Neil Macdonald: Fiscal showdown at the U.S. Congress

Americans, it would appear, are about to give the world another lesson in their self-proclaimed exceptionalism.

What other democratic nation's leaders, after all, would deliberately design a fiscal disaster and aim the country's economy straight for it?

And then stand back, holding news conferences, double-dog-daring each other to step over some imagined line, chanting the political equivalent of nana-nana-boo-boo?

It now appears the U.S. will actually plunge over the "fiscal cliff" its politicians concocted two years ago.

The idea, at the time, was to create a situation so damaging, so contrary to the national self-interest, so unimaginably irresponsible that even the most hardline political zealot would have the sense to compromise in order to prevent it.

Bad assumption, it turns out.

With the deadline now three days away, it looks as though Congress has rewritten P.T. Barnum's old aphorism: You can, and possibly will, go broke overestimating the intelligence of the American politician.

As that dismal reality sinks in, a national panic is slowly building. Markets are unsettled. Workers are bracing for paycheque shocks when the new year rolls around.

If nothing is done, all sorts of taxes kick in for everyone here on Jan. 1, and the government will begin indiscriminately slicing hundreds of billions in federal spending, a double blow to a still fragile economy.

Americans, who commonly regard Canadians and Western Europeans as a bunch of socialists, are about to suddenly discover the extent to which government dominates their own lives.

Cliff ahead

The fiscal cliff measures could subtract more than four per cent from America's GDP, and trigger another recession, Congress's own accounting office has said.

A grim-looking Barack Obama walks across the White House lawn Thursday, having cut short his Hawaii vacation to deal with fiscal cliff negotiations. (Charles Dharapak / Associated Press)

And what have the people who created this mess been doing about it?

Well, having lost an election in which one of their opponents' main promises was to raise tax rates on the wealthy (defined as households making more than a quarter of a million dollars a year), Republicans immediately declared that the election had changed nothing, and promised to block any such effort in the House of Representatives, the one branch of government they still control.

Then, in behind-the-scenes negotiations, President Barack Obama caved on his campaign pledge and offered to exempt anyone making up to $400,000.

House Republicans rejected that immediately.

Republican Speaker John Boehner tried to counter with a bill that would protect everyone who makes less than a million dollars. But he was publicly humiliated when his own party revolted, or at least enough members to have guaranteed the plan's defeat on the House floor.

Evidently, there are Republicans who want to fight the 2014 midterm elections as the party that was literally willing to risk another recession in order to shield millionaires from a return to the taxation levels they paid during the Clinton years.

Boehner finally held a news conference where he effectively declared that fixing the mess, which his party helped create, is no longer his responsibility.

He and other GOP leaders said it is now up to Democrats, who control the Senate, to come up with a solution.

"The Senate first must act," they declared, ignoring the fact that the Senate has already acted, at least on the tax front, and has passed a bill (incorporating Obama's initial $250,000 tax-rate cutoff) that the House could consider any time it wishes.

The debt ceiling

At the same time as all this is going on, the U.S. Treasury announced the government will hit the $16.4-trillion federal debt ceiling again on Monday.

And, once again, rather than authorize the Treasury to continue making interest payments on the nation's accumulated debt, some House Republicans are willing to risk default, with all its disastrous international implications for the faith and credit of the United States.

The party evidently feels it needs to preserve that threat as some sort of leverage for future battles.

House Speaker John Boehner, How many Republicans can he corral now? (Yuri Gripas / Reuters)

Subtract the political posturing and parse the numbers, and this all makes even less sense.

All that separates the two sides is $450 billion over 10 years — less than one per cent of projected federal spending over that period.

So largely on principle, the custodians of America's economy are about to drive it into the ditch, dragging the rest of the world behind them.

Understandably, American voters are staring at all this with disbelief and puzzlement.

Until recently, most of them were telling pollsters they were confident there would be some sort of last-minute deal. It never occurred to them, it appears, that the people they sent to Washington would actually let the country go over this cliff.

But then, they did send those particular people to Washington.

As the hours tick by, Obama and his party's leadership in the Senate returned to town Thursday — the House is coming back Sunday night, barely 24 hours before the deadline — trying for a last-minute deal to save the entire nation from needless financial grief.

If they accomplish that, it will be nothing short of exceptional.

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Stock markets edgy before 'fiscal cliff'

The Toronto stock market was lower Friday amid growing skepticism about whether U.S. lawmakers can keep the economy from going over the so-called fiscal cliff.

The S&P/TSX composite index dropped 44.55 points to 12,329.22 as the clock ticks towards huge spending cuts and significant tax increases that will automatically click in after Dec. 31 if there's no deal.

The American economy is already weak and economists warn the imposition of those measures could tip the U.S. back into recession and depress other economies around the globe unless the White House and Congress find a compromise budget plan.

The TSX Venture Exchange slipped 0.54 of a point to 1,196.21.

The Canadian dollar was down 0.07 of a cent at 100.44 cents US.

U.S. markets were also lower with the Dow industrials down 60.89 points to 13,035.42, the Nasdaq dropped seven points to 2,978.91 and the S&P 500 index declined 6.09 points to 1,412.01.

3 p.m. meeting

Congressional leaders and President Barack Obama are expected to meet at 3 p.m. ET today at the White House for last-minute talks. Obama and congressional Democrats want a deal that would let tax rates rise for the wealthiest taxpayers, a measure opposed by Republicans.

Traders also took further indications of an improving housing sector as a measure of Americans who signed contracts to buy homes increased last month to its highest level in two and a half years.

The U.S. National Association of Realtors says its seasonally adjusted pending home sales index rose 1.7 per cent in November from October to 106.4.

The increase points to higher sales of previously occupied homes in the coming months. There's generally a one-to-two-month lag between a signed contract and a completed sale.

Stock markets headed for a negative end to a shortened trading week as top lawmakers alternately cast blame on each other while portraying themselves as open to a reasonable last-minute bargain.

Miners, industrials slip

Commodities were mixed with March copper unchanged at $3.60 US a pound. The mining sector fell 0.7 per cent with HudBay Minerals down 12 cents to $9.86 Cdn and First Quantum Minerals gave back 34 cents to $21.15.

The industrials sector was down 0.5 per cent with Bombardier Inc. down two cents to $3.74.

The energy sector also dropped 0.5 per cent with February crude on the New York Mercantile Exchange down 21 cents to $90.66 US a barrel. Suncor Energy declined 37 cents to $32.25 Cdn while Canadian Natural Resources shed 14 cents to $28.35.

February gold declined $7 to $1,656.70 US an ounce while the gold sector declined 0.35 per cent. Barrick Gold Corp. faded 22 cents to $34.02 Cdn.

The financial sector was also a drag with Scotiabank down 91 cents to $57.58.

On the corporate front, Research In Motion Ltd. shares edged up 15 cents to $11.85. The BlackBerry maker has sold NewBay to mobile services company Synchronoss Technologies Inc. for $55.5 million US. NewBay's cloud-based services allow customers to store, share and deliver content like photo albums, social networking and other data, through smartphones, tablets and other electronic devices.

Europe slides

Worries about the U.S. economy put European bourses firmly in the red with London's FTSE 100 index down 0.35 per cent, Frankfurt's DAX gave back 0.57 per cent and the Paris CAC 40 was down 1.34 per cent.

However, Asian markets advanced as Tokyo's Nikkei 225 index rose 0.7 per cent to its highest level since March 10, 2011, the day that an earthquake and tsunami pummelled Japan's northeastern coast.

Investors have been cheering newly named Japanese Prime Minister Shinzo Abe and his calls for more public spending to reinvigorate the economy.

Hong Kong's Hang Seng rose 0.2 per cent, while South Korea's Kospi added 0.5 per cent. Australia's S&P/ASX 200 gained 0.5 per cent.

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CIBC pays $150M to settle Lehman-related claim

The collapse of a firm that had been considered too big to fail sent shock waves through the global financial industry and contributed to the 2008-09 recession. (Nicholas Roberts/AFP/Getty)

CIBC has agreed to pay $149.5 million US to settle a claim with the Lehman Estate, which was set up after the collapse of a onetime Wall Street giant.

The claims were filed against CIBC and numerous other financial institutions in September 2010, two years after the venerable investment bank Lehman Bros. went bankrupt.

The firm's collapse was part of a credit crunch linked to the U.S. housing and mortgage industries and made worse by the use of complex financial instruments.

The estate claimed CIBC was obliged honour a commitment made under one of those agreements before the collapse.

The Toronto-based bank originally reduced its obligation to zero and recognized a $841 million gain after Lehman filed for bankruptcy in September 2008.

The collapse of a firm that had been considered too big to fail sent shock waves through the global financial industry and contributed to the 2008-09 recession.

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'Fiscal cliff' talks go down to the wire

Markets appeared Monday to be taking in stride the prospect that U.S. politicians will fail to agree a budget deal in time to avoid automatic tax increases and spending cuts that many economists think could tilt the world's largest economy back into recession.

With just hours to go before the U.S. falls off the so-called "fiscal cliff," Republicans and Democrats remained divided over tax and spend, raising the prospect that markets will start 2013 without a clear idea of America's budget policy. The main sticking point appears to be what level of taxes are imposed on higher incomes.

Discussions in the Senate broke off Sunday night without an agreement. The Senators will return to their offices Monday to try and hammer out a deal before the deadline.

Gaps remain

"With the gulf between both parties still wide and the desire to protect their supporters' key interests so ingrained, it is difficult to see how both sides can compromise enough to agree a deal at this point," said Rebecca O'Keeffe, head of investment at Interactive Investor.

However, it's not the first time that budget discussions in the U.S. have gone down to the wire, and investors remain confident that some sort of deal will be reached, if not Monday then in the coming days or weeks. As a result, they think that the potential damage wrought by higher taxes and spending cuts will be limited.

In addition, a backup proposal that would address only a few issues is expected to be presented by Senate Majority Leader Harry Reid, a Democrat, if a bipartisan deal is not reached.

The prospect of counter-measures to offset the "fiscal cliff" impact helps explain why markets were fairly calm in Europe and Asia, and Wall Street was poised to open higher.

In Europe, the FTSE 100 index of leading British shares was down 0.4 per cent at 5,901 but the CAC-40 in France was 0.4 per cent higher at 3,633. Most European indexes are only trading for half of the day ahead of the New Year break, while others including Germany's DAX were closed.

U.S. stocks were poised for gains at the open, with Dow futures up 0.2 per cent and the broader S&P 500 futures 0.4 per cent higher, even though in theory, the U.S. faces around $671 billion of tax increases and spending cuts over the coming months, equivalent to the sort of fiscal tightening taking place in highly indebted Europe.

Recession possible

Clearly, their full imposition would hobble an economy that has shown some signs of late of a more sustainable economic recovery.

Some economists predict the tax-and-spending effects of the "fiscal cliff" could eventually throw the U.S. economy back into recession — although if the deadline passes, politicians still have a few weeks to keep the tax hikes and spending cuts at bay by repealing them retroactively once a deal is reached.

"It is likely that many of the fiscal cliff measures allow a certain amount of room within which the government can introduce measures to refrain from any tax increases," said Joshua Mahony, an analyst at Alpari.

Still, the failure to adhere to the deadline following weeks of squabbling and procrastination could be view negatively by the major credit rating agencies and weigh on investor confidence going into 2013.

"I think the market reaction to that will be very negative. This means the U.S. will never be able to bring its house in order. And the deficit will continue to accumulate," said Francis Lun, managing director of Lyncean Holdings in Hong Kong. "No meaningful reform and no solution in sight. You can throw confidence out of the window."

Earlier in Asia, the picture was fairly subdued in those markets that were open — among others, markets in Japan and South Korea were closed for the New Year's holidays.

Hong Kong's Hang Seng, trading for a half-day, closed marginally lower at 22,656.92, while mainland Chinese stocks rose after a private survey showed the country's manufacturing growth at its strongest level in 18 months in December. Australia's S&P/ASX 200 fell 0.5 per cent to close at 4,648.90.

There was also a fairly calm atmosphere in other financial markets, with the euro down just 0.2 per cent at $1.3191 and the price of benchmark New York crude down 11 cents at $90.69 a barrel.

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TSX among world's worst stock markets in 2012

The Toronto Stock Exchange is set to close out an underwhelming three per cent gain for 2012, which would place Canada's benchmark bourse among the developed world's worst-performing stock markets this year.

The S&P/TSX Composite Index was trading at 12,305 when North American markets opened, down 10 points on the day in light trading. If that flat showing holds, the TSX will post just over a three-per-cent gain for the year.

That would make the TSX almost the worst-performing major stock exchange in the world.

The TSX has been outpaced by most of its North American rivals this year. The Dow Jones Industrial Average was slightly better, with a five-per-cent gain on the year. But the broader S&P 500 is on pace to post an 11-per-cent gain on the year. The technology-focused Nasdaq did even better, up by more than 13 per cent.

The Nasdaq's showing was buoyed by Apple, which exploded out of the gate before regressing somewhat in the later months when concerns about the iPhone 5's reception and doubts about growth potential began to manifest. All in all, the company's stock was up 26 per cent on the year.

Elsewhere in the Americas, Mexico's IPC index was up almost 18 per cent, and Brazil's benchmark Bovespa was up seven per cent.

European stocks did well

Despite all the concern's over European debt, the continent's stock markets performed well for the most part and left the TSX in their dust. The continent-wide Euro Stoxx index was up by more than 13 per cent in 2012, while Paris' CAC-40 index did even better, up 15 per cent.

Germany's DAX Index had a great year, up more than 29 per cent. The main stock index of Switzerland, a country that often gets grouped with Canada as a "safe haven," went up by more than 14 per cent.

One of the only major European exchanges to lose ground in 2012 was Spain, where the Ibex was off almost 5 per cent. Italy's Borsa Italiana was up almost eight per cent on the year.

Asian stocks also did well, for the most part. The Japanese Nikkei rebounded from a poor 2011 with an almost 23-per-cent gain in 2012. Hong Kong's Hang Seng did almost as well, with a 22-per-cent gain.

Shanghai's stock exchange gained about three per cent on the year, while Taiwan's Taiex and Korea's Kospi were each up by about nine per cent on the year.

The TSX's three-per-cent gain was a rebound from a disastrous 2011 that saw the exchange lose more than 11 per cent of its value. But it was well off the 30- and 14-per-cent gains the TSX posted in the two years following the recession, in 2009 and 2010.

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RIM shares rise another 13% after Christmas shutdown

RIM shares marched higher on Thursday after the Toronto Stock Exchange reopened following a two-day closure for the Christmas holiday period.

Waterloo, Ont.-based Research In Motion gained $1.27, or more than 12 per cent, to trade at 11.77.

That's the first strong gain since the company released quarterly results last Monday. The results themselves were actually better than expected, with revenue holding steady.

But at the news conference that accompanied the data's release, CEO Thorsten Heins warned the company's revenue model is likely to change drastically moving forward, as carriers become less willing to pay so much to use RIM's secure network.

RIM shares had been as high as almost $14 before that news. They quickly lost about 25 per cent of their value in the sell-off that followed. But from the $6 level RIM was at as recently as September, the stock has been on quite a run, more than doubling over that period.

RIM shares gained ground Wednesday on U.S. markets while the Toronto Stock Exchange was closed, and the TSX followed Nasdaq's lead on Thursday.

In New York, RIM shares continued to move higher Thursday, adding about 18 cents, or nearly two per cent, from the Wednesday close.

At the end of January, RIM will release its line of BlackBerry 10 smartphones to consumers.

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Neil Macdonald: Fiscal showdown at the U.S. Congress

Americans, it would appear, are about to give the world another lesson in their self-proclaimed exceptionalism.

What other democratic nation's leaders, after all, would deliberately design a fiscal disaster and aim the country's economy straight for it?

And then stand back, holding news conferences, double-dog-daring each other to step over some imagined line, chanting the political equivalent of nana-nana-boo-boo?

It now appears the U.S. will actually plunge over the "fiscal cliff" its politicians concocted two years ago.

The idea, at the time, was to create a situation so damaging, so contrary to the national self-interest, so unimaginably irresponsible that even the most hardline political zealot would have the sense to compromise in order to prevent it.

Bad assumption, it turns out.

With the deadline now three days away, it looks as though Congress has rewritten P.T. Barnum's old aphorism: You can, and possibly will, go broke overestimating the intelligence of the American politician.

As that dismal reality sinks in, a national panic is slowly building. Markets are unsettled. Workers are bracing for paycheque shocks when the new year rolls around.

If nothing is done, all sorts of taxes kick in for everyone here on Jan. 1, and the government will begin indiscriminately slicing hundreds of billions in federal spending, a double blow to a still fragile economy.

Americans, who commonly regard Canadians and Western Europeans as a bunch of socialists, are about to suddenly discover the extent to which government dominates their own lives.

Cliff ahead

The fiscal cliff measures could subtract more than four per cent from America's GDP, and trigger another recession, Congress's own accounting office has said.

A grim-looking Barack Obama walks across the White House lawn Thursday, having cut short his Hawaii vacation to deal with fiscal cliff negotiations. (Charles Dharapak / Associated Press)

And what have the people who created this mess been doing about it?

Well, having lost an election in which one of their opponents' main promises was to raise tax rates on the wealthy (defined as households making more than a quarter of a million dollars a year), Republicans immediately declared that the election had changed nothing, and promised to block any such effort in the House of Representatives, the one branch of government they still control.

Then, in behind-the-scenes negotiations, President Barack Obama caved on his campaign pledge and offered to exempt anyone making up to $400,000.

House Republicans rejected that immediately.

Republican Speaker John Boehner tried to counter with a bill that would protect everyone who makes less than a million dollars. But he was publicly humiliated when his own party revolted, or at least enough members to have guaranteed the plan's defeat on the House floor.

Evidently, there are Republicans who want to fight the 2014 midterm elections as the party that was literally willing to risk another recession in order to shield millionaires from a return to the taxation levels they paid during the Clinton years.

Boehner finally held a news conference where he effectively declared that fixing the mess, which his party helped create, is no longer his responsibility.

He and other GOP leaders said it is now up to Democrats, who control the Senate, to come up with a solution.

"The Senate first must act," they declared, ignoring the fact that the Senate has already acted, at least on the tax front, and has passed a bill (incorporating Obama's initial $250,000 tax-rate cutoff) that the House could consider any time it wishes.

The debt ceiling

At the same time as all this is going on, the U.S. Treasury announced the government will hit the $16.4-trillion federal debt ceiling again on Monday.

And, once again, rather than authorize the Treasury to continue making interest payments on the nation's accumulated debt, some House Republicans are willing to risk default, with all its disastrous international implications for the faith and credit of the United States.

The party evidently feels it needs to preserve that threat as some sort of leverage for future battles.

House Speaker John Boehner, How many Republicans can he corral now? (Yuri Gripas / Reuters)

Subtract the political posturing and parse the numbers, and this all makes even less sense.

All that separates the two sides is $450 billion over 10 years — less than one per cent of projected federal spending over that period.

So largely on principle, the custodians of America's economy are about to drive it into the ditch, dragging the rest of the world behind them.

Understandably, American voters are staring at all this with disbelief and puzzlement.

Until recently, most of them were telling pollsters they were confident there would be some sort of last-minute deal. It never occurred to them, it appears, that the people they sent to Washington would actually let the country go over this cliff.

But then, they did send those particular people to Washington.

As the hours tick by, Obama and his party's leadership in the Senate returned to town Thursday — the House is coming back Sunday night, barely 24 hours before the deadline — trying for a last-minute deal to save the entire nation from needless financial grief.

If they accomplish that, it will be nothing short of exceptional.

22.39 | 0 komentar | Read More

Stock markets edgy before 'fiscal cliff'

The Toronto stock market was lower Friday amid growing skepticism about whether U.S. lawmakers can keep the economy from going over the so-called fiscal cliff.

The S&P/TSX composite index dropped 44.55 points to 12,329.22 as the clock ticks towards huge spending cuts and significant tax increases that will automatically click in after Dec. 31 if there's no deal.

The American economy is already weak and economists warn the imposition of those measures could tip the U.S. back into recession and depress other economies around the globe unless the White House and Congress find a compromise budget plan.

The TSX Venture Exchange slipped 0.54 of a point to 1,196.21.

The Canadian dollar was down 0.07 of a cent at 100.44 cents US.

U.S. markets were also lower with the Dow industrials down 60.89 points to 13,035.42, the Nasdaq dropped seven points to 2,978.91 and the S&P 500 index declined 6.09 points to 1,412.01.

3 p.m. meeting

Congressional leaders and President Barack Obama are expected to meet at 3 p.m. ET today at the White House for last-minute talks. Obama and congressional Democrats want a deal that would let tax rates rise for the wealthiest taxpayers, a measure opposed by Republicans.

Traders also took further indications of an improving housing sector as a measure of Americans who signed contracts to buy homes increased last month to its highest level in two and a half years.

The U.S. National Association of Realtors says its seasonally adjusted pending home sales index rose 1.7 per cent in November from October to 106.4.

The increase points to higher sales of previously occupied homes in the coming months. There's generally a one-to-two-month lag between a signed contract and a completed sale.

Stock markets headed for a negative end to a shortened trading week as top lawmakers alternately cast blame on each other while portraying themselves as open to a reasonable last-minute bargain.

Miners, industrials slip

Commodities were mixed with March copper unchanged at $3.60 US a pound. The mining sector fell 0.7 per cent with HudBay Minerals down 12 cents to $9.86 Cdn and First Quantum Minerals gave back 34 cents to $21.15.

The industrials sector was down 0.5 per cent with Bombardier Inc. down two cents to $3.74.

The energy sector also dropped 0.5 per cent with February crude on the New York Mercantile Exchange down 21 cents to $90.66 US a barrel. Suncor Energy declined 37 cents to $32.25 Cdn while Canadian Natural Resources shed 14 cents to $28.35.

February gold declined $7 to $1,656.70 US an ounce while the gold sector declined 0.35 per cent. Barrick Gold Corp. faded 22 cents to $34.02 Cdn.

The financial sector was also a drag with Scotiabank down 91 cents to $57.58.

On the corporate front, Research In Motion Ltd. shares edged up 15 cents to $11.85. The BlackBerry maker has sold NewBay to mobile services company Synchronoss Technologies Inc. for $55.5 million US. NewBay's cloud-based services allow customers to store, share and deliver content like photo albums, social networking and other data, through smartphones, tablets and other electronic devices.

Europe slides

Worries about the U.S. economy put European bourses firmly in the red with London's FTSE 100 index down 0.35 per cent, Frankfurt's DAX gave back 0.57 per cent and the Paris CAC 40 was down 1.34 per cent.

However, Asian markets advanced as Tokyo's Nikkei 225 index rose 0.7 per cent to its highest level since March 10, 2011, the day that an earthquake and tsunami pummelled Japan's northeastern coast.

Investors have been cheering newly named Japanese Prime Minister Shinzo Abe and his calls for more public spending to reinvigorate the economy.

Hong Kong's Hang Seng rose 0.2 per cent, while South Korea's Kospi added 0.5 per cent. Australia's S&P/ASX 200 gained 0.5 per cent.

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Exemption allows for sale of troubled XL Foods meat plant

The sale of the Alberta meat plant at the centre of Canada's largest beef recall is now one step closer to becoming reality.

JBS says it hasn't yet bought the XL Foods meat plant in Brooks, Alta., but it is moving through the steps necessary to make that happen.

Just days before Christmas, the province granted the company an exemption from foreign land ownership rules.

In the fall — in the midst of an E. coli scare that stretched across the country — the meat packing plant was forced to close after several deficiencies were identified by the Canadian Food Inspection Agency.

The plant was allowed to resume operations in October under enhanced oversight.

Just before it reopened, JBS stepped in to manage the plant in a deal that gave them an exclusive option to buy the Canadian and U.S. operations of XL Foods.

The Brazilian-based company is one of the world's biggest meat processing operations, and its arrival on the scene was welcomed among many in Alberta's cattle industry who feared for the troubled plant's future.

A JBS spokesperson says there is no timeline for a potential sale.

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Obama warns of 'self-inflicted wound' to U.S. economy

U.S. Senate leaders groped for a last-minute compromise Saturday to avoid middle-class tax increases and possibly prevent deep spending cuts at the dawn of the new year as President Barack Obama warned that failure could mean a "self-inflicted wound to the economy."

Obama chastised lawmakers in his weekly radio and internet address for waiting until the last minute to try and avoid a "fiscal cliff," yet said there was still time for an agreement.

"We cannot let Washington politics get in the way of America's progress," he said as the hurry-up negotiations unfolded.

Don Drummond, chief economist of TD Bank, told CBC News on Saturday, "it's not surprising" that negotiations are going to deadline, forcing the Democrats into a corner.

"A bunch of [Republicans] signed memorandums to not agree to tax increases," he noted. "One of the reasons they are not coming to the agreement is that some of them like the aesthetic appeal of this being done to them as opposed to them doing something to the American people."

Drummond addressed fears the U.S. would fall into a recession if a deal isn't inked — thereby affecting Canada's economy as well.

"We have latched our wagon on to the U.S. locomotive," he said. "Canada has had a recession every time the U.S. had a recession. The one recession we missed, 2001, was an exception — that was in their high-tech sector."

Drummond predicts the most the Canadian government would do is have the Bank of Canada cut the interest rate by half a percentage point.

Capitol nearly empty

For all the recent expressions of urgency, bargaining took place by phone, email and paper in a Capitol nearly empty except for tourists. Alone among top lawmakers, Senate Republican leader Mitch McConnell spent the day in his office.

In the Republicans' weekly address, Sen. Roy Blunt of Missouri cited a readiness to compromise. "Divided government is a good time to solve hard problems — and in the next few days, leaders in Washington have an important responsibility to work together and do just that," he said.

Even so, there was no guarantee of success, and a dispute over the federal tax on large estates emerged as yet another key sticking point alongside personal income tax rates.

In a blunt challenge to Republicans, Obama said that barring a bipartisan agreement, he expected both houses to vote on his own proposal to block tax increases on all but the wealthy and simultaneously preserve expiring unemployment benefits.

Political calculations mattered as much as deep-seated differences over the issues, as divided government struggled with its first big challenge since the November elections.

Republican Speaker Boehner stays at arm's-length

Speaker John Boehner remained at arm's-length, juggling a desire to avoid the fiscal cliff with his goal of winning another term as speaker when a new Congress convenes next Thursday. Any compromise legislation is certain to include higher tax rates on the wealthy, and the House Republican rank and file rejected the idea when he presented it to them as part of a final attempt to strike a more sweeping agreement with Obama.

Speaker of the House John Boehner was among congressional leaders involved in talks at the White House on Friday in the latest meeting to see where things stand in the attempt to avoid the U.S. from going over the fiscal cliff. (J. Scott Applewhite/Associated Press)

Lawmakers have until the new Congress convenes to pass any compromise, and even the calendar mattered. Democrats said they had been told House Republicans might reject a deal until after Jan. 1, to avoid a vote to raise taxes before they had technically gone up and then vote to cut taxes after they had risen.

Nor was any taxpayer likely to feel any adverse impact if legislation is signed and passed into law in the first two or three days of 2013 instead of the final hours of 2012.

Gone was the talk of a grand bargain of spending cuts and additional tax revenue in which the two parties would agree to slash deficits by trillions of dollars over a decade.

Now negotiators had a more cramped goal of preventing additional damage to the economy in the form of higher taxes across the board — with some families facing increases measured in the thousands of dollars — as well as cuts aimed at the Pentagon and hundreds of domestic programs.

Republicans said they were willing to bow to Obama's call for higher taxes on the wealthy as part of a deal to prevent them from rising on those less well-off.

Obama wants tax increases on those with $250K income

Democrats said Obama was sticking to his campaign call for tax increases above $250,000 in annual income, even though he said in recent negotiations he said he could accept $400,000. There was no evidence of agreement even at the higher level.

There were indications from Republicans that estate taxes might hold more significance for them than the possibility of higher rates on income.

One senior Republican, Sen. Jon Kyl of Arizona, said late Friday he was "totally dead set" against Obama's estate tax proposal, and as if to reinforce the point, Blunt mentioned the issue before any other in his broadcast remarks. "Small businesses and farm families don't know how to deal with the unfair death tax — a tax that the president and congressional leaders have threatened to expand to include even more family farms and even more small businesses," he said.

Several officials said Republicans want to leave the tax at 35 per cent after exempting the first $5 million US in estate value. Officials said the White House wants a 45 per cent tax after a $3.5 million exemption. Without any action by Congress, it would climb to a 55 per cent tax after a $1 million exemption on Jan. 1.

Income taxes or estate tax

Democrats stressed their unwillingness to make concessions on both income taxes and the estate tax, and said they hoped Republicans would choose which mattered more to them.

Officials said any compromise was likely to ease the impact of the alternative minimum tax, originally designed to make sure that millionaires did not escape taxation. If left unchanged, it could hit an estimated 28 million households for the first time in 2013, with an average increase of more than $3,000.

Taxes on dividends and capital gains are also involved in the talks, as well as a series of breaks for businesses and others due to expire at the first of the year.

Obama and congressional Democrats are insisting on an extension of long-term unemployment benefits that are expiring for about 2 million jobless individuals.

Leaders in both parties also hope to prevent a 27 per cent fee cut from taking effect on Jan. 1 for doctors who treat Medicare patients.

There was also discussion of a short-term extension of expiring farm programs, in part to prevent a spike in milk prices at the first of the year. It wasn't clear if that was a parallel effort to the cliff talks or had become wrapped into them.

Next round of brinkmanship likely soon

Across-the-board spending cuts that comprise part of the cliff were a different matter.

Republicans say Boehner will insist that they will begin to take effect unless negotiators agreed to offset them with specified savings elsewhere.

That would set the stage for the next round of brinkmanship — a struggle over Republican calls for savings from Medicare, Medicaid and other federal benefit programs.

The Treasury's ability to borrow is expected to expire in late winter or early spring, and without an increase in the $16.4 trillion limit, the government would face its first-ever default. Republicans have said they will use administration requests for an extension as leverage to win cuts in spending.

Ironically, it was just such a manoeuvre more than a year ago that set the stage for the current crisis talks over the fiscal cliff.

With files from CBC News

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Exemption allows for sale of troubled XL Foods meat plant

The sale of the Alberta meat plant at the centre of Canada's largest beef recall is now one step closer to becoming reality.

JBS says it hasn't yet bought the XL Foods meat plant in Brooks, Alta., but it is moving through the steps necessary to make that happen.

Just days before Christmas, the province granted the company an exemption from foreign land ownership rules.

In the fall — in the midst of an E. coli scare that stretched across the country — the meat packing plant was forced to close after several deficiencies were identified by the Canadian Food Inspection Agency.

The plant was allowed to resume operations in October under enhanced oversight.

Just before it reopened, JBS stepped in to manage the plant in a deal that gave them an exclusive option to buy the Canadian and U.S. operations of XL Foods.

The Brazilian-based company is one of the world's biggest meat processing operations, and its arrival on the scene was welcomed among many in Alberta's cattle industry who feared for the troubled plant's future.

A JBS spokesperson says there is no timeline for a potential sale.

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RIM shares rise another 13% after Christmas shutdown

RIM shares marched higher on Thursday after the Toronto Stock Exchange reopened following a two-day closure for the Christmas holiday period.

Waterloo, Ont.-based Research In Motion gained $1.27, or more than 12 per cent, to trade at 11.77.

That's the first strong gain since the company released quarterly results last Monday. The results themselves were actually better than expected, with revenue holding steady.

But at the news conference that accompanied the data's release, CEO Thorsten Heins warned the company's revenue model is likely to change drastically moving forward, as carriers become less willing to pay so much to use RIM's secure network.

RIM shares had been as high as almost $14 before that news. They quickly lost about 25 per cent of their value in the sell-off that followed. But from the $6 level RIM was at as recently as September, the stock has been on quite a run, more than doubling over that period.

RIM shares gained ground Wednesday on U.S. markets while the Toronto Stock Exchange was closed, and the TSX followed Nasdaq's lead on Thursday.

In New York, RIM shares continued to move higher Thursday, adding about 18 cents, or nearly two per cent, from the Wednesday close.

At the end of January, RIM will release its line of BlackBerry 10 smartphones to consumers.

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Neil Macdonald: Fiscal showdown at the U.S. Congress

Americans, it would appear, are about to give the world another lesson in their self-proclaimed exceptionalism.

What other democratic nation's leaders, after all, would deliberately design a fiscal disaster and aim the country's economy straight for it?

And then stand back, holding news conferences, double-dog-daring each other to step over some imagined line, chanting the political equivalent of nana-nana-boo-boo?

It now appears the U.S. will actually plunge over the "fiscal cliff" its politicians concocted two years ago.

The idea, at the time, was to create a situation so damaging, so contrary to the national self-interest, so unimaginably irresponsible that even the most hardline political zealot would have the sense to compromise in order to prevent it.

Bad assumption, it turns out.

With the deadline now three days away, it looks as though Congress has rewritten P.T. Barnum's old aphorism: You can, and possibly will, go broke overestimating the intelligence of the American politician.

As that dismal reality sinks in, a national panic is slowly building. Markets are unsettled. Workers are bracing for paycheque shocks when the new year rolls around.

If nothing is done, all sorts of taxes kick in for everyone here on Jan. 1, and the government will begin indiscriminately slicing hundreds of billions in federal spending, a double blow to a still fragile economy.

Americans, who commonly regard Canadians and Western Europeans as a bunch of socialists, are about to suddenly discover the extent to which government dominates their own lives.

Cliff ahead

The fiscal cliff measures could subtract more than four per cent from America's GDP, and trigger another recession, Congress's own accounting office has said.

A grim-looking Barack Obama walks across the White House lawn Thursday, having cut short his Hawaii vacation to deal with fiscal cliff negotiations. (Charles Dharapak / Associated Press)

And what have the people who created this mess been doing about it?

Well, having lost an election in which one of their opponents' main promises was to raise tax rates on the wealthy (defined as households making more than a quarter of a million dollars a year), Republicans immediately declared that the election had changed nothing, and promised to block any such effort in the House of Representatives, the one branch of government they still control.

Then, in behind-the-scenes negotiations, President Barack Obama caved on his campaign pledge and offered to exempt anyone making up to $400,000.

House Republicans rejected that immediately.

Republican Speaker John Boehner tried to counter with a bill that would protect everyone who makes less than a million dollars. But he was publicly humiliated when his own party revolted, or at least enough members to have guaranteed the plan's defeat on the House floor.

Evidently, there are Republicans who want to fight the 2014 midterm elections as the party that was literally willing to risk another recession in order to shield millionaires from a return to the taxation levels they paid during the Clinton years.

Boehner finally held a news conference where he effectively declared that fixing the mess, which his party helped create, is no longer his responsibility.

He and other GOP leaders said it is now up to Democrats, who control the Senate, to come up with a solution.

"The Senate first must act," they declared, ignoring the fact that the Senate has already acted, at least on the tax front, and has passed a bill (incorporating Obama's initial $250,000 tax-rate cutoff) that the House could consider any time it wishes.

The debt ceiling

At the same time as all this is going on, the U.S. Treasury announced the government will hit the $16.4-trillion federal debt ceiling again on Monday.

And, once again, rather than authorize the Treasury to continue making interest payments on the nation's accumulated debt, some House Republicans are willing to risk default, with all its disastrous international implications for the faith and credit of the United States.

The party evidently feels it needs to preserve that threat as some sort of leverage for future battles.

House Speaker John Boehner, How many Republicans can he corral now? (Yuri Gripas / Reuters)

Subtract the political posturing and parse the numbers, and this all makes even less sense.

All that separates the two sides is $450 billion over 10 years — less than one per cent of projected federal spending over that period.

So largely on principle, the custodians of America's economy are about to drive it into the ditch, dragging the rest of the world behind them.

Understandably, American voters are staring at all this with disbelief and puzzlement.

Until recently, most of them were telling pollsters they were confident there would be some sort of last-minute deal. It never occurred to them, it appears, that the people they sent to Washington would actually let the country go over this cliff.

But then, they did send those particular people to Washington.

As the hours tick by, Obama and his party's leadership in the Senate returned to town Thursday — the House is coming back Sunday night, barely 24 hours before the deadline — trying for a last-minute deal to save the entire nation from needless financial grief.

If they accomplish that, it will be nothing short of exceptional.

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Stock markets edgy before 'fiscal cliff'

The Toronto stock market was lower Friday amid growing skepticism about whether U.S. lawmakers can keep the economy from going over the so-called fiscal cliff.

The S&P/TSX composite index dropped 44.55 points to 12,329.22 as the clock ticks towards huge spending cuts and significant tax increases that will automatically click in after Dec. 31 if there's no deal.

The American economy is already weak and economists warn the imposition of those measures could tip the U.S. back into recession and depress other economies around the globe unless the White House and Congress find a compromise budget plan.

The TSX Venture Exchange slipped 0.54 of a point to 1,196.21.

The Canadian dollar was down 0.07 of a cent at 100.44 cents US.

U.S. markets were also lower with the Dow industrials down 60.89 points to 13,035.42, the Nasdaq dropped seven points to 2,978.91 and the S&P 500 index declined 6.09 points to 1,412.01.

3 p.m. meeting

Congressional leaders and President Barack Obama are expected to meet at 3 p.m. ET today at the White House for last-minute talks. Obama and congressional Democrats want a deal that would let tax rates rise for the wealthiest taxpayers, a measure opposed by Republicans.

Traders also took further indications of an improving housing sector as a measure of Americans who signed contracts to buy homes increased last month to its highest level in two and a half years.

The U.S. National Association of Realtors says its seasonally adjusted pending home sales index rose 1.7 per cent in November from October to 106.4.

The increase points to higher sales of previously occupied homes in the coming months. There's generally a one-to-two-month lag between a signed contract and a completed sale.

Stock markets headed for a negative end to a shortened trading week as top lawmakers alternately cast blame on each other while portraying themselves as open to a reasonable last-minute bargain.

Miners, industrials slip

Commodities were mixed with March copper unchanged at $3.60 US a pound. The mining sector fell 0.7 per cent with HudBay Minerals down 12 cents to $9.86 Cdn and First Quantum Minerals gave back 34 cents to $21.15.

The industrials sector was down 0.5 per cent with Bombardier Inc. down two cents to $3.74.

The energy sector also dropped 0.5 per cent with February crude on the New York Mercantile Exchange down 21 cents to $90.66 US a barrel. Suncor Energy declined 37 cents to $32.25 Cdn while Canadian Natural Resources shed 14 cents to $28.35.

February gold declined $7 to $1,656.70 US an ounce while the gold sector declined 0.35 per cent. Barrick Gold Corp. faded 22 cents to $34.02 Cdn.

The financial sector was also a drag with Scotiabank down 91 cents to $57.58.

On the corporate front, Research In Motion Ltd. shares edged up 15 cents to $11.85. The BlackBerry maker has sold NewBay to mobile services company Synchronoss Technologies Inc. for $55.5 million US. NewBay's cloud-based services allow customers to store, share and deliver content like photo albums, social networking and other data, through smartphones, tablets and other electronic devices.

Europe slides

Worries about the U.S. economy put European bourses firmly in the red with London's FTSE 100 index down 0.35 per cent, Frankfurt's DAX gave back 0.57 per cent and the Paris CAC 40 was down 1.34 per cent.

However, Asian markets advanced as Tokyo's Nikkei 225 index rose 0.7 per cent to its highest level since March 10, 2011, the day that an earthquake and tsunami pummelled Japan's northeastern coast.

Investors have been cheering newly named Japanese Prime Minister Shinzo Abe and his calls for more public spending to reinvigorate the economy.

Hong Kong's Hang Seng rose 0.2 per cent, while South Korea's Kospi added 0.5 per cent. Australia's S&P/ASX 200 gained 0.5 per cent.

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U.S. Senate leaders rush to assemble deal to avoid fiscal cliff

Senate leaders rushed late Friday to assemble a last-ditch agreement to avoid middle-class tax increases and possibly delay steep spending cuts in an urgent attempt to find common ground after weeks of post-election gridlock, after an impatient President Barack Obama pressed top lawmakers to cut a deal to avoid going over the fiscal cliff.

Obama warned that without a resolution, "every American's paycheque will get a lot smaller."

"Congress can prevent it from happening, if they act now," he said in his weekly Saturday radio and internet address.

Following a White House meeting Friday among Obama and congressional leaders, aides to Senate Republican Leader Mitch McConnell of Kentucky and Senate Majority Leader Harry Reid, a Democrat from Nevada, began racing against the clock for a bipartisan bargain. The leaders could present legislation to senators as early as Sunday, with a vote possible on Sunday or Monday.

'Outside of Washington, nobody understands how it is that this seems to be a repeat pattern, over and over again.'—Barack Obama, U.S. president

The guest list for the White House meeting included Reid, McConnell, House Speaker John Boehner, a Republication from Ohio, and House Democratic leader Nancy Pelosi, a California Democrat. But the key players were clearly Reid and McConnell, both of whom stayed behind briefly at the White House and huddled with their staffs and Obama's top legislative aide, Rob Nabors, in the West Wing Cabinet Room just outside the Oval Office.

Neither side expected compromise to be easy. However, McConnell and Reid voiced unexpected optimism that they could work toward a deal that could win support in both their camps.

Warned Reid: "Whatever we come up with is going to be imperfect."

Looking to add pressure on negotiators, Obama said that if there is no compromise, he expects Reid to put legislation on the floor to prevent tax increases on the middle class and extend unemployment benefits, an implicit challenge to Republicans to dare to vote against what polls show is popular.

Democrats urged to work with Republicans

Speaking for Republicans in a Saturday radio address, Senator Roy Blunt of Missouri sought to put the burden of a deal on Obama and Reid.

"We still can avoid going over the fiscal cliff if the president and the Democrat-controlled Senate step forward this week and work with Republicans to solve this problem and solve it now," he said.

Whatever manages to pass in the Senate, with its Democratic majority, would then face a second test in the Republican-controlled House.

Boehner, a Republican speaker who has struggled recently with anti-tax rebels inside his own party, said through an aide that he would await the results of the talks between the Senate and White House. A House vote could come as late as Wednesday, the final full day before a new Congress takes office.Speaker of the House John Boehner was among congressional leaders involved in talks at the White House on Friday in the latest meeting to see where things stand in the attempt to avoid the U.S. from going over the fiscal cliff. (J. Scott Applewhite/Associated Press)

Officials said there was a general understanding that any agreement would block scheduled income tax increases for middle-class earners while letting rates rise at upper-income levels.

Obama was sticking to his campaign call for increases above $250,000 US in annual income, even though in recent negotiations he said he could accept $400,000.

The two sides also confronted a divide over estate taxes. Obama favours a higher tax than is currently in effect, but one senior Republican, Senator Jon Kyl of Arizona, said he's "totally dead set" against it. Speaking of fellow GOP lawmakers, he said they harbour more opposition to an increase in the estate tax than to letting taxes on income and investments rise at upper levels.

But the estate tax was more likely to be used as a possible bargaining chip that Democrats could give away in exchange for higher rates for top earners and other Obama priorities.

Tax rises without deal feared

Obama and Democrats want to prevent the expiration of unemployment benefits for about two million long-term jobless men and women, and there is widespread sentiment in both parties to shelter doctors from a 27 per cent cut in Medicare fees.

Also likely to be included in the negotiations are taxes on dividends and capital gains, both of which are scheduled to rise with the new year. Also the alternative minimum tax, which, if left unchanged, could hit an estimated 28 million households for the first time and mean an average increase of more than $3,000.

The White House has shown increased concern about a possible doubling of milk prices if a farm bill is not passed in the next few days, although it is not clear whether that issue too might be included in the talks.

One Republican who was briefed on the White House meeting said Boehner made it clear he would leave in place spending cuts scheduled to take effect unless alternative savings were included in any compromise to offset them. In previous White House proposals, Obama has suggested finding enough cuts in government spending to put off the steeper cuts for up to six months.

Obama, speaking to reporters following his meeting with the congressional leaders, faulted a system that left crucial decisions to the last minute, a way of governing that he said the public finds "mindboggling."

"Outside of Washington, nobody understands how it is that this seems to be a repeat pattern, over and over again," he said.

Discussions move in fits and starts

Still, Obama himself is part of the negotiating process, and his meeting with all four top leaders Friday was the first since Nov. 16. A phone call he placed Wednesday night to McConnell was the first the Republican leader had received from a Democrat on the fiscal talks since Thanksgiving.

Looking to add pressure on negotiators, Obama said he expects Reid to put legislation on the floor to prevent tax increases on the middle class and extend unemployment benefits, an implicit challenge to Republicans to dare to vote against what polls show is popular.

The start of negotiations in the Senate marked a new endgame for discussions that have moved in fits and starts since the November election.

Boehner refused for weeks to accept any rate increases, and simultaneously accused Obama of skimping on the spending cuts he would support as part of a balanced deal to reduce deficits, remove the threat of spending cuts and prevent the across-the-board tax cuts.

Last week, the Ohio Republican presented a Plan B measure that would have let rates rise on million-dollar earners, well above Obama's latest offer for a $400,000 threshold.

Facing defeat, Boehner scrapped plans for a vote, leaving the economy on track for the cliff that political leaders in both parties had said they could avoid.

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RIM shares rise another 13% after Christmas shutdown

RIM shares marched higher on Thursday after the Toronto Stock Exchange reopened following a two-day closure for the Christmas holiday period.

Waterloo, Ont.-based Research In Motion gained $1.27, or more than 12 per cent, to trade at 11.77.

That's the first strong gain since the company released quarterly results last Monday. The results themselves were actually better than expected, with revenue holding steady.

But at the news conference that accompanied the data's release, CEO Thorsten Heins warned the company's revenue model is likely to change drastically moving forward, as carriers become less willing to pay so much to use RIM's secure network.

RIM shares had been as high as almost $14 before that news. They quickly lost about 25 per cent of their value in the sell-off that followed. But from the $6 level RIM was at as recently as September, the stock has been on quite a run, more than doubling over that period.

RIM shares gained ground Wednesday on U.S. markets while the Toronto Stock Exchange was closed, and the TSX followed Nasdaq's lead on Thursday.

In New York, RIM shares continued to move higher Thursday, adding about 18 cents, or nearly two per cent, from the Wednesday close.

At the end of January, RIM will release its line of BlackBerry 10 smartphones to consumers.

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Toyota safety defect case settlement tops record $1B

A major chapter of a nearly four-year legal saga that left Toyota Motor Corp. fighting hundreds of lawsuits and struggling with a tarnished image has ended with a proposed payout of more than $1 billion US.

The settlement — unprecedented in its size according to a plaintiff's attorney — brings an end to claims from owners in the U.S. who said the value of their vehicles plunged after recalls over sudden and unintended acceleration.

Lawsuits claiming that the defects caused injury or death remain, with the first trial beginning in February unless another major deal comes first.

Steve Berman, a lawyer representing Toyota owners, said the settlement is the largest in U.S. history involving automobile defects.

"We kept fighting and fighting and we secured what we think was a good settlement given the risks of this litigation," Berman said.

Although the issue has also arisen in Canada, a Toyota Canada spokeswoman said this settlement is limited to U.S. litigation and has no bearing in Canada.

Canadian litigation against Toyota includes a lawsuit filed by a Toronto woman, Karen Stekel, who says she was injured in an accelerator-related car crash in 2005. She filed the lawsuit against Toyota in 2010 in Ontario Superior Court. The case is expected to go to trial in 2013, which would make it the first in Canada, her lawyer Ted Charney told CBC News on Thursday.

Class-action lawsuits have also been filed against Toyota in Canada.

More than 14 million vehicles recalled

The U.S. courtroom claims began with a highway tragedy. A California Highway Patrol officer and three of his family members were killed in suburban San Diego in 2009 after their car, a Toyota-built Lexus, reached speeds of more than 193 km/h, hit an SUV, launched off an embankment, rolled several times and burst into flames.

Investigators determined that a wrong-size floor mat trapped the accelerator and caused the crash.

That discovery, and the accident's grisliness, spurred a series of recalls involving more than 14 million vehicles and a flood of lawsuits soon followed, with numerous complaints of accelerations in several models, and brake defects with the Prius hybrid.

The Japanese automaker has blamed driver error, faulty floor mats and stuck accelerator pedals for the problems.

The runaway Lexus case was settled separately for $10 million in 2010, before the cases were consolidated by U.S. District Judge James Selna.

Selna divided them into two categories: economic loss and wrongful death. He needs to approve Wednesday's settlement, which only applies to the first group of lawsuits. The deal was filed Wednesday and Selna is expected to review it on Friday.

Cash for customers who sold, returned vehicles

Toyota said it will take a one-time, $1.1-billion pre-tax charge against earnings to cover the estimated costs of the settlement. Berman said the total value of the deal is between $1.2 billion and $1.4 billion.

As part of the economic loss settlement, Toyota will offer cash payments from a pool of about $250 million to eligible customers who sold vehicles or turned in leased vehicles between September 2009 and December 2010.

The company also will launch a $250-million program for 16 million current owners to provide supplemental warranty coverage for certain vehicle components, and it will retrofit about 3.2 million vehicles with a brake override system. An override system is designed to ensure a car will stop when the brakes are applied, even if the accelerator pedal is depressed.

The settlement would also establish additional driver education programs and fund new research into advanced safety technologies.

"In keeping with our core principles, we have structured this agreement in ways that work to put our customers first and demonstrate that they can count on Toyota to stand behind our vehicles," said Christopher Reynolds, Toyota vice president and general counsel.

Toyota president pledged to improve quality control

Current and former Toyota owners are expected to receive more information about the settlement in the coming months.

Plaintiffs' attorneys have spent the past two years deposing Toyota employees, poring over thousands of documents and reviewing software code, but the company maintains those lawyers have been unable to prove that a design defect — namely Toyota's electronic throttle control system — was responsible for vehicles surging unexpectedly.

Both the National Highway Traffic Safety Administration and NASA were unable to find any defects in Toyota's source code that could cause problems.

The company has been dogged by fines for not reporting problems in a timely manner.

Earlier this month, NHTSA doled out a record $17.4 million fine to Toyota for failing to quickly report floor mat problems with some of its Lexus models. Toyota paid a total of $48.8 million in fines for three violations in 2010.

Toyota president Akio Toyoda appeared before Congress last year and pledged to strengthen quality control. Recent sales figures show the company appears to have rebounded following its safety issues.

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Apple CEO handed more modest $4.2M salary for 2012

Apple CEO Tim Cook received $4.2 million US in pay for the latest fiscal year, a modest sum compared with last year, when the company's board set him up with stock now worth $510 million for taking the reins in 2011.

Cook's pay for fiscal 2012, which ended in September, consisted of $1.4 million in salary, a bonus of $2.8 million, and $17,000 in company contributions to his 401(k) account and life insurance premiums, according to a filing.

Apple's board saw no need to give Cook additional shares in 2012 after the sign-on grant of one million shares in 2011. Half of those shares vest in 2016 and the other half in 2021. A lot could happen to the value of the shares before Cook can cash them out, but the sign-on grant made him — at least on paper — the highest-paid U.S. CEO in 2011.

Cook did vest into shares worth $140 million in 2012. Those shares were granted earlier, when he was chief operating officer. He had been acting CEO for a while before the death of company co-founder Steve Jobs in October 2011.

Apple tends to grant shares to executives every other year. Cook's closest cohorts got big grants in 2012, including top hardware engineer Robert Mansfield, who received shares worth $83 million. Chief financial officer Peter Oppenheimer and general counsel Bruce Sewell both got stock grants worth just over $66 million, more than double the value of the grants they got two years ago, reflecting the zooming value of Apple's stock.

The Cupertino, Calif.-based company's compensation policies are relatively simple. Missing are many of the perks that other CEOs command, such as country club fees and private use of company aircraft.

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Neil Macdonald: Fiscal showdown at the U.S. Congress

Americans, it would appear, are about to give the world another lesson in their self-proclaimed exceptionalism.

What other democratic nation's leaders, after all, would deliberately design a fiscal disaster and aim the country's economy straight for it?

And then stand back, holding news conferences, double-dog-daring each other to step over some imagined line, chanting the political equivalent of nana-nana-boo-boo?

It now appears the U.S. will actually plunge over the "fiscal cliff" its politicians concocted two years ago.

The idea, at the time, was to create a situation so damaging, so contrary to the national self-interest, so unimaginably irresponsible that even the most hardline political zealot would have the sense to compromise in order to prevent it.

Bad assumption, it turns out.

With the deadline now three days away, it looks as though Congress has rewritten P.T. Barnum's old aphorism: You can, and possibly will, go broke overestimating the intelligence of the American politician.

As that dismal reality sinks in, a national panic is slowly building. Markets are unsettled. Workers are bracing for paycheque shocks when the new year rolls around.

If nothing is done, all sorts of taxes kick in for everyone here on Jan. 1, and the government will begin indiscriminately slicing hundreds of billions in federal spending, a double blow to a still fragile economy.

Americans, who commonly regard Canadians and Western Europeans as a bunch of socialists, are about to suddenly discover the extent to which government dominates their own lives.

Cliff ahead

The fiscal cliff measures could subtract more than four per cent from America's GDP, and trigger another recession, Congress's own accounting office has said.

A grim-looking Barack Obama walks across the White House lawn Thursday, having cut short his Hawaii vacation to deal with fiscal cliff negotiations. (Charles Dharapak / Associated Press)

And what have the people who created this mess been doing about it?

Well, having lost an election in which one of their opponents' main promises was to raise tax rates on the wealthy (defined as households making more than a quarter of a million dollars a year), Republicans immediately declared that the election had changed nothing, and promised to block any such effort in the House of Representatives, the one branch of government they still control.

Then, in behind-the-scenes negotiations, President Barack Obama caved on his campaign pledge and offered to exempt anyone making up to $400,000.

House Republicans rejected that immediately.

Republican Speaker John Boehner tried to counter with a bill that would protect everyone who makes less than a million dollars. But he was publicly humiliated when his own party revolted, or at least enough members to have guaranteed the plan's defeat on the House floor.

Evidently, there are Republicans who want to fight the 2014 midterm elections as the party that was literally willing to risk another recession in order to shield millionaires from a return to the taxation levels they paid during the Clinton years.

Boehner finally held a news conference where he effectively declared that fixing the mess, which his party helped create, is no longer his responsibility.

He and other GOP leaders said it is now up to Democrats, who control the Senate, to come up with a solution.

"The Senate first must act," they declared, ignoring the fact that the Senate has already acted, at least on the tax front, and has passed a bill (incorporating Obama's initial $250,000 tax-rate cutoff) that the House could consider any time it wishes.

The debt ceiling

At the same time as all this is going on, the U.S. Treasury announced the government will hit the $16.4-trillion federal debt ceiling again on Monday.

And, once again, rather than authorize the Treasury to continue making interest payments on the nation's accumulated debt, some House Republicans are willing to risk default, with all its disastrous international implications for the faith and credit of the United States.

The party evidently feels it needs to preserve that threat as some sort of leverage for future battles.

House Speaker John Boehner, How many Republicans can he corral now? (Yuri Gripas / Reuters)

Subtract the political posturing and parse the numbers, and this all makes even less sense.

All that separates the two sides is $450 billion over 10 years — less than one per cent of projected federal spending over that period.

So largely on principle, the custodians of America's economy are about to drive it into the ditch, dragging the rest of the world behind them.

Understandably, American voters are staring at all this with disbelief and puzzlement.

Until recently, most of them were telling pollsters they were confident there would be some sort of last-minute deal. It never occurred to them, it appears, that the people they sent to Washington would actually let the country go over this cliff.

But then, they did send those particular people to Washington.

As the hours tick by, Obama and his party's leadership in the Senate returned to town Thursday — the House is coming back Sunday night, barely 24 hours before the deadline — trying for a last-minute deal to save the entire nation from needless financial grief.

If they accomplish that, it will be nothing short of exceptional.

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Obama, congressional leaders to meet as 'fiscal cliff' looms

U.S. President Barack Obama has asked congressional leaders to convene Friday at the White House for last-minute talks on a "fiscal cliff" deal that avoids automatic tax increases and broad spending cuts that threaten the economy's nascent recovery.

The development capped a day of growing urgency in which Obama returned early from a Hawaiian holiday and planned to meet with top members of Congress just four days before the government goes over the so-called fiscal cliff if no deal is reached.

The bitter partisan fight is over reining in deficit spending by raising taxes for some wealthy earners — the Democrats' priority — and cutting some popular benefit programs, as demanded by Republicans.

As the Senate reconvened Thursday, Senate Majority Leader Harry Reid warned that the U.S. appeared to be headed over the year-end "fiscal cliff" with no deal in sight. He also slammed House of Representatives Speaker John Boehner for not immediately reconvening the House. Boehner called the House back into session for a highly unusual Sunday evening session.

White House to host meeting

Friday's meeting would be the first time Obama has huddled with all the leaders of Congress since Nov. 16 and would represent that last hope for a deal before the year-end deadline. Obama spoke to each leader individually Wednesday.

Administration officials confirmed the Friday meeting at the White House in a bare-bones announcement that said the president would "host a meeting."

An aide to Senate Republican Leader Mitch McConnell said he "is eager to hear from the president."

A spokesman for Boehner issued a statement that said the speaker would attend and "continue to stress that the House has already passed legislation to avert the entire fiscal cliff and now the Senate must act."

While there was no guarantee of a compromise, Republicans and Democrats said privately that elements of any agreement would likely include an extension of middle class tax cuts with increased rates at upper incomes as well as cancellation of the scheduled spending cuts. An extension of expiring unemployment benefits, a reprieve for doctors who face a cut in payments from the federal Medicare program and possibly a short-term measure to prevent dairy prices from soaring could also become part of a year-end bill, they said.

Efforts to prevent the U.S. economy from going over a fiscal cliff stirred back to life with less than a week to go before potentially disastrous tax hikes and spending cuts kick in. (Mary F. Calvert/Reuters)

That would postpone politically contentious disputes over spending cuts for 2013.

The issue has been Obama's first test of muscle after his re-election in November. At stake are Bush-era tax cuts that expire on Dec. 31 and revert to the higher rates in place during the administration of President Bill Clinton in the 1990s. Nearly all Americans and branches of the federal government, including the military, would be affected.

The parties are also arguing about cutting entitlement programs like Social Security pensions. The changes are part of a long-delayed need for the government to address its chronic deficit spending.

Obama ran on a theme of having the wealthy pay a greater share toward deficit reduction with a focus on raising upper tax rates for individuals earning $200,000 or more and couples making more than $250,000. In negotiations with Boehner toward a deficit reduction plan, he offered to increase that threshold to $400,000, but those negotiations collapsed.

Boehner countered with his own plan to let taxes rise for anyone earning more than $1 million, but even that was too far for conservative House Republicans who rebelled and doomed the bill last week.

Top Senate leaders said they remain ready to seek a last-minute agreement. Yet there was no legislation pending and no sign of negotiations in either the House or the Senate on a bill

Public opinion has sagged under the weight of the negotiations. Consumer confidence fell to its lowest monthly level since August, largely on concerns over the fiscal cliff, the Conference Board reported Thursday.

The market was glum, with stocks falling for the fourth day in a row amid the stalled negotiations and a report that consumer confidence had plunged to its lowest level since August.

In addition, Treasury Secretary Timothy Geithner told Congress on Wednesday that the government would hit its borrowing limit on Monday, the final day of the year. He said he would take "extraordinary measures as authorized by law" to postpone a government default. But he said uncertainty over the outcome of the fiscal cliff negotiations made it difficult to determine how much time those measures would buy.

Geithner's news on the government about to hit its $16.4 trillion borrowing limit has brought more pressure to the process. Obama wants an increase in the borrowing limit as part of any agreement to avoid the fiscal cliff, but Republicans want concessions in return.

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Oil surges to 2-month high above $91 a barrel

Oil prices jumped more than $2 a barrel Wednesday as commodity markets viewed the early return to Washington of U.S. President Barack Obama from his Hawaiian vacation as a positive development in the search for a deal to avert the so-called "fiscal cliff."

The benchmark West Texas crude price hit $91.05 US a barrel at 2:45 p.m. ET on the New York Mercantile Exchange — a two-month high. That represents a jump of $2.44 from the previous close and took the NYMEX price to a two-month high. The February contract subsequently settled at $90.98, up $2.37.

Bloomberg quoted technical analysts as saying the rise was also due, in part, to oil topping its 100-day moving average of $90.68 in light morning trading.

News of a potential extremist attack being thwarted in the United Arab Emirates was also seen as pressuring oil prices.

Obama's return to Washington is being viewed as a small but hopeful sign that he and Congress may finally be able to work out a compromise that would avert huge tax hikes and spending cuts that are due to automatically take effect on Jan. 1 unless action is taken.

So far, the White House and Republicans in Congress have been unable to fashion a deal.

Today's oil price rise represents a bit of a rebound for the commodity. Oil prices in North America have been comparatively weak lately as U.S. shale oil production booms. As recently as May, crude oil futures were trading at more than $105 a barrel.

At the same time, Canadian oilsands producers who export to the U.S. market have been seeing their oil selling at a huge discount to North Sea Brent — the international benchmark.

The average pump price for a litre of regular unleaded gas in Canada was $1.177 last week, according to Calgary-based MJ Ervin. That's near a one-year low.

U.S. retail gasoline prices fell to an average of $3.25 US per U.S. gallon, according to the U.S. Energy Department. That is a one-year low.

Natural gas futures for the January contract rose 4.6 cents to settle at $3.39.

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Boxing Day shoppers lured by bargains

Canadians headed out in search of Boxing Day bargains, with some eager shoppers camping overnight outside stores to get the first chance at massive deals.

Retailers in most provinces offered deep discounts and extended shopping hours in an attempt to clear out unsold inventory after Christmas.

Other parts of the country, however, were exempt from the retail frenzy. In Newfoundland and Labrador, and the Maritimes, there is no legal shopping in malls and big-box stores. In Nova Scotia, however, drugstores and bookstores are allowed to open the day after Christmas.

At Toronto's downtown Eaton Centre, thrifty customers began camping outside the H&M clothing store at 8 p.m. ET the night before, reported the CBC's Steven D'Souza.

'So many people were pushing... it was crazy.'—Boxing Day shopper at H&M

The retailer was handing out gift cards, as much as $25, and one customer told CBC News she showed up at 4 a.m. to ensure she got one. She said the wait was worth it, but "so many people were pushing and everything just to get the card, for money. It was crazy."

Shoppers started lining up outside the Best Buy consumer electronics store in downtown Toronto as early as 1 a.m., D'Souza reported.

"When the store opened up at 6 o'clock this morning, the lineup stretched an entire city block," he said.

Elliott Chun, the spokesman for Future Shop, which is also owned by the same company that runs Best Buy, said the average Boxing Day transaction amounts to $500.

"We see customers come in with their gift cards, their Christmas cash, and they're spending it on themselves," said Chun.

Bargain hunters brave chilly temperatures

Similar lineups also occured outside the Best Buy store in Winnipeg, where roughly 200 people braved frosty temperatures —including one person who waited nearly 12 hours, wrapped in blankets.

Shoppers in Toronto push through the door of a Future Shop electronics store for the 6 a.m. Boxing Day sale Wednesday. (Frank Gunn/Canadian Press)

"No one is leisurely browsing the aisles here," reported the CBC's Ryan Hicks. "You're dodging people with carts and huge televisions as they try to get through the checkout and onto the next store."

In Saskatoon, although the temperature felt like -37 degrees Celsius with the wind chill, about 50 people were lined up outside the Lululemon store downtown.

And in Edmonton, despite temperatures of –21C, about 50 people lined up outside a Future Shop store when it opened at 6 a.m., the CBC's Terry Reith reported.

"There has been a steady stream of customers ever since... these are some very committed shoppers," he said.

'What else are you going to do after eating all that food yesterday?'— Matt Cirka, shopper at West Edmonton Mall

Matt Cirka, who was shopping at West Edmonton Mall with his sisters on Wednesday, said the cold weather isn't a deterrent.

He said at 7 a.m. when he arrived at the shopping centre it was already crowded with customers.

"You're not going to keep people away," he told CBC News. "And this is Edmonton, people get used to it. It's been freezing for months now. What else are you going to do after eating all that food yesterday?"

Customers came with flyers, coupons

Many shoppers came prepared with flyers, coupons and a targeted plan to seek out their wares of choice, reported D'Souza.

"This morning I woke up knowing where I wanted to go," one Toronto customer told CBC News. "I knew the TV I wanted... Luckily, they still had it in stock. I got it. I'm feeling pretty good."

In Quebec, under provincial labour laws, the shops aren't allowed to open until 1 p.m. on Dec. 26th. Before the Future Shop in the Montreal Forum opened Wednesday, a long line of people snaked through the mall waiting to get in, said the store's general manager Pierre-André Houle.

"I think there were about 1,200 people that were waiting at 12:30 p.m.," he told CBC News.

Houle said he believed that there were more people lined up this year than last. He attributed the boost to new technologies released by retailers in 2012.

Poll says majority of Canadians plan to shop

Sixty-two per cent of Canadians say they plan to shop on Boxing Day, according to a recent poll conducted by the Bank of Montreal.

Members of the public look at a flyer offering big discounts as they queue outside an electronics store on Boxing Day in Montreal on Wednesday. (Graham Hughes/Canadian Press)

Alberta, Atlantic Canada and Ontario may see a hefty turnout at the tills: 76 per cent, 72 per cent and 69 per cent of Canadians surveyed there, respectively, say they plan to shop today.

Quebecers, however, are less enthusiastic about bargain hunting, with just 36 per cent saying they intend to head to stores Wednesday, BMO said.

The survey also discovered that 66 per cent of men were planning to take advantage of the Dec. 26th bargains versus 58 per cent of women.

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$1B settlement in Toyota recall case

Toyota Motor Corp. said Wednesday it has reached a settlement worth more than $1 billion in a case involving hundreds of lawsuits over acceleration problems in its vehicles.

The company said in a statement that the deal will resolve cases involving motorists who said the value of their vehicles plummeted after a series of recalls by the Japanese automaker stemming from claims of sudden acceleration defects.

Lawyer Steve Berman, a plaintiffs' attorney, said the settlement is the largest settlement in U.S. history involving automobile defects.

"We kept fighting and fighting and we secured what we think was a good settlement given the risks of this litigation," Berman told The Associated Press.

The proposed deal was filed Wednesday and must receive the approval of U.S. District Judge James Selna, who was expected to review the settlement Friday.

Berman said the total value of the deal is between $1.2 billion and $1.4 billion. Toyota said it will take a one-time, $1.1 billion pre-tax charge against earnings to cover the estimated costs of the settlement.

The case was filed two years ago and divided into two categories: economic loss and wrongful death. Claims by people who seek compensation for injury and death due to sudden acceleration are not part of the settlement.

The first trial involving those suits is scheduled for February.

Cash payments to certain customers

As part of the economic loss settlement, Toyota said it will offer cash payments to eligible customers who sold vehicles or turned in leased vehicles between September 2009 and December 2010.

The company also will launch a program for 16 million current owners to provide supplemental warranty coverage for certain vehicle components, and it will retrofit about 3.2 million vehicles with a brake override system. An override system is designed to ensure a car will stop when the brakes are applied, even if the accelerator pedal is depressed.

The settlement would also establish additional driver education programs and fund new research into advanced safety technologies.

"In keeping with our core principles, we have structured this agreement in ways that work to put our customers first and demonstrate that they can count on Toyota to stand behind our vehicles," said Christopher Reynolds, Toyota vice president and general counsel.

Toyota has recalled more than 14 million vehicles worldwide due to acceleration problems in several models and brake defects with the Prius hybrid.

The company said plaintiffs' lawyers have been unable to prove that a design defect — namely its electronic throttle control system — was responsible for vehicles surging unexpectedly. Both the National Highway Traffic Safety Administration and NASA were unable to find any defects in Toyota's source code that could cause problems.

Toyota has blamed driver error, faulty floor mats and stuck accelerator pedals for the unintended acceleration.

Plaintiffs' attorneys have spent the past two years deposing Toyota employees, poring over thousands of documents and reviewing software code. The results of their efforts have not been made public.

"We are extraordinarily proud of how we were able to represent the interests of Toyota owners, and believe this settlement is both comprehensive in its scope and fair in compensation," Berman said.

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U.S. jobless claims fall to almost 5-year low

The average number of people seeking unemployment benefits in the United States over the past month fell to the lowest level since March 2008, a sign that the job market is healing.

The Labor Department says weekly applications dropped 12,000 to a seasonally adjusted 350,000 in the week ended Dec. 22. That's about 10,000 less than what economists were expecting.

The four-week average, a less volatile measure, fell to a nearly five-year low of 356,750.

The Christmas holiday may have some impact on the reliability of the figures.

A department spokesman said many state unemployment offices were closed Monday and Tuesday and unable to compile complete data.

Fourteen states provided estimates and the department estimated the numbers for five additional states.

The government might estimate one or two states in a typical week, but 19 state estimates are unusually high.

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Obama, some senators return to face 'fiscal cliff'

President Barack Obama cut short his holiday and was returning to Washington today as no deal appeared in sight to avoid the year-end "fiscal cliff" of higher taxes and deep spending cuts that could spin the still-fragile back into a recession.

Treasury Secretary Timothy Geithner warned that the government was on track to hit its borrowing limit on Monday, the last day of the year.

Geithner has said he would take "extraordinary measures as authorized by law" to postpone a government default, but he said uncertainty over the outcome of the fiscal cliff negotiations made it difficult to determine how much time those measures would buy.

Congress was not expected to return until Friday. In recent days, Obama's aides have been consulting with Senate Democratic Leader Harry Reid's office, but Republicans have not been part of the discussions, suggesting that much still needs to be done to strike and pass a deal, even a small one, by Monday.

Senators are expected to return to Washington Thursday evening, but with no potential solution on the agenda. The series of votes waiting for them are unrelated to the fiscal deadline, the New York Times reported. The House of Representatives will begin a session at 2 p.m. Friday, but because Republicans haven't been called back by leader John Boehner, the session will most likely recess soon after.

At stake are tax cuts that expire on Dec. 31 and revert to the higher rates in place during the administration of President Bill Clinton in the 1990s. That means $536 billion in tax increases that would affect nearly all Americans. Moreover, the military and other federal departments would have to cut $110 billion in spending.

The changes are part of a long-delayed need for the government to address its deficit spending.

While economists have warned about the impact of such a massive and abrupt shift, both the Obama administration and Congress appear to be proceeding as if they have more than just four days left.

Major challenge

Congress could still act in January in time to retroactively counter the effect on most taxpayers and government agencies, but chances for a large deficit reduction package would likely be put off.

A major challenge in the negotiations is taxes. Obama has wanted the current tax cuts to stay in place for most Americans while letting taxes go higher for the wealthiest ones.

House Republican leaders on Wednesday urged the Democratic-controlled Senate to consider or amend a House-passed bill that extends all existing tax rates. "The Senate first must act," they said.

But Reid's office insisted that the Republican-controlled House act on Senate legislation passed in July that would raise tax rates only on incomes above $200,000 for individuals and $250,000 for couples.

Meanwhile, Obama has been pushing for a variant of that Senate bill that would include an extension of jobless aid and some spending reductions to prevent the steeper, broader spending cuts from kicking in.

Even if the Senate acts, House Speaker Boehner would have to let the bill get to the House floor for a vote. The chances of accomplishing that by Dec. 31 were slim.

Accounting measures

Amid the standoff, Geithner advised Congress on Wednesday that the administration will begin taking action to prevent the government from hitting its borrowing limit. In a letter to congressional leaders, Geithner said accounting measures could save approximately $200 billion.

That could keep the government from reaching the debt limit for about two months. But if Congress and the White House don't agree on how to avoid the "fiscal cliff," Geithner said, the amount of time before the government hits its borrowing limit is more uncertain.

Whenever the debt ceiling hits, however, it is likely to set up yet another deadline for one more budget fight between the White House and congressional Republicans.

Clearing the way for a higher debt ceiling was supposed to be part of a large deal aimed at reducing deficits by more than $2 trillion over 10 years with a mix of tax increases and spending cuts. But chances for that bargain fizzled last week when conservatives sank Boehner's legislation to let tax increases affect only taxpayers making $1 million or more.

Another potential showdown is pending. A renewed clash over spending could come in late March, since spending authority for much of the government expires on March 27.

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Obama pushes smaller-scale budget deal as fiscal cliff looms

U.S. President Barack Obama has throttled back his ambitions for a sweeping budget bargain with Republicans, calling for a scaled-back measure sufficient to prevent the so-called fiscal cliff in January by extending tax cuts for most taxpayers and forestalling a painful set of agency budget cuts.

In a White House appearance Friday in Washington, D.C., Obama also called on Congress to extend jobless benefits for the long-term unemployed that would otherwise be cut off for two million people at the end of the year.

Obama's announcement was a recognition that chances for a larger agreement before year's end have probably collapsed. It also suggested that any chance for a smaller deal may rest in the Senate, particularly after the collapse of a plan by House Speaker John Boehner, a Republican from Ohio, to permit tax rates to rise on million-dollar-plus incomes.

'Because of the political divide in the country, because of the divide here in Washington, trying to bridge these differences has been difficult.'—House Speaker John Boehner

"In the next few days, I've asked leaders of Congress to work towards a package that prevents a tax hike on middle-class Americans, protects unemployment insurance for two million Americans, and lays the groundwork for further work on both growth and deficit reduction," Obama said. "That's an achievable goal. That can get done in 10 days."

Maybe, maybe not.

The latest plan faces uncertainty at best in the sharply divided Senate.

GOP leader Mitch McConnell of Kentucky, who wields great power even in the minority, called Friday for Senate action on a House bill from the summer extending the full menu of Bush-era tax cuts. He promised that it will take GOP votes for anything to clear the Senate, where 60 votes are required to advance most legislation. Democrats control 53 votes.

Earlier, Boehner said Obama needs to give more ground to reach an agreement, and that both he and Obama had indicated in a Monday telephone call that their latest offers represented their bottom lines.

"How we get there," he added, "God only knows."

Obama optimistic despite failed talks

Congress shut down for Christmas and Obama flew to Hawaii with his family for the holidays. But both men indicated they would be back in Washington, working to beat the fast-approaching Jan. 1 deadline with an agreement between Christmas and New Year's.

Obama announced his plans after talking by phone with Boehner and meeting with Senate Majority Leader Harry Reid, a Democrat from Nevada who had previously pinned his hopes on an Obama-Boehner agreement and is wary of dealing with McConnell.

At the White House, Obama projected optimism despite weeks of failed negotiations.

"Call me a hopeless optimist, but I actually still think we can get it done," he said.House Speaker John Boehner says heading off the perilous combination of across-the-board tax hikes and deep spending cuts by the Jan. 1 deadline to avoid the fiscal cliff has been difficult. His plan to permit tax rates to rise on million-dollar-plus incomes has collapsed. (Yuri Gripas/Reuters)

Boehner spoke in the morning, describing the increasingly tangled attempts to beat the Jan. 1 deadline and head off the perilous combination of across-the-board tax hikes and deep spending cuts.

"Because of the political divide in the country, because of the divide here in Washington, trying to bridge these differences has been difficult," Boehner said. "If it were easy, I guarantee you this would have been done decades before."

Obama said that in his negotiations with Boehner, he had offered to meet Republicans halfway when it came to taxes and "more than halfway" toward their target for spending cuts.

It's clear, however, that there's great resistance in GOP ranks to forging a bargain with Obama along the lines of a possible agreement that almost seemed at hand just a few days ago: tax hikes at or just over $1 trillion US over 10 years, matched by comparable cuts to federal health-care programs, Social Security benefits and across federal agency operating budgets.

Obama said he remains committed to working toward a goal of longer-term deficit reduction to reduce chronic trillion-dollar deficits while keeping tax rates in place for nearly everyone.

"Even though Democrats and Republicans are arguing about whether those rates should go up for the wealthiest individuals, all of us — every single one of us — agrees that tax rates shouldn't go up for the other 98 per cent of Americans," Obama said, citing statistics associated with his promise to protect household income under $250,000 from higher tax rates.

Senior Republicans oppose possible deal

Neither the House nor the Senate is expected to meet again until after Christmas. Officials in both parties said there was still time to prevent the changes from kicking in with the new year.

The week began amid optimism that Obama and Boehner had finally begun to significantly narrow their differences. Both were offering a cut in taxes for most Americans, an increase for a relative few, and cuts of roughly $1 trillion in spending over a year. Also included was a provision to scale back future cost-of-living increases for Social Security recipients — a concession by the president that inflamed many liberals..

GOP officials said some senior Republicans such as Representative Paul Ryan, a Republican from Wisconsin and the most recent Republican vice-presidential nominee, opposed the possible agreement. But No. 2 House Republican Eric Cantor of Virginia has joined arms with Boehner.

Boehner stepped back and announced what he called Plan B, legislation to let tax rates rise on incomes of $1 million or more while preventing increases for all other taxpayers.

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