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Hours before US 'fiscal cliff,' hints of despair

 Sen. John McCain, R-Ariz., left, and Senate Minority Whip Jon Kyl, R-Ariz., leave the chamber as the Senate rushes to negotiate a legislative path to...
 Senate Majority Leader Harry Reid, D-Nev., walks to a closed-door meeting with fellow Democrats as he and Senate Minority Leader Mitch McConnell, R-K...

Fiscal Cliff

Sen. John McCain, R-Ariz., left, and Senate Minority Whip Jon Kyl, R-Ariz., leave the chamber as the Senate rushes to negotiate a legislative path to...

APTOPIX Fiscal Cliff

Senate Majority Leader Harry Reid, D-Nev., walks to a closed-door meeting with fellow Democrats as he and Senate Minority Leader Mitch McConnell, R-K...

The U.S. Congress and the White House had just hours left Monday before a midnight deadline to come to a deal on the so-called "fiscal cliff" of austerity measures that threaten the still-weak economy, as an increasingly frustrated country wondered why its bitterly divided leaders couldn't come to terms even in crisis.
Unless an agreement is reached and approved by Congress by the start of New Year's Day, more than a half-trillion dollars in tax increases for nearly all Americans will begin to take effect, and $109 billion will be cut from defense and domestic programs. Though both would be felt gradually, economists warn that if allowed to fully take hold, their combined impact would rekindle a recession.
The House of Representatives and the Senate planned to meet Monday, a rarity for New Year's Eve, in hopes of having a tentative agreement to consider.
Republicans, who control the House, are scared of raising taxes. Democrats, who control the Senate and are in the White House, are scared of cutting spending.
Each side is scared of looking like it's giving in to the other.
Meanwhile, the country's chronic deficit spending continues without a deal to address it.
"This whole thing is a national embarrassment," Sen. Bob Corker, a Republican, said Monday on MSNBC, adding that any solution Congress would come to at this late stage would be inconsequential.
World markets were fairly calm Monday, perhaps on hopes that the tax hikes and spending cuts largely could be held at bay for a few weeks and then repealed retroactively if a deal is reached.
If there's no deal, the effects could be harsh. The nation would lose up to 3.4 million jobs, the Congressional Budget Office has predicted. And budget cuts of 8 percent or 9 percent would hit most of the federal government.
And if the limit isn't raised on how much the government can borrow, the government's reaching the $16.4 trillion ceiling in February or March could lead to a first-ever default that would shake worldwide confidence in the United States.
On top of that, the current Congress is in session only through midday Jan. 3. After that, a newly elected Congress with 13 new senators and 82 new House members would inherit the problem.
At the end of an unusual Sunday session, Senate Majority Leader Harry Reid, a Democrat, said there was still time to reach an agreement. "There is still significant distance between the two sides, but negotiations continue," Reid said.
Senate Minority Leader Mitch McConnell, a Republican, spoke repeatedly Sunday to Vice President Joe Biden, a former Senate colleague, in hopes of settling remaining differences.
Biden and top administration bargainer Rob Nabors were working late at the White House on Sunday, and McConnell was making late-night phone calls as well.
And in a move that was sure to irritate Republicans, Reid was planning _ absent a deal _ to force a Senate vote Monday on the proposal that President Barack Obama successfully campaigned on for re-election, to continue the tax cuts set to expire at midnight for all but those with income over $200,000 for individuals and $250,000 for couples.
Attached to the measure _ which the Republicans seemed likely to block _ would be an extension of jobless benefits for around 2 million long-term unemployed people. The plan was described by Sen. Richard Durbin, the chamber's No. 2 Democrat.
Sunday's meetings showed little progress, despite Senate chaplain Barry Black's opening prayer in which he asked, "Look with favor on our nation and save us from self-inflicted wounds."
Obama's meeting with top congressional leaders Friday appeared to have been little help.
There was still no final agreement on the income level above which decade-old income tax cuts would be allowed to expire. While Obama has long insisted on letting the top 35 percent tax rate rise to 39.6 percent on earnings over $250,000, he'd agreed to boost that level to $400,000 in his talks with House Speaker John Boehner, a Republican.
Republicans also were insisting that budget cuts be found to pay for some of the spending proposals Democrats were pushing, including ones to erase scheduled defense and domestic cuts exceeding $200 billion over the next two years.
Republicans complained that in effect, Democrats would pay for that spending with the tax boosts on the wealthy.
"We can't use tax increases on anyone to pay for more spending," said Republican Sen. Kay Bailey Hutchison.
A senior defense official said if the spending cuts were triggered, the Pentagon would soon begin notifying its 800,000 civilian employees to expect furloughs _ mandatory unpaid leave, not layoffs. The official requested anonymity because the official was not authorized to discuss the preparations
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Associated Press writers Alan Fram, Andrew Taylor, David Espo, Julie Pace and Robert Burns contributed to this report.


Updated : 2021-01-19 08:01 GMT+08:00