OTTAWA — Finance Minister Jim Flaherty says U.S. politicians need to get to work quickly on putting together a fiscal compromise that will avoid an economic crisis.
Flaherty says failure to reach a fiscal deal before Jan. 1 will plunge the United States into a recession quickly, with Canada to follow shortly afterward.
His comments come amid warnings that gridlock in Washington could prevent a deal to extend about $600 billion in tax cuts and spending beyond Dec. 31.
There are estimates that going over this “fiscal cliff” would reduce U.S. gross domestic product by about four or five percentage points.
Speaking in Ottawa, Flaherty says finding compromise won’t be easy for American politicians, but he pointed out that the Harper government was able govern for five years as a minority, so it can be done.
The newly re-elected President Barack Obama will face a Republican-dominated House of Representatives.
The Democratic president’s attempts to formulate a budget plan has been thwarted at almost every turn the past two years by hardline Republicans.
Flaherty was expected to expand on his comments when he testifies before the Commons finance committee later in the day.