Fiscal cliff deal 'incomplete' - Obama
Financial markets are on edge hours before the midnight arrival at the long-awaited "cliff", an assortment of $600 billion (€455 billion) in tax hikes and broad federal spending cuts on defence and domestic programmes that has defied a political solution.
Senate Republican Leader Mitch McConnell and Democratic vice-president Joe Biden carried on "good talks" late yesterday evening, aides said. Details of their discussions are unclear.
Any resolution in the tug-of-war over taxes and spending cuts forged in the Senate would need to win approval in the House of Representatives, and the outcome in that chamber is uncertain.
"Republicans in the House do not want to raise tax rates without some significant spending cuts, and the Senate apparently has abandoned" a proposal to trim cost-of-living adjustments in the Social Security pension programme, said Greg Valliere, chief political strategist at Potomac Research Group.
"So, while the Senate stumbles toward a potential compromise, there's absolutely no assurance that it could pass later this week in the House," he said.
Still, a serious jolt from the markets could prod Democrats and Republicans into action, even at the eleventh hour - or in this case, today, at 11:59pm (or 0459 GMT tomorrow).
"I believe investors will show their displeasure" at the lack of progress in Washington, said Mohannad Aama, managing director at Beam Capital Management, an investment advisory firm in New York.
Democratic and Republican leaders in the Senate had hoped to clear the way for swift action yesterday. But with the two sides still at odds, Senate Democratic leader Harry Reid postponed any possible votes and the Senate adjourned until today.
The main sticking point between Republicans and Democrats remain whether to extend existing tax rates for everyone, as Republicans want, or just for income below $250,000 to $400,000, as Democrats have proposed. That threshold may be rising closer to a level of $500,000 or so, analysts said.
Also at issue are Republican demands for larger cuts in spending than those offered by Mr Obama.
Hopes for a "grand bargain" of deficit-reduction measures vanished weeks ago as talks stalled.
Expiring along with low tax rates at midnight tonight are a raft of other tax measures. One is a payroll tax holiday that Americans have enjoyed for two years.
Support for extending this seems to have faded away, in part because the tax funds Social Security. If it ends, the current 4.2 per cent payroll tax rate paid by about 160 million workers will revert to the previous 6.2 per cent rate after today and will be the most immediate hit to taxpayers.
A "patch" for the Alternative Minimum Tax (AMT) that would prevent millions of middle-class Americans from being taxed as if they were rich could go over the cliff. Republicans and Democrats support inserting another patch, but have not approved one.