WASHINGTON - US lawmakers are returning to work on New Year's Eve for the first time in more than 40 years in a final attempt to reach a deal to avert a fiscal calamity set to hit the world economy within hours.
Two days of last-gasp talks produced no deal Sunday between US political leaders struggling for a compromise to head-off a punishing package of spending cuts and tax hikes due to come into force on January 1 that could roil global markets and plunge the United States back into a punishing recession.
"There is still time left to reach an agreement, and we intend to continue negotiations," Senate Democratic Majority Leader Harry Reid said, as he ordered the Senate back into session at 11:00 am (local time 12am Tuesday) Monday, the last day before the deadline.
But "there is still significant distance between the two sides," Reid told the Senate, after huddling for nearly two hours with his Democratic caucus.
Reid said Democrats were unwilling to brook talk of social security cuts.
"This morning, we have been trying to come up with some counteroffer to my friend's proposal," Reid told the Senate. "We have been unable to do that."
Senate Republican Minority Leader Mitch McConnell also warned that, despite talks through the night, negotiators were still a long way from success.
McConnell told AFP he received no response to a "good faith offer" to Senate Democrats and had spoken twice by telephone with his old friend and sparring partner Vice President Joe Biden in the hope of breaking the stalemate.
If leaders fail to find agreement, President Barack Obama has demanded a vote on his fallback plan that would preserve lower tax rates for families earning less than US$250,000 (S$305,700) a year and extend unemployment insurance for two million people.
Republicans admitted such an option could emerge on Monday.