PROSPECTS of a deal to pull the American economy back from the "fiscal cliff" appeared dimmer than ever last night after the Democratic leader of the Senate admitted that attempts to agree an alternative to the automatic tax and spending changes due to kick in next month were likely to fail.
The White House and Republicans in Congress have less than a week to forge a deal that would lessen the impact of the more than $600bn in tax rises and spending cuts that will come into force in January.
But Harry Reid, the Senate Majority Leader, suggested that the gulf between the two side was too wide to bridge in time.
"I have to very honest. I don't know time-wise how it can happen now," Mr Reid said in a speech on the floor of the Senate, excoriating the Republicans for failing to agree on measures that would protect the vast majority of Americans from the looming tax rises.
President Barack Obama, who along with Congress returned to Washington on Wednesday, has been pressing for an extension of tax breaks for most Americans while raising rates on the wealthy.
Republicans have resolutely opposed his calls.
Now the President is asking for a narrower deal that would temporarily raise taxes on those earning more than $250,000 and protect jobless benefits for more than 2 million Americans while a long-term agreement is hammered out.
But Mr Reid said even that was unlikely, blaming John Boehner, Speaker of the Republican-controlled House of Representatives.
"The American people I don't think understand the House of Representatives is operating without the House of Representatives," he said.
"It's being operated by a dictatorship of the Speaker, not allowing the vast majority of the House … to get what they want."
He claimed that if the issue of maintaining tax rates for those earning up to $250,000 was brought up in the House, it would "pass overwhelmingly".
Figures showed Americans are growing more downbeat, with consumer confidence retreating by more than forecast.
The widely followed Conference Board gauge eased from a revised 71.5 reading for November to 65.1 for this month - well below estimates of a relaxation to 70.
Amid worries about the fiscal cliff, there were signs that the US job market is continuing to heal.
The number filing new claims for unemployment benefits eased last week to nearly its lowest level in more than four years, declining by 12,000 to a seasonally adjusted figure of 350,000, against expectations of a decline to 360,000, officials said.
The data raised hopes that the tide of firings seen in the wake of the financial crisis and the recession had eased.
Update your news preferences and get the latest news delivered to your inbox.