Lawmakers on Thursday gave themselves a last chance to prevent the United States from plunging off a "fiscal cliff" by setting up a late session in Congress just about a day before taxes are due to rise for most working Americans.
Republican leaders in the House of Representatives told their members to be back in Washington from the Christmas holiday break on Sunday night in case they need to vote on budget measures.
That leaves the door open to a last-minute solution to avert big tax hikes due to begin on Jan. 1 and deep, automatic government spending cuts set to begin on Jan. 2 - together worth $600 billion - that could push the United States back into recession.
But the two political parties remained far apart, particularly over plans to increase taxes on the wealthiest Americans to help close the U.S. budget deficit.
"Hopefully, there is still time for an agreement of some kind that saves the taxpayers from a wholly, wholly preventable economic crisis," Mitch McConnell, the top Republican in the Democratic-controlled Senate, said on the Senate floor.
U.S. stocks sharply cut losses after news of the House reconvening as investors clung to hopes of an 11th-hour deal.
Earlier in the day, Senate Majority Leader Harry Reid, the top Democrat in Congress, warned that the United States looked to be headed over the "fiscal cliff."
"It looks like that is where we're headed," he said on the Senate floor, blaming Republicans for the impasse in talks.
He called on the Republicans who control the House to prevent the worst of the fiscal shock by getting behind a Senate bill to extend existing tax cuts for all except those households earning more than $250,000 a year.
With the clock ticking toward the deadline for action, Reid offered little hope.
"I don't know time-wise how it can happen now," he said.
Referring to the House run by Speaker John Boehner - the top Republican in Congress - Reid said, "It's being operated with a dictatorship of the speaker, not allowing a vast majority of the House of Representatives to get what they want."
Boehner's failed effort last week to push his own "fiscal cliff" solution through the House was a "debacle," Reid added. He also accused Boehner of delaying "fiscal cliff" action until after he seeks re-election as House speaker on Jan. 3.
"John Boehner seems to care more about keeping his speakership than about keeping the nation on firm financial footing," Reid added.
His comments may have been more an attempt to spur Republican rivals into action than a definitive prediction that "fiscal cliff" talks will fail.
OBAMA RETURNS TO WASHINGTON
President Barack Obama arrived back at the White House from a brief vacation in Hawaii to try to restart stalled negotiations with Congress.
The House and Senate passed bills months ago reflecting their own sharply divergent positions on the expiring low tax rates, which went into effect during the administration of Republican former President George W. Bush.
Democrats want to allow the tax cuts to expire on the wealthiest Americans and leave them in place for everyone else. Republicans want to extend the tax cuts for everyone.
In another sign that Americans are increasingly worrying about their finances as Washington fails to fix the budget crisis, consumer confidence fell to a four-month low in December. The fiscal cliff wrangling in Congress sapped what had been a growing sense of optimism about the economy, a report released on Thursday showed.
"People are hearing about (the "fiscal cliff") and it negatively impacts confidence and investor sentiment and even holiday sales," said Todd Schoenberger, managing partner at Landcolt Capital in New York.
Americans blame Republicans in Congress more than congressional Democrats or Obama for the "fiscal cliff" crisis, a Reuters/Ipsos poll showed.
When asked who they held more responsible for the "fiscal cliff" situation, 27 percent blamed Republicans in Congress, 16 percent blamed Obama and 6 percent pointed to Democrats in Congress. The largest percentage - 31 percent - blamed "all of the above."
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