x Abu Dhabi, UAESunday 23 July 2017

Obama cuts short holiday to tackle budget impasse

Barack Obama, the US president, was preparing to cut short his holiday and return to the White House yesterday, to restart jammed discussions on a budget solution to meet a year-end deadline.

Barack Obama, the US president, was preparing to cut short his holiday and return to the White House yesterday, to restart jammed discussions on a budget solution to meet a year-end deadline.

Mr Obama planned to leave his Hawaii vacation and return for the budget talks due today, according to a White House aide who asked not to be identified. Congress will also return today to continue negotiations on averting the so-called fiscal cliff.

A failure to reach an agreement on the budget plan would push the United States into recession for the first half of next year, the nonpartisan congressional budget office has said.

The fiscal cliff is the result of a poison-pill agreement reached this year that would require major spending reductions as tax cuts passed under George W Bush, the former president, expire at the end of the year - should Democrats and Republicans fail to reach a deal to cut the deficit. The White House has offered a deal with US$1.2 trillion (Dh4.4tn) in revenues - by fulfilling a campaign promise from Mr Obama to allow the Bush tax cuts to expire for the wealthy - and nearly $1tn in spending cuts.

Republicans are opposed to raising taxes and have questioned whether the spending cuts proposed by the White House are real.

They have instead offered a deal that would raise $1tn in tax revenue - mainly by closing loopholes and ending deductions - and another $1tn in spending cuts, including cuts to Medicare and other social programmes.

Venting frustration with Republicans, Mr Obama on Friday urged policymakers to pass scaled-down legislation that would at least prevent taxes from going up for the vast majority of Americans, those making $250,000 or less per year.

The move would satisfy Mr Obama's demand to raise taxes on the richest Americans, as all Bush-era taxes will go up on January 1, and Mr Obama only envisions extending the lower rates for middle-class earners.

House Republicans led by the speaker John Boehner have, in turn, pitched to the Democratically-led senate, asking Mr Obama and the senate majority leader Harry Reid to write up legislation that can pass both houses.

Mr Obama's suggestion would extend tax breaks to 98 per cent of Americans - those earning below $250,000 a year. In talks on a larger compromise, the president had offered to raise that threshold to $400,000.

Meanwhile, uncertainty over the budget spurred crude to climb 0.6 per cent to US$89.13 a barrel in New York yesterday. US crude stockpiles probably fell last week to the lowest in 10 weeks as refineries kept utilisation at a high rate and imports decreased, a Bloomberg News survey showed.

"The oil market's movement depends on the fiscal cliff but I don't think it will lose ground," said Ken Hasegawa, an energy trading manager at Newedge Group in Tokyo.

"In a worst-case scenario the situation may continue as it is now for one month or a few months."

 

* with Bloomberg News