Fiscal cliff Bill facing new hitch
US politicians who hoped to resolve any uncertainty over the so-called “fiscal cliff” before financial markets reopen tomorrow ran into trouble today as the Republican-controlled House of Representatives objected to urgent legislation approved by the Senate in a New Year drama unlike any other in the history of Congress.
The No 2 House Republican, Eric Cantor, emerged from a party meeting to say: “I do not support the Bill.”
Politicians indicated that they wanted more spending cuts in the largely tax-focused legislation and wanted to send it back to the Senate. House Republican leaders continued to meet.
They had very little time. Rejection by the House would mean that any fiscal deal would have to start all over again when a new Congress, with dozens of new members, is seated on Thursday.
The legislation at issue was only part of the grand deal President Barack Obama had hoped to make with politicians on addressing the country’s chronic deficit spending. That means his administration and a bitterly partisan Congress face more showdowns on fiscal issues in the months ahead.
Economists, who had warned that the “fiscal cliff” combination of higher taxes on almost all Americans and deep spending cuts taking effect at the start of the year would spin the country back into recession, were warning that even a limited agreement to avoid it could still dent economic growth.
The deal under consideration today tackled one of the most sensitive issues: higher taxes. The measure would be the first significant bipartisan tax increase since 1990. It would prevent taxes from going up on the poor and middle class but would raise rates on households earning more than US $450,000 US dollars (€340,858) a year.
It also would also put off for two months more than US $100 billion (€75.7 billion) in automatic spending cuts which were set to hit the Pentagon and domestic programmes starting this week, and it would extend unemployment benefits for the long-term unemployed.
The measure cleared the Democrat-controlled Senate on an 89-8 vote not long after midnight, hours after Vice President Joe Biden and Senate Republican Leader Mitch McConnell, veteran negotiators, sealed a deal.
The top Republican in Congress, House Speaker John Boehner, briefed his party members today, while Mr Biden met House Democrats. A Boehner aide said Republican leaders would not decide their course until a second meeting later in the day.
Mr Boehner pointedly refrained from endorsing the agreement, though he promised a vote on it or a Republican alternative right away. He was expected to encounter opposition from House conservatives, who oppose any tax increase at all.
The spending cuts will have to be addressed in the coming weeks and months, along with an increase in the government’s borrowing limit as it seeks to pay its bills. The deadline of midnight on Monday had been set back in 2011 as motivation for the Obama administration and Congress to get serious about taking sweeping action to address deficit spending that has averaged about 1 trillion US dollars a year.
Obama, who had campaigned for re-election on the promise of protecting households making under 250,000 US dollars a year from a tax increase, praised the agreement after the Senate’s vote. Some liberal Democrats were disappointed that the White House did not stick to a harder line in negotiations, considering that Mr Obama no longer faces re-election.
“While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country and the House should pass it without delay,” Mr Obama said in a statement.
“This agreement will also grow the economy and shrink our deficits in a balanced way – by investing in our middle class, and by asking the wealthy to pay a little more.”
The sweeping Senate vote exceeded expectations and would appear to give momentum to the measure despite lingering questions in the House, where conservative forces sank a recent bid by Mr Boehner to permit taxes to rise on incomes exceeding 1 million US dollars, returning them to Clinton-era levels of the 1990s.
Even die-hard conservatives in the Senate endorsed the measure, arguing that the alternative was to raise taxes on virtually every earner.
“I reluctantly supported it because it sets in stone lower tax rates for roughly 99% of American taxpayers,” said Senator Orrin Hatch. “With millions of Americans watching Washington with anger, frustration and anxiety that their taxes will skyrocket, this is the best course of action we can take to protect as many people as possible from massive tax hikes.”
