WASHINGTON (AP) — Lawmakers are engaged in a playground game of "who goes first," daring each political party to let the year end without resolving a Jan. 1 confluence of higher taxes and deep spending cuts that could rattle a recovering, but-still-fragile economy.
President Barack Obama returns from Hawaii Thursday to this increasingly familiar deadline showdown in the nation's capital, with even a stopgap solution now in doubt.
Adding to the mix of developments pushing toward a "fiscal cliff," Treasury Secretary Timothy Geithner informed Congress on Wednesday that the government was on track to hit its borrowing limit on Monday and that he would take "extraordinary measures as authorized by law" to postpone a government default.
Still, he added, uncertainty over the outcome of negotiations over taxes and spending made it difficult to determine how much time those measures would buy.
In recent days, Obama's aides have been consulting with Senate Democratic Leader Harry Reid's office, but Republicans have not been part of the discussions, suggesting much still needs to be done if a deal, even a small one, were to be struck and passed through Congress by Monday.
At stake are current tax rates that expire on Dec. 31 and revert to the higher rates in place during the administration of President Bill Clinton. All in all, that means $536 billion in tax increases that would touching nearly all Americans. Moreover, the military and other federal departments would have to cut $110 billion in spending.
But while economists have warned about the economic impact of tax hikes and spending cuts of that magnitude, both sides appear to be proceeding as if they have more than just four days left. Indeed, Congress could still act in January in time to retroactively counter the effect on most taxpayers and government agencies, but chances for a large deficit reduction package would likely be put off.
House Republican leaders on Wednesday said they remain ready to negotiate, but urged the Senate to consider or amend a House-passed bill that extends all existing tax rates. In a statement, the leaders said the House would consider whatever the Senate passed. "But the Senate first must act," they said.
Aides said any decision to bring House members back to Washington would be driven by what the Senate does.
Reid's office responded shortly after, insisting that the House act on Senate legislation passed in July that would raise tax rates only on incomes above $200,000 for individuals and $250,000 for couples.
Meanwhile, Obama has been pushing for a variant of that Senate bill that would include an extension of jobless aid and some surgical spending reductions to prevent the steeper and broader spending cuts from kicking in.