Last minute talks stalled Sunday between top U.S. political leaders aimed at averting a fiscal calamity due to hit within hours, as Democrats and Republicans blamed each other for a lack of progress, AFP reports.
Top Democrats and Republicans tried to reach a compromise before a punishing package of government spending cuts and tax hikes come into force on January 1 which could roil global markets and send the U.S. economy back into recession.
Senate Republican minority leader Mitch McConnell warned that, despite through-the-night talks, negotiators were still a long way from success, as they raced against the ebbing 2012 calendar in search of a compromise.
McConnell said he had got no response to a "good faith offer" to Senate Democrats, and called on his old friend and sparring partner Vice President Joe Biden to join the fray in the hope of breaking the stalemate.
Senate Democratic leader Harry Reid agreed talks were at a standstill, raising the prospect that Americans will ring in the New Year with no deal to avert a budget disaster known as the "fiscal cliff."
Reid said Democrats were unwilling to brook talk of social security cuts.
"This morning, we have been trying to come up with some counteroffer to my friend's proposal," Reid told the Senate, according to AFP. "We have been unable to do that."
Earlier, Democratic President Barack Obama, accused Republicans of causing the mess, saying they had refused to move on what he said were genuine offers of compromise from Democrats.
"Now the pressure's on Congress to produce," Obama said, in an interview with NBC's "Meet the Press" that was recorded on Saturday, a day after he expressed modest optimism that a deal could be reached.
Obama said it had been "very hard" for top Republican leaders to accept that "taxes on the wealthiest Americans should go up a little bit, as part of an overall deficit reduction package."
Republicans were irked by Obama's tone and matched his accusations. The ugly mood could suggest that hopes for a consensus are fading -- or be the kind of political-base pleasing rhetoric that sometimes heralds a compromise.
"Americans elected President Obama to lead, not cast blame," said House Republican speaker John Boehner, arguing Republicans sought a 'balanced' deficit deal while Obama insisted on higher taxes that would kill jobs.
"We've been reasonable and responsible. The president is the one who has never been able to get to 'yes,'" Boehner said, according to AFP.
If no deal is reached, a package of tax cuts for all Americans that was first passed by former president George W. Bush will expire on January 1.
All American workers will see their own paycheck hit and the broader economy will be hit by massive automatic spending cuts across the government.
Experts expect the U.S. economy could slide into recession if the standoff is prolonged, in a scenario that could cause turmoil in stock markets and hit prospects for global growth in 2013.
Republican Senator Lindsey Graham, speaking as his party bosses huddled with senior Democrats in search of a deal, predicted a short-term agreement would emerge, but would only postpone the budget battle by a few months.
"Hats off to the president. He stood his ground. He's going to get tax rate increases," Graham told Fox News Sunday.
"The sad news for the country is that we have accomplished little in terms of not becoming Greece or getting out of debt."
Any deal must pass the Senate, before going to the House, where such is the power of the conservative bloc of the Republican Party, it is unclear whether any solution backed by Obama can win majority support.
If leaders fail to find an agreement, Obama has demanded a vote on his fallback plan that would preserve lower tax rates for families on less than $250,000 a year and extend unemployment insurance for two million people.
Should Republicans block that attempt, they would face being lambasted by angry voters who see their taxes shoot up -- an unenviable political plight.