WASHINGTON: US President Barack Obama and congressional leaders were to meet last night for the first time since November with no sign of progress in resolving their differences over the federal budget and low expectations for a "fiscal cliff" deal before January 1.
Instead, members of Congress are increasingly looking at the period immediately after the December 31 deadline to come up with a retroactive fix to avoid the steep tax increases and sharp spending cuts that economists have said could plunge the country into another recession.
With taxes on all Americans set to rise when rates established under former president George W Bush expire on December 31, legislators would be able to come back in January and take a more politically palatable vote to cut some of the tax rates.
But some in the market were resigned to Washington going beyond the New Year's Day deadline, as long as a serious agreement on deficit reduction comes out of the talks in early January.
"Regardless of whether the government resolves the issues now, any deal can easily be retroactive. We're not as concerned with January 1 as the market seems to be," said Richard Weiss, a Mountain View, California-based senior money manager at American Century Investments.
The new factor in the mix was involvement by Republican Senate Minority Leader Mitch McConnell of Kentucky, who held conversations with Obama this week and said he expected a new proposal from the president that he would consider.
The White House spent much of Thursday stifling expectations for any new offer from Obama, beyond the limited fallback plan he outlined in vague terms on December 21, which would protect what he described as "middle class Americans" from the tax increases, extend unemployment insurance and lay the "groundwork for further work" on deficit reduction and tax reform.
The major sticking point on taxes is Republican opposition to increases on anyone, particularly in the absence of heavy cuts in spending for so-called entitlement programmes such as Medicare and Medicaid, the government-run health programmes for senior citizens and the poor.
Democrats in Congress want to keep lower tax rates for most Americans but raise them on those earning above $250,000 a year.
"The wealthy have got to kick in," Senator Debbie Stabenow, a Michigan Democrat, said on CNN. "The tough part is in the House, where they have taken this very extreme position" of "protecting the wealthy at all costs", she said.
"It's feeling very much to me like an optical meeting than a substantive meeting," said Republican Senator Bob Corker of Tennessee, noting that it was not a sign of urgency to set a meeting for mid-afternoon with a deadline just days away.