Congress OKs Fiscal Cliff Deal, Signaling Future Fights
Speaker of the House John Boehner, R-Ohio, passes waiting reporters as he leaves a closed-door GOP meeting on the "fiscal cliff" bill, Jan. 1, 2013. (AP Photo/J. Scott Applewhite)
By ALAN FRAM Associated Press
WASHINGTON (AP) - Congress' excruciating, extraordinary New Year's
Day approval of a compromise averting a prolonged tumble off the fiscal
cliff hands President Barack Obama most of the tax boosts on the rich
that he campaigned on. It also prevents House Republicans from facing
blame for blocking tax cuts for most American households, though most
GOP lawmakers parted ways with Speaker John Boehner and opposed the
Passage also lays the groundwork for future battles between the two sides over federal spending and debt.
Capping a holiday season political spectacle that featured enough
high and low notes for a Broadway musical, the GOP-run House voted final
approval for the measure by 257-167 late Tuesday. That came after the
Democratic-led Senate used a wee-hours 89-8 roll call to assent to the
bill, belying the partisan brinkmanship that colored much of the path to
the final deal.
"A central promise of my campaign for president was to change the tax
code that was too skewed towards the wealthy at the expense of working
middle-class Americans," Obama said at the White House before flying to
Hawaii to resume his holiday break. "Tonight we've done that."
The bill would boost the top 35 percent income tax rate to 39.6
percent for incomes exceeding $400,000 for individuals and $450,000 for
couples, while continuing decade-old income tax cuts for everyone else.
In his re-election campaign last year Obama had vowed to boost rates on
earnings at somewhat lower levels - $200,000 for individuals and
$250,000 for families.
Scores of GOP lawmakers voted for the measure, reversing a
quarter-century of solid Republican opposition to boosting any tax rates
The bill would also raise taxes top earners pay on dividends, capital
gains and inherited estates; permanently stop the alternative minimum
tax from raising levies on millions of middle-income families; extend
expiring jobless benefits; prevent cuts in Medicare reimbursements to
doctors; and delay for two months billions in budget-wide cuts in
defense and domestic programs slated for this year.
Both sides lamented their failure to reach a significant
deficit-cutting agreement. But neither much mentioned another omission:
The immediate expiration of a two-year, 2-percentage-point cut in the
Social Security payroll tax.
That break, which put an extra $1,000 in the wallets of typical
families earning $50,000 a year, was an Obama priority two years ago as a
way to boost consumer spending and spark the flagging economy, but it
fell victim this time to other priorities.
House Democrats voted by an overwhelming 172-16 for the agreement,
which was crafted over the weekend by Senate Minority Leader Mitch
McConnell, R-Ky., and Vice President Joe Biden.
But Republicans tilted against it 151-85. It is rare for leaders to
bring a bill to the House floor that will be opposed by most lawmakers
from their own party, and the decision underscored the pressure GOP
leaders felt to approve the legislation.
Boehner, R-Ohio, took no public stance on the measure before the
vote. But he guided the compromise to the House floor after an
unsuccessful attempt by many conservatives to persuade leaders to add
spending cuts to the bill.
Had the House inserted those budget cuts and the Senate refused to
consider them, the legislation could have died. That left House
Republicans worried that voters might blame them for a huge, sweeping
tax increase and for any swoon the nation's financial markets might take
when they reopened Wednesday.
"You can be right and you can be dead right. Which is it?" said Rep.
Rich Nugent, R-Fla., of the quandary Republicans faced. "Right now you
need to take the tax issue off the table" and move on to a focus on
curbing spending, he said.
Boehner voted for the bill, an unusual step because speakers seldom
vote, and he was joined by Rep. Paul Ryan, R-Wis., the GOP's vice
presidential candidate last fall. Voting "no" were the other two top GOP
leaders, Reps. Eric Cantor of Virginia and Kevin McCarthy of
Passage came nearly 24 hours after a decade's worth of tax cuts
enjoyed by tens of millions of Americans expired with the stroke of the
new year, technically raising taxes by more than $500 billion in 2013
Those tax increases - plus $109 billion in defense and domestic
spending cuts that were to be automatically triggered Wednesday - became
known as the fiscal cliff. Economists warned that their combined impact
would hurl the economy back into recession, but Obama's signature on
the bill would prevent the "cliff" from taking hold.
Obama can sign the bill remotely using a machine called an "autopen," or the bill can be flown to Hawaii for his signature.
Overall, the legislation would add nearly $4 trillion to federal
deficits over the next decade compared with what would have happened had
all the tax cuts expired, according to the nonpartisan Congressional
"I'm embarrassed for this generation. Future generations deserve better," complained one foe, Rep. Louie Gohmert, R-Texas.
The agreement's journey to passage was a tortured one. It included
negotiations between Obama and Boehner on a larger, deficit-cutting deal
that collapsed, and a failed effort by the speaker to drum up enough
GOP votes to pass a "Plan B" that would have limited tax boosts to
incomes exceeding $1 million.
It took weekend talks between McConnell and Biden, former Senate
colleagues, to craft the more modest package that focused on averting
the worst impacts of the fiscal cliff while postponing any deficit
reduction efforts to coming months.
Those first showdowns will come over the next three months, when the
government's legal ability to borrow money will expire and temporary
financing for federal agency budgets will expire. Republicans have
already said that, as they did in 2011, they will demand spending cuts
as a condition for extending the debt ceiling.
"Now the focus turns to spending" and overhauling the tax code,
Boehner said in a written statement after the vote. He said the GOP will
fight for "significant spending cuts and reforms to the entitlement
programs that are driving our country deeper and deeper into debt," a
reference to costly benefit programs like Medicare, Social Security and
Spending cuts are "going to be a component of every single battle we
have" in the new Congress, conservative GOP Rep. Marsha Blackburn of
Tennessee told CNN on Wednesday.
Obama, in his White House remarks, said that while he was open to
compromise, he would demand deficit-cutting savings from added revenue
on the well-off, not just spending cuts.
He also pointedly said he would "not have another debate with this Congress" over extending the federal borrowing limit.
"If Congress refuses to give the United States government the ability
to pay these bills on time, the consequences for the entire global
economy would be catastrophic - far worse than the impact of a fiscal
cliff," he said.
Though its focus was on taxes, the measure approved Tuesday would
prevent a potential doubling of milk prices and prevent a $900 salary
increase for members of Congress in March. Its extension of jobless
benefits would help 2 million people out of work at least six months,
and it would prevent a 27 percent cut in reimbursements doctors get for
treating Medicare patients.
Weighing in with criticism of the compromise were the chief authors
of an influential bipartisan deficit-cutting proposal, former GOP Sen.
Alan Simpson and Democrat Erskine Bowles, a former White House chief of
staff under President Bill Clinton. They called the measure "truly a
missed opportunity to do something big to reduce our long term fiscal
AP reporters David Espo, Charles Babington, Andrew Taylor and Larry Margasak contributed to this report.
Copyright 2013 The Associated Press. All
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rewritten or redistributed.
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