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US inches closer to fiscal cliff deal, but gaps remain

business Updated: Dec 18, 2012 21:53 IST

Reuters
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After making major concessions on long-held “fiscal cliff” positions in late-night talks on Monday, President Barack Obama and House of Representatives speaker John Boehner will test the reaction of their respective parties in the US Congress and continue talks aimed at narrowing differences.

The effort is designed to avert the steep tax hikes and across the board spending cuts set to take effect unless a deal is enacted into law before December 31. Enactment would require a buy-in by the full US Senate and House on whatever Obama and Boehner present to them. Neither Obama or Boehner can be certain yet on how much resistance they might meet.

Though much work remains the progress contrasted dramatically with previous movement so slow that as recently as Sunday some Washington insiders saw a 50-50 chance of going over the cliff — which the Congressional Budget Office says would bring on a new recession.

Obama and Boehner made the most headway on extending the reduced tax rates originally enacted in the administration of President George W Bush. Both have agreed to keep the low rates for everyone but the wealthy, though they still differ on who qualifies as wealthy for tax purposes.

Obama also offered a “fast track” process for major tax and spending reforms in the year ahead. A Republican aide who asked not to be identified said that “conceptually” there was agreement to make permanent changes in the tax code, with some of those changes taking effect at the start of 2013.

A comprehensive cliff-avoiding agreement would immediately substitute new and more targeted spending cuts for the indiscriminate slashing of defense and non-defense programmes.