Fiscal Cliff: Countdown Begins For Congress

Politicians in Washington are back at work as they attempt to strike a last-minute deal to avoid huge tax hikes and spending cuts set for January 1.

Economists warn the $500bn in fiscal pain due to hit in the New Year could send the country back into recession, and destabilise the global economy in the process.

Aides to both leaders in the Democrat-controlled Senate worked feverishly behind closed doors on Saturday to fashion a deal palatable to both sides.

The Senate convenes Sunday at 1pm (6pm GMT) while the House goes into session an hour later, with no votes expected before 8.30pm ET (11.30pm GMT).

Both chambers would have little time to debate and then pass a deal that has eluded the White House and Congress for weeks.

Barack Obama, who called congressional leaders to the White House on Friday, addressed the crisis once more as he appeared on NBC's Sunday morning talk show Meet the Press.

The president said Republicans were unwilling to see tax rates raised for the richest taxpayers.

"They say that their biggest priority is making sure that we deal with the deficit in a serious way," Mr Obama said.

"But the way they're behaving is that their only priority is making sure that tax breaks for the wealthiest Americans are protected.

"That seems to be their only overriding, unifying theme," he added.

Mitch McConnell and Harry Reid still heading in different directions

Senate Democratic majority leader Harry Reid and Republican minority leader Mitch McConnell are reported to have set a deadline of about 3pm ET (8pm GMT) for a deal.

The parties will then decide whether to put it to the vote on New Year's Eve in the Senate and then the Republican-controlled House of Representatives.

President Obama has pressed lawmakers to clinch a deal, even if they must reach a compromise that lacks the significant deficit-reduction measures both sides had sought.

"I was modestly optimistic yesterday, but we don't yet see an agreement," the president told NBC in the interview recorded on Saturday. "And now the pressure's on Congress to produce."

At least one senior Republican is optimistic of a deal, and a "political victory" for Mr Obama.

Senator Lindsey Graham told Fox News that the odds are "exceedingly good" a deal can get done.

"I don't think people want to go over the cliff," he said.

The US is facing the fiscal cliff because tax rate cuts dating back to George W Bush's presidency expire at the end of the year.

Mr Obama originally insisted on letting the tax cuts expire on households earning more than $250k (£154k) but later upped that threshold to $400k (£246k).

The pending reductions in spending, which will hit everything from social programmes to the military, were put in place last year as an incentive to both parties to find ways to cut America's soaring deficit.

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