22 Dec 2012

Fiscal cliff looms as Congress cancels tax vote

6:22 am on 22 December 2012

The United States government is pledging to work with Congress to avoid an end-of- year "fiscal cliff" of tax hikes and spending cuts that could tip the country into recession.

After an alternative tax cut bill proposed by Republicans collapsed, the White House has announced that President Barack Obama will work with Congress to find a solution that protects the middle class and the economy.

But Stephen Moore, senior economics writer for the Wall Street Journal, says the failure of the Republicans' Plan B legislation comes at the eleventh hour.

"It means if we don't go over the cliff, we're going to be right there at the precipice of the cliff as late as December 31"

A deal must be reached by 1 January or a combination of steep tax rises and sharp spending cuts will take effect which is feared could take the US into recession.