Focus on Obama as House abandons the Republicans’ fiscal cliff solution

The task of picking up the pieces of the fiscal cliff talks — and reassuring global financial markets — is likely to fall largely to President Barack Obama after Republicans abandoned their own proposed fix championed by House of Representatives Speaker John Boehner.

Boehner, the top Republican in Congress and Obama’s chief negotiating partner, failed to muster enough support from his fellow Republicans, who control the House, to pass his bill called “Plan B” on Thursday.

He had hoped to use it to pressure Obama in talks to avert the steep tax hikes and automatic government spending cuts slated to start taking effect in 11 days.

Boehner late on Thursday abruptly pulled the legislation, which would have raised taxes only on people earning $1m (€750,000) or more a year.

House members, heading to their home states for the holidays, were instructed to be available on 48 hours notice if necessary.

Obama said he still plans to work with Congress and was hopeful for a bipartisan solution, his press secretary said.

The failure casts fresh uncertainty over talks to avoid across-the-board tax hikes and spending cuts that could push the US economy into recession.

Global stock markets weakened yesterday and both the euro and gold slipped as the new setback rattled investors’ nerves.

The crumbling of Boehner’s plan highlights his struggle to lead some House Republicans who flatly reject any deal that would increase taxes on anyone.

Republican Representative Tim Huelskamp criticised Boehner’s handling of the negotiations, saying the speaker had “caved” to Obama opening the door to tax hikes.

Obama and his fellow Democrats in Congress are insisting that the wealthiest Americans pay more in taxes in order to help reduce high federal budget deficits.

Democrats are now stepping up efforts to gather some Republican votes for a Democratic bill passed by the Senate months ago that would extend the expiring tax cuts to all but the wealthy.

“The worst-case scenario is increasingly becoming a probable scenario,” BlackRock chief executive Laurence Fink told the Wall Street Journal.