Obama returns as fiscal cliff battle heats up

Cutting short his Christmas vacation in Hawaii, Obama arrived at the White House and strode inside ignoring reporters' shouted questions about the crisis, four days before a deadline to agree a deal on tax and spending.

He has returned to a sharply divided Washington, where the mood has soured on a possible plan to prevent hundreds of billions of dollars in tax hikes and deep automatic spending cuts from kicking in from January 1.

On Wednesday he had called the nation's top lawmakers: Republicans House Speaker John Boehner and Senate Minority Leader Mitch McConnell; and Democrats Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi.

McConnell told the Senate he was "happy" to look at any Obama proposal, warning: "But the truth is we're coming up against a hard deadline here."

The lawmaker insisted the Senate Democratic majority had yet to offer a viable solution and that if they did "members on both sides of the aisle will review it, and then we'll decide how best to proceed.

"Hopefully there is still time for an agreement of some kind that saves the taxpayers from a wholly preventable economic crisis," he said.

Despite reports from some quarters that Obama had drawn up his own plan to offer lawmakers, there was no sign that the White House was ready to intervene.

Vice President Joe Biden was in Congress to swear in Hawaii's new Democratic US Senator Brian Schatz, who fills the seat of the late Daniel Inouye, but Biden dodged questions about a possible deal.

Lawmakers have refused to compromise and Reid blamed Republicans for the breakdown.

With just four days before a year-end deadline, the Senate leader said "it looks like" the US economy will hurtle over the fiscal cliff because Boehner and McConnell were stalling.

Reid said Boehner was running a "dictatorship" in the House by refusing to put to a vote a Senate-passed bill which would prevent taxes from rising on all households making less than $250,000 per year.

He also took Boehner to task for keeping his members on vacation while the Senate was hard at work.

Without McConnell and Boehner, "nothing can happen on the fiscal cliff -- and so far they are radio silent," Reid said.

"Take the escape hatch that we've left you" in the form of the Senate bill, Reid advised Boehner. "Put the economic fate of the nation ahead of your own fate as speaker of the House."

With tension mounting, Boehner's office shot back with a curt message.

"Senator Reid should talk less and legislate more," Boehner spokesman Michael Steel said, arguing the House has passed bills that would extend tax breaks for all Americans and replace the indiscriminate spending cuts.

"Senate Democrats have not," he added.

House leaders eventually ordered members to return for a session late Sunday, with Majority Leader Eric Cantor's office saying the House "may be in session through Wednesday, January 2."

The new Congress convenes on January 3.

The deadlock has spooked markets, left Americans wondering whether they will pay thousands more in taxes next year, and worried the Pentagon, which fears defense cuts could undermine the military.

Complicating efforts to avoid disaster, Treasury Secretary Timothy Geithner has warned the nation will reach its $16.39 trillion debt limit on December 31 and his department take "extraordinary measures" to avoid a US default.