted a comprehensive and large deficit-cutting bill to put the US economy on the path to long-term prosperity, but that effort stalled when talks broke down between the White House and House Republicans this week.

So to avoid massive looming spending cuts and tax hikes due to kick in on all Americans on January 1, Obama called for a stop-gap bill, to protect middle-class tax payers and to avert the “fiscal cliff” crisis.

“There is absolutely no reason, none, not to protect these Americans from a tax hike. At the very least, let's agree right now on what we already agree on. Let's get that done.”

Obama said he met Democratic Senate leader Harry Reid and spoke to Republican House speaker John Boehner on the phone to discuss a fall-back plan.

He called on Congress to produce a package that prevents a tax hike on the middle class, would extend unemployment insurance and which laid the groundwork for further growth and deficit reduction next year.

The move would still satisfy his 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.

“Everybody can cool off, everybody can drink some egg nog, have some Christmas cookies, sing some Christmas carols,” Obama said.

“Call me a hopeless optimist, but I actually still think that we can get it done,” said Obama, who will spend Christmas in his native Hawaii, but told reporters he would be back in Washington next week.

Obama spoke following the collapse of negotiations between the White House and House Republicans on a deal to stave off the fiscal cliff, which many analysts believe could cause a recession and hurt the global recovery.

On Thursday, Republicans rejected a bid by Boehner to pass a backup bill to solve the crisis, leaving Washington in turmoil. -Sapa-AFP


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