US leaders wary of 'cliff'

At a speech in Michigan, the US president renewed his call for higher tax rates on the richest Americans.

"What you need is a package that keeps taxes where they are for middle-class families, we make some tough spending cuts on things that we don't need, and then we ask the wealthiest Americans to pay a slightly higher tax rate, and that's a principle I won't compromise on," Obama said during a visit to an auto plant in Redford, Michigan.

On Sunday, John Boehner (left in photo), the Republican leader of the lower chamber of the US congress, met at the White House with Obama, raising hopes of progress in averting the tax increases and spending cuts set to automatically kick in on January 1 unless a deal is reached.

Little common ground

Republican leaders urged Obama to submit a new offer with specific spending cuts he would back. Both sides seek to cut budget deficits by more than $4 trillion (3.1 trillion euros) over the next 10 years but differ drastically on how to get there.

The Republicans oppose letting any tax rates increase. They also want deeper spending cuts than Obama has offered in social safety-net programs. Democrats have insisted that tax rates for the richest must be nailed down before negotiating further on how to proceed with reform efforts or new spending cuts.

Financial markets have calmed after a period when nearly every word from a politician about the looming budget crisis caused volatility. US stocks edged higher on Monday, but concerns that lawmakers might not broker a deal have kept a lid on optimism in the equity market. The S&P 500 index has nearly retraced the 5.3 percent slide it suffered in the first seven sessions after the Nov 6 election.

Polls show that most Americans would blame Republicans if the country goes over the cliff.

mkg/ccp (Reuters, dpa)