President Barack Obama waves to reporters as he steps off the Marine One helicopter and walks on the South Lawn at the White House in Washington, Dec. 27, 2012.
President Barack Obama waves to reporters as he steps off the Marine One helicopter and walks on the South Lawn at the White House in Washington, Dec. 27, 2012.

U.S. President Barack Obama cut short his Hawaiian holiday and flew back to Washington Thursday as the deadline for avoiding the fiscal cliff comes down to the wire.

If there is no deal by January 1, nearly every American will see his or her taxes go up, along with automatic government spending cuts. Economists fear this could plunge the fragile economy back into recession.

Congressional Republican leaders have called the House of Representatives back into session this Sunday evening.  The House adjourned last week after failing to agree on a fiscal cliff deal with the White House.

The Senate, however, has kept working.  Democratic Majority Leader Harry Reid blasted Republican House Speaker John Boehner Thursday, accusing him of being more concerned with saving his job than coming to an agreement.

Boehner has blamed President Obama for what he says is the president’s unwillingness to cut spending.  He also urged the Senate to pass a long-term deficit reduction package that would stop the economy from going over the cliff.

President Obama has insisted on raising taxes on wealthy Americans along with some spending cuts as the only practical way to cut the country’s huge deficit.  Conservative Republicans do not want anyone’s taxes to go up. They rejected Boehner’s alternative plan to raise taxes only on Americans making at least $1 million per year.  The president’s offer would let taxes go up for those making at least $400,000.

Meanwhile, U.S. Treasury Secretary Timothy Geithner says the nation’s debt ceiling will reach its $16.4 trillion limit Monday, New Year’s Eve.  The ceiling is a limit on how much money the government can borrow to avoid defaulting on its debt.  Geithner says Treasury officials will take what he calls “extraordinary measures” under the law to avoid default.

What is the U.S. Fiscal Cliff?

  • An agreement intended to force politicians to compromise and make deals.
  • Without a deal by January 1, 2013, sharp spending cuts would hit military and social programs.
  • Tax hikes also would go into effect.
  • The combination would reduce economic activity, and could boost unemployment and push the nation back into recession.

Some information for this report was provided by Reuters.

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