Obama prepared to go over 'fiscal cliff'

The US Treasury Secretary has said the Obama administration is "absolutely" ready for the US economy to go over the "fiscal cliff" rather than accept a budget deal that does not include higher tax rates for top earners.

Timothy Geithner said on Wednesday that the administration believes budget deficits are so large that they cannot be closed without boosting tax rates on the highest-earning two per cent of Americans. Most Republicans oppose higher rates for any taxpayers.

"There's no prospect in an agreement that doesn't involve those rates going up on the top two per cent of the wealthiest Americans," Geithner said in an interview on CNBC.

Geithner's comments immediately drew fire from a top Republican senator.

"This is one of the most stunning and irresponsible statements I've heard in some time," Senator Orrin Hatch said.

"Going over the fiscal cliff will put our economy, jobs, people's paychecks and retirement at risk, but that is what the White House wants, according to Secretary Geithner, if they don't get their way."

Republicans in Congress and Obama consumed much of Wednesday talking up their positions on the "fiscal cliff" and though Obama and Republican House Speaker John Boehner spoke by phone, neither side offered any new compromises in public.

Nor was the phone call, a rarity, followed by any immediate announcement of a face-to-face meeting that has been widely anticipated all week and was explicitly requested early in the day by House of Representatives Republican leader Eric Cantor.

Obama has said there could be a quick deal if Republican leaders dropped their opposition to raising tax rates for those making more than $250,000 a year in exchange for spending cuts and entitlement reforms.

"If we can get the leadership on the Republican side to take that framework, to acknowledge that reality, then the numbers actually aren't that far apart," Obama told The Business Roundtable in Washington.

"Another way of putting this is we can probably solve this in about a week. It's not that tough, but we need that
conceptual breakthrough," he said.

The fiscal cliff refers to the tax increases and deep spending cuts that will take effect in January unless Congress and the White House reach a budget deal first.

In the interview, Geithner also said the administration would reject a budget plan that did not include an increase in the federal borrowing limit. The current limit is expected to be reached either late this month or early next year.

"We are not prepared to have the American economy held hostage to periodic threats that Republicans will force the country to default on our obligations," Geithner said.

"That would be a terrible thing for the financial security of the average American, for businesses, for confidence around the world and the United States."

Geithner said he still thinks progress is being made in the budget negotiations and that the outlines of an agreement are becoming clearer.

"They look inevitable," he said