(MENAFN - AFP) After weeks of failed haggling, the fiscal cliffhanger is at hand as US lawmakers convene Sunday in a bid to strike a year-end deal that avoids huge tax hikes and possibly spending cuts set to kick in January 1.
With the clock ticking ever closer to the New Year's time bomb, the suddenly alarmed Senate and House were holding special sessions 36 hours before the year-end deadline for a plan that would keep America from tumbling off the so-called fiscal cliff.
The stakes in the game of holiday-interrupting brinkmanship are enormous.
Economists agree the 500 billion in fiscal pain due to hit when the new year starts would stifle the US economic recovery and send the country back into recession, spelling bad news for the global economy as well.
Aides to both sides' leaders in the Democrat-controlled Senate worked feverishly behind closed doors Saturday to fashion a deal palatable to Democrats as well as to Republicans, who control the House of Representatives.
The Senate convenes Sunday at 1:00 pm (1800 GMT) while the House goes into session an hour later, with no votes expected before 2330 GMT.
Both chambers would have little time to debate and then pass a deal that has eluded the White House and Congress for weeks.
President Barack Obama, who called congressional leaders to the White House on Friday, will address the crisis once more when he gives an interview on NBC's Sunday morning talk show "Meet the Press."
Amid the tense negotiations, Obama pressed lawmakers to clinch a deal, even if they must reach a compromise that lacks the significant deficit-reduction measures both sides had sought.
If lawmakers fail, "every American's paycheck will get a lot smaller," the president warned. "Congress can prevent it from happening, if they act now."
Obama, sensing a mandate from his re-election last month, wants to raise taxes on the rich. Republicans want only to close tax loopholes to raise revenue and demand significant spending cuts in return, notably to federal benefit programs like Social Security.
But if nothing is done by the deadline, all taxpayers will see an increase.
Following the White House talks, the Senate Majority Leader Harry Reid and Republican Minority Leader Mitch McConnell are heading efforts to craft a deal.
But any agreement would also have to pass the House, where there is doubt that an Obama-backed deal would win favor with restive conservatives in the Republican caucus.
While each side must for the sake of appearances be seen to be seeking a deal, one way out is to go over the cliff, then fix the problem in the first days of next year.
Under that scenario, Republicans who are philosophically opposed to raising taxes could vote to lower the newly raised rates on almost all Americans without formally hiking taxes.
Lawmakers, while ruing the inability to work out a multi-trillion-dollar grand bargain in time, have said a pared down version dealing mainly with taxes was within reach.
Citing unnamed people briefed on the talks, The Washington Post said one version under consideration would protect nearly 30 million taxpayers from paying the higher, alternative minimum tax rate for the first time and maintain unemployment benefits for two million people.
The plan also would halt a steep cut in Medicare reimbursements for doctors and preserve popular tax breaks for both businesses and individuals, such as those for research and college tuition, the report said.
But the two sides were still at odds over where to set the limits of wealthy -- at 250,000 or 400,000 of annual income -- and over taxes on inherited estates.
Nor has there been agreement on spending cuts so sought after by Republicans, who say excessive government spending is the main driver of US debt.
Obama warned that if an agreement was not reached in time, he would ask the Senate to hold an up-or-down vote on a basic package that protects the middle class from a tax hike, extends unemployment insurance, and "lays the groundwork for future... deficit reduction."
In a weekly Republican address, Senator Roy Blunt expressed some optimism, saying that "going over the fiscal cliff is avoidable."
But he criticized Democrats for focusing mainly on taxes while setting aside government spending, arguing that such inaction "shouldn't be an option."