US lawmakers have entered a weekend of budget negotiations in a final effort to prevent at least some of more than US$600 billion in tax increases and spending cuts from taking effect in January.
The US Senate majority leader Harry Reid and minority leader Mitch McConnell said they will try to reach a deal by today, likely focusing on a relatively narrow range of issues rather than the full list of tax and spending changes. They face the same partisan mistrust and divides on fiscal policy that have prevented a budget deal for more than two years, compounded by the December 31 deadline and the January 3 start of the next Congress.
"The hour for immediate action is here," the US president Barack Obama said at the White House, declaring himself "modestly optimistic" about a deal and complaining about Congress's tendency to wait until the last minute to act. "The American people are not going to have any patience for a politically self-inflicted wound to our economy."
Both sides are positioning themselves to embrace a bipartisan deal as a welcome and rare accord in a polarised government. They're also trying to demonstrate willingness to compromise so they can blame the other party if talks collapse and the so-called fiscal cliff occurs.
Beyond extension of the tax cuts and expanded unemployment insurance, Mr Reid and Mr McConnell will consider provisions to prevent a reduction in Medicare payments to doctors, avoid some automatic spending cuts and prevent a scheduled increase in milk prices, said a person familiar with the talks who requested anonymity to discuss the private conversations.
Any agreement probably will not raise the federal debt limit, which is almost at its ceiling, the person said.
During a meeting with congressional leaders, Mr Obama left open the possibility of setting the threshold where tax increases would start at $400,000 in annual income instead of the $250,000 he prefers, said a Republican aide who was briefed on the talks and requested anonymity.
The automatic spending reductions are not likely to be addressed in an immediate agreement, the aide said. About half of the spending cuts would affect defence programmes, and defence contractors including Lockheed Martin have been lobbying to prevent them.
"For the first time, you're seeing an opportunity for a real result rather than the phony-baloney acts that they've been engaged in," said senator John McCain, an Arizona Republican. "Republicans know that they're losing the PR battle but the president knows that history will judge him."
* Bloomberg News