House may not vote on fiscal cliff deal until tomorrow
The aide said any negative fallout from delaying a vote until Tuesday, New Year's Day, would be minimal since financial markets would be closed.
The aide noted, "We still don't have a bill from the Senate and we want members to read it before they vote on it."
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WASHINGTON - President Barack Obama said on Monday that a deal with Congress to avoid the U.S. "fiscal cliff," with its tax increases looming at midnight, was close, but he warned that it was not yet complete.
"Today it appears that an agreement to prevent this New Year's tax hike is within sight, but it is not done," Obama said during remarks at the White House complex.
"There are still issues left to resolve, but we're hopeful that Congress can get it done, but it's not done."
The president made his remarks surrounded by cheering supporters identified as "middle class Americans."
Obama, who won re-election in November partially on a promise to raise tax rates for the top two percent of U.S. earners, said the deal would ensure that taxes do not go up for middle income families.
He stressed that it would include an extension of unemployment benefits for the long-term jobless and extension of popular tax credits.
Obama said the agreement being worked out with Republican leaders in Congress would not include a long-term solution to the government's debt problem.
"My preference would have been to solve all these problems in the context of a larger agreement, a bigger deal, a grand bargain, whatever you want to call it that solves our deficit problems in a balanced and responsible way," he said.
"But with this Congress that was obviously a little too much to hope for at this time. Maybe we can do it in stages. We're going to solve this problem instead in several steps."
The outlines of a deal in the U.S. Senate include raising income tax rates for individuals making more than $400,000 a year and households making more than $450,000 a year, but a sticking point remains on how long to delay automatic spending cuts to defense and domestic programs, known as a "sequester."
Obama stressed that a deal over those spending cuts had to include revenue.
"Any agreement we have to deal with these automatic spending cuts that are being threatened for next month, those also have to be balanced," he said.
"That means that revenues have to be part of the equation in turning off the sequester, in eliminating these automatic spending cuts, as well as spending cuts."
The same would be true for any future deficit-cutting agreement, he said.
As he often stresses, Obama said deficit reduction would have to follow the principle of not hurting senior citizens, students, or middle class families.
"If we're going to be serious about deficit reduction and debt reduction, then it's going to have to be a matter of shared sacrifice, at least as long as I'm president, and I'm going to be president for the next four years," he said.
Reporting by Jeff Mason, Mark Felsenthal, Tabassum Zakaria, Roberta Rampton, David Morgan
Market rallies on word of emerging "fiscal cliff" deal
NEW YORK (Reuters) - U.S. stocks jumped on Monday after a deal emerged from negotiations in Washington to avert the "fiscal cliff," sources familiar with the talks said.
Equities surged in a thinly traded session, on track to break a five-day streak of losses, as the sources said a majority of Senate Republicans were expected to support the legislation.
If adopted by Congress and President Barack Obama, the plan would sidestep a combination of tax hikes and spending cuts that many feared could push the economy into recession.
The deal, which would still need to be approved by both the Senate and House of Representatives, would raise tax rates for individuals with annual income over $400,000 a year but permanently extend middle class tax cuts.
"The market just wants this resolved and especially resolved in a way where the impact is pushed as far down the road as possible," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont. "That is exactly what the market wants and I'm hoping that is what they deliver."
President Barack Obama is scheduled to speak on the fiscal cliff at 1:30 p.m.
"Right now the market is up 70 points, an hour from now we could be down 70 points, it all depends on what these people say," Mendelsohn said.
The Dow Jones industrial average .DJI was up 50.38 points, or 0.39 percent, at 12,988.49 after trimming some of its gains. The Standard & Poor's 500 Index .SPX was up 9.73 points, or 0.69 percent, at 1,412.16. The Nasdaq Composite Index .IXIC was up 31.37 points, or 1.06 percent, at 2,991.68.
The S&P 500 is now up 12.4 percent for the year, compared with a flat performance in 2011. The Dow is about 6.4 percent higher and the Nasdaq is up 15 percent.
Gains in Apple Inc (AAPL.O: Quote, Profile, Research, Stock Buzz), the most valuable U.S. company, helped lift the Nasdaq. The stock rose 3.2 percent to $525.71, lifting the S&P information technology sector up 1 percent. For the year so far, Apple is up 29.1 percent.
The Dow was lifted by Caterpillar Inc (CAT.N: Quote, Profile, Research, Stock Buzz) and General Electric (GE.N: Quote, Profile, Research, Stock Buzz), both of which rallied more than 1 percent.
While a deal on the cliff is not yet official, investors may be ready to take on more risk next year in hopes of a greater reward.
Bank stocks rose after a New York Times report that U.S. regulators are nearing a $10 billion settlement with several banks that would end the government's efforts to hold lenders responsible for faulty foreclosure practices.
Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz) was up 0.8 percent at $11.46.
Financial stocks were among the strongest of the year, with the S&P financial index surging 24.5 percent for 2012 so far. Bank of America is the top-performing Dow component, with its stock price more than doubling over the past 12 months.
WASHINGTON - An emerging deal to avoid the U.S. "fiscal cliff" would raise $600 billion in revenue over the next 10 years by increasing tax rates for individuals making more than $400,000 and households making above $450,000 annually, according to a source familiar with the talks.
The deal would also delay a series of automatic government spending cuts, known as the "sequester," though a sticking point remains on how long that delay would last.
The White House is pressing for it to be delayed a full fiscal year and to include offsets made up of a mix of spending cuts and revenue, the source said.
The deal would permanently extend middle-class tax cuts for 114 million households and includes a permanent fix for the so-called "alternative minimum tax." It would extend unemployment insurance for 2 million people for one year.
The deal would raise the estate tax for estates worth $10 million per couple or more to 40 percent from 35 percent.
The agreement would return capital gains tax rates for individuals making $400,000 a year and couples making $450,000 a year to what they were under President Bill Clinton. Including a 3.8 percent tax from Obama's 2010 healthcare law, dividends and capital gains would be taxed at a rate of 23.8 percent.
The deal also prevents a 27 percent cut to reimbursements for doctors who see Medicare patients, known as the "doc fix," and does not include cuts from Obama's healthcare law to do so, according to the source.
WASHINGTON - U.S. lawmakers pushed the country to the edge of the "fiscal cliff" on Sunday as they struggled to reach a last-minute deal that could protect the world's largest economy from a politically induced recession.
Democratic and Republican leaders in the Senate had hoped to clear the way for swift action that would avert sweeping tax increases and spending cuts due to kick in on Tuesday.
But with the two sides still at loggerheads in talks, Senate Democratic leader Harry Reid postponed any possible votes and the Senate adjourned until Monday, leaving mere hours to pass any deal that may emerge through both chambers of a bitterly divided Congress.
"There are still significant differences between the two sides," Reid said on the Senate floor.
Behind closed doors, the parties kept seeking a way to bridge deep divides over taxes and spending. But even if a deal emerges in the coming hours, under Senate rules any one of the 100 senators could prevent the chamber from acting quickly.
Prospects are also uncertain in the House of Representatives, where dozens of conservative Republicans could oppose any deal that includes a tax increase on the nation's wealthiest households.
As the hours ticked away, it appeared increasingly likely that Washington's failure to act would deliver a $600 billion hammer blow to the fragile U.S. economic recovery.
"Something has gone terribly wrong when the biggest threat to the American economy is the American Congress," said Democratic Senator Joe Manchin of West Virginia.
Americans could see a bigger bite taken out of their paychecks starting on Tuesday as payroll and income tax cuts expire, while 2 million unemployed Americans could see their jobless benefits run out. Government contractors might be forced to lay off employees as $109 billion in automatic spending cuts kick in, and businesses could lose tax breaks for everything from wind power to research and development.
The uncertainty has weighed on financial markets and forced businesses to slow hiring and investment. Market participants braced for more turbulence on Monday.
"I believe investors will show their displeasure tomorrow by selling stocks if there is no deal," said Mohannad Aama, managing director at Beam Capital Management in New York.
Though corporate chieftains have lobbied lawmakers to show flexibility, Congress also faces pressure from an array of interest groups urging them not to compromise core principles.
Conservative groups have warned Republicans that a vote to increase any taxes could be held against them, while liberal and labor groups have pressed Democrats to resist any benefit cuts to popular retirement and health programs.
Lawmakers may find it easier to act once the country goes over the "fiscal cliff" on Jan. 1, as any new legislation can then be portrayed as a tax cut rather than a tax increase.
Republicans floated a proposal on Sunday to slow the growth of Social Security retirement benefits by changing the way they are measured against inflation, but they backed away after Democrats said they would not consider it.
Still, there were disagreements over all the major aspects of the negotiation.
Buoyed by his re-election in November, Obama has insisted that any deal must include a tax increase on the wealthiest Americans, who have seen their earnings rise steadily over the past decade at a time when income for the less affluent has stalled.
Many conservative Republicans in the House of Representatives oppose a tax hike on anyone, no matter how wealthy.
Obama has proposed raising income taxes on households that earn more than $250,000, but Republicans pushed to set the threshold between $400,000 and $500,000. Republicans also were resisting a Democratic proposal to raise inheritance taxes on the wealthiest estates.
Republicans were looking for new reductions to replace the looming spending cuts, which would fall equally on military and domestic social programs.
Democrats say the increased taxes on the wealthy would generate enough revenue to offset those cuts.
Senate Republican leader Mitch McConnell talked several times to Vice President Joe Biden by phone in the hope of breaking the stalemate.
"I'm willing to get this done, but I need a dance partner," McConnell said.
In a rare appearance on NBC's "Meet the Press," Obama accused Republicans of rejecting significant compromises several times already. He said he would try to reverse the tax hikes for most Americans if Congress fails to act.
"If people start seeing that on January 1st this problem still hasn't been solved ... then obviously that's going to have an adverse reaction in the markets," he said.
House Speaker John Boehner rejected Obama's accusations that his fellow Republicans were not being amenable to compromise.
"The president's comments today are ironic, as a recurring theme of our negotiations was his unwillingness to agree to anything that would require him to stand up to his own party," he said in a statement.