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Obama to cut vacation short to deal with fiscal crisis

U.S. President Barack Obama waves next to first lady Michelle Obama as they prepare to depart Joint Base Andrews outside Washington, for the
U.S. President Barack Obama waves next to first lady Michelle Obama as they prepare to depart Joint Base Andrews outside Washington, for the

By Mark Felsenthal

HONOLULU (Reuters) - President Barack Obama is cutting short his Hawaiian holiday to leave for Washington on Wednesday to address the unfinished "fiscal cliff" negotiations with Congress, the White House said on Tuesday.

As the clock ticks toward a January 1 deadline, efforts to avert a sharp rise in taxes and deep spending cuts have stalled, worrying world financial markets.

Obama and congressional lawmakers left Washington on Friday for the Christmas holidays with talks to avert the fiscal disaster in limbo.

When Obama arrives back in Washington early on Thursday, the focus will shift to the U.S. Senate after Republicans in the House of Representatives failed to pass their own budget measures last week.

Obama is expected to turn to a trusted Democratic ally, Senate Majority Leader Harry Reid, to help craft a quick deal.

White House aides began discussing details of the year-end budget measure with Senate Democratic counterparts early this week, a senior administration official said on Monday

The president will also need at least tacit approval from Senate Minority Leader Mitch McConnell to insure Republicans will permit passage of what is likely to be a stripped down bill that prevents taxes from rising on all Americans.

The measure may not, however, contain difficult spending cuts both parties had sought to speed deficit reduction. It is unclear how the president will seek to address the draconian across-the-board government spending reductions set to go into effect early in the year without a deal.

McConnell, who is up for re-election in 2014, has been a cautious participant in the process. His spokesman has said it was now up to Democrats in the Senate to make the next move.

Once clear of the Senate, the fiscal cliff legislation must also win enough bipartisan support to pass the House of Representatives, which failed last week to approve Speaker John Boehner's proposal to extend tax breaks for all Americans earning less than $1 million a year.

Conservative Republicans balked at any tax increases at all and withdrew support for the measure, which never came to a vote. Some Republican votes will be needed to pass any Senate bill.

BIG DAY THURSDAY

The next session of the Senate is set for Thursday, but the issues presented by the fiscal cliff - across-the-board tax increases and indiscriminate reductions in government spending - were not on the calendar.

The House has nothing on its schedule for the week, but members have been told they could be called back with 48 hours notice, making a Thursday return a theoretical possibility.

Obama and his family arrived in Hawaii early on Saturday and have devoted their time to spending the Christmas holiday together. First Lady Michelle Obama and the couple's two daughters are to remain in Hawaii, suggesting the president hopes to rejoin them if a deal is struck

Before the talks ran into trouble, Obama had originally been expected to stay in Hawaii - where he was born - until well into the first week of January.

But many observers are pessimistic that lawmakers, who have repeatedly come close to agreement only to see negotiations collapse, can wrap up a deal in the few days left before the end-of-year cut-off point.

The impact of a blown deadline would likely be first seen in financial markets, which wobbled last week after House of Representatives Speaker John Boehner's "Plan B" tax and spending effort fell flat.

Obama had offered a deal early last week that would have let tax rates rise for those making more than $400,000 a year, a higher threshold than the $250,000 income level he originally wanted to subject to higher tax rates. However, Boehner was unimpressed with the offer and pursued his alternative instead.

The president appears to have set consideration of fiscal cliff issues aside during his four days in Hawaii. His only public events have been to attend the funeral of long-time Hawaiian Senator Daniel Inouye on Sunday and a Christmas Day visit to soldiers at a Marine Corps base near the vacation home his family is using in Kailua, Hawaii.

He has spent his time with family and friends, with excursions to play golf, exercise, go hiking or to the beach.

(With additional reporting by Jade Eckhardt in Kailua, Hawaii; editing by Alistair Bell and Todd Eastham)

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