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Only hours left in countdown to Fiscal Cliff

Politicians in the US are running out of time to avoid the “fiscal cliff” deadline.

Republican and Democratic congressional leaders worked through Sunday without success, hoping to bridge differences over how to avoid year-end tax increases and possibly spending cuts.

Senate negotiators missed a self-imposed deadline on Sunday afternoon and later reports said the talks see-sawed between possible success and failure late into the day.

Vice President Joe Biden was asked by Senate Minority leader Mitch O'Connell to try to find a way out of the impasse, while the White House sent the president’s chief legislative negotiator to the Capitol to meet with Senate Democrats.

The talks went on behind closed doors and the media were dependent on various statements from aides on both sides.

In the end, Senate Majority leader Harry Reid recessed the Senate until Monday at 11am (local time).

"There is significant distance between the two sides," he told reporters. "There is still time left to reach an agreement and we intend to continue negotiations."

In the absence of a bipartisan deal, Senator Reid is preparing for a Monday vote on a bill to carry out President Obama's backup proposal, which tackles only a few items on the legislative agenda, including extending current tax rates for income up to $US250,000 for couples filing jointly.

Democrats are confident they can pass the bill through the Senate. A key question is whether the House will approve it if it doesn't enjoy broad bipartisan support in the Senate.

Recent issues include slowing CPI adjustments to social security payments and tax cuts for the wealthiest Americans.

The first cuts, involving $US110 billion in domestic and military spending, are set to take effect on January 2.

In a television appearance on Sunday, President Barack Obama sought to increase pressure on congressional Republicans by attempting to hold them responsible if talks fail.

Interviewed on NBC's Meet the Press, he rejected the idea that both sides were equally at fault.

Crucial to any deal are income tax rates that will expire and be replaced by higher rates that prevailed during the Clinton administration.

Republicans have conceded that rates will go up for wealthier Americans and the talks centre on efforts to reduce the number of people in that category.

While President Barack Obama is plumping for a $US250,000 threshold, the Republicans want it raised to at least $US400,000.

Another sticking point is estate tax, which the Republicans want kept at current levels rather than rising as President Obama and many Democrats desire.

However, some farm-state Democratic senators also back a lower rate.

President Obama has told Republican leaders they will have to accept a higher estate tax if they also want to raise the income threshold to $US400,000.

More by Nevil Gibson

Comments and questions

US will go over the cliff just to change what the republicans are voting for;

They cant vote for tax hikes on certain parties that control them, but they can vote for tax cuts after they have gone over the cliff

The United States is one of the only countries in the world to tax on citizenship and with New Zealand Government about to sign an IGA on the information collection of U.S. citizens and U.S. greencard holders with bank accounts in New Zealand the U.S. will be sucking a lot of a cash out of New Zealand banks as the many dual NZ/US citizens have had no idea they need to be paying capital gains taxes and income taxes on their New Zealand income, and report their bank account outside the U.S. to the United States IRS on a yearly basis, the fines can equal more than the account holdings and are generally a minimum of 5% of your net worth if you can prove you never heard of such laws or didn't know you were a U.S. citizen.

You may never have lived in the United States but if one of your parents or parents parents parents was a U.S. citizen so are you and the New Zealand government is about to hand your cash over to the U.S. taxman.

Its amazing how Obama thinks that business will expand and employ by taking more off them.

You can't see it, but on the other side of the 'cliff' is a step ladder.

i am amazed that a president of the USA does not have the will or understanding to negotiate and he will now go down in history as the president who failed to understand the right time to use his balls

Fiscal responsibility by the federal government has to happen sooner or later. The US can't allow itself to devolve into a "New Zealand". At least with some fiscal discipline and increasing energy independence over the next 20 years we should see a stronger US which is good for democracy worldwide.

Let energy poor China play with the Arab states and reap the consequences.

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