US Republicans abandon ‘fiscal cliff’ bill

The political drama, which signals a major defeat for the House Speaker John Boehner [pictured], leaves little time for the divided government to prevent across-the-board tax increases and deep spending cuts from taking effect in the new year.

Economists say the combination threatens a return to recession for an economy that has been recovering slowly from the last one.

The vote failed to gather enough support but was intended to strengthen the party’s position ahead of final negotiations with President Barack Obama.

Mr Boehner’s so-called “plan B” legislation was drafted unilaterally by Republicans who have a majority in the House of Representatives, but faced defeat in the Democrat-held Senate.

It was crafted to protect almost all Americans from the expiration of Bush-era tax cuts on 1 January, 2013, but would have let rates increase for people earning more than $1m annually – much higher than Obama’s proposed $400,000 threshold.

But Mr Boehner’s offer went against Republicans’ aversion to tax and triggered the opposition of fiscal conservatives.

Read more: What is the fiscal cliff? Your questions answered

In a brief statement, Mr Boehner said the bill “did not have sufficient support from our members to pass” and challenged Mr Obama and Democratic Senate majority leader Harry Reid to work on legislation to avert the fiscal cliff.

The White House, in a statement released a short while later, said the president’s main priority was “to ensure that taxes don’t go up on 98 per cent of Americans and 97 per cent of small businesses in just a few short days.

“The president will work with congress to get this done and we are hopeful that we will be able to find a bipartisan solution quickly that protects the middle class and our economy,” the statement added.

Emerging from a hurriedly-called evening meeting of House Republicans, Congressman Steve LaTourette told lawmakers: “He’s [Mr Boehner] going to call the president and he’s going to go down and talk to him and maybe they can hammer something out.”

The House will not meet again until after Christmas, if then, and the Senate is expected to meet briefly on Friday, then not reconvene until next Thursday.