WRAPUP 2-Fear, finger-pointing mount over U.S. 'fiscal cliff'

Thomas Ferraro and Richard Cowan
Reuters Middle East

* Little sign of movement in talks

* Focus shifting to Congress acting after Jan. 1

WASHINGTON, Dec 23 (Reuters) - Some U.S. lawmakers voiced

concern on Sunday that the country would go over "the fiscal

cliff" in nine days, triggering harsh spending cuts and tax

hikes, and some Republicans charged that was President Barack

Obama's goal.

"It's the first time that I feel it's more likely that we

will go over the cliff than not," Senator Joe Lieberman, an

independent from Connecticut, said on CNN's "State of the


"If we allow that to happen it will be the most colossal

consequential act of congressional irresponsibility in a long

time, maybe ever in American history."

"It looks like to me that obviously this is going to drag on

into next year, which is going to hurt our economy," Republican

Senator Bob Corker of Tennessee said on CBS "Capitol Gains."

The Democratic president and Republican House of

Representatives Speaker John Boehner, the two key negotiators,

are not talking and are out of town for the Christmas holidays.

Congress is in recess, and will have only a few days next week

to act before Jan. 1.

On the Sunday TV talk shows, no one signaled a change of

position that could form the basis for a short-term fix, despite

a suggestion from Obama on Friday that he would favor one.

The focus was shifting instead to the days following Jan. 1

when the lowered tax rates dating back to President George W.

Bush's administration will have expired, presenting Congress

with a redefined and more welcome task that involves only

cutting taxes, not raising them.

"I believe we are," going over the cliff, Republican Senator

John Barrasso of Wyoming said on Fox News Sunday. "I think the

president is eager to go over the cliff for political purposes.

I think he sees a political victory at the bottom of the cliff."

Some Republicans have said Obama would welcome the fiscal

cliff's tax increases and defense cuts, as well as the chance to

blame Republicans for rejecting deal. Obama has rejected that


Democrats have charged that Boehner has his own

self-interested reasons for avoiding a deal before Jan. 3, when

the House elected on Nov. 6, is sworn in and casts votes for a

new speaker.

Democratic Senator Charles Schumer of New York said on NBC's

"Meet the Press" that Boehner has been reluctant to reach across

the political aisle for fear it could cost him the speakership

when he runs for re-election. "I know he's worried," said


Boehner, who so far has no serious challenger for the job of

speaker, has said that he has no such concerns.

Such finger pointing has been under way since Congress

returned after the election, but it has gained intensity in the

past few days, with the heightened prospect of plunging off the


Congress started the clock ticking in August of 2011 on the

cliff. The threat of about $600 billion of spending cuts and tax

increases was intended to shock the Democratic-led White House

and Senate and the Republican-led House into bridging their many

differences to approve a plan to bring tax relief to most

Americans and curb runaway federal spending.

Economists say the harsh tax increases and budget cuts from

the fiscal cliff could thrust the world's largest economy back

into a recession, unless Congress acts quickly to ease the

economic blow.


The most immediate impact could come in financial markets,

which have been relatively calm in recent weeks as Republicans

and Democrats bickered, but could tumble without prospects for a


Markets will be open for a half-day on Christmas Eve, when

Congress will not be in session, and will be closed on Tuesday

for Christmas.

Wall Street will resume regular stock trading on Wednesday,

but volume is expected to be light throughout the week with

scores of market participants away on a holiday break.

If Congress fails to reach any agreement, income tax rates

will go up on just about everyone on Jan. 1. Unemployment

benefits, which Democrats had hoped to extend as part of a deal,

will expire for many as well.

In the first week of January, Congress could scramble and

get a quick deal on taxes and the $109 billion in automatic

spending cuts for 2013 that most lawmakers want to avoid.

Once tax rates go up on Jan. 1, it could be easier to keep

those higher rates on wealthier taxpayers while reducing them

for middle- and lower-income taxpayers. Lawmakers would not have

to cast votes to raise taxes.

Some lawmakers expressed guarded hope that a short-term deal

on deficit reduction could be reached in the next week or so,

with a longer, more permanent deal hammered out next year.

But a short-term deal would need bipartisan support, as

Obama has said he would veto a bill that does not raise taxes on

the wealthiest Americans.

Democratic Senator Kent Conrad, chairman of the Budget

Committee, said Obama and Boehner are not that far apart and

that both sides should keep pushing for a long-term big deal.

"I would hope we would have one last attempt here to do what

everyone knows needs to be done, which is the larger plan that

really does stabilize the debt and get us moving in the right

direction," Conrad of North Dakota told Fox News Sunday.

But most Republicans are now looking past Jan. 1 to what

they consider their next best chance of leveraging Obama for

more cuts in the Federal budget - a fight over the debt ceiling

expected in late January or early February. At that time, the

administration will need Congress' authorization to raise the

limit on the amount of money the government can borrow.

"That's where the real chance for change occurs, at the

debt-ceiling debate," Republican Senator Lindsey Graham of South

Carolina said on "Meet the Press."

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