After briefly pumping the brakes, House Republicans were poised Tuesday night to pass the deal to avert the “fiscal cliff” despite deep misgivings about hundreds of billions of dollars in new spending included in the compromise foisted on them by Senate Republicans and the White House.
The nation started sliding down that cliff on New Year’s Day, after lawmakers dithered for more than a year over solving the combination of across-the-board spending cuts and tax hikes that began taking effect with the start of the year.
The compromise was passed by the Senate at 2 a.m. Tuesday. The House threatened to blow up the deal, but reluctantly followed suit 20 hours later, ultimately passing a permanent extension of many Bush-era tax cuts by an overwhelming vote of 257 to 167.
House Majority Leader Eric Cantor (R., Va.) voted against it, while House Speaker John Boehner (R., Ohio) voted for it. Also supporting the bill was Rep. Paul Ryan (R., Wis.) the GOP vice presidential nominee who has been an ardent opponent of increasing taxes.
“We went over the cliff, and we are pulling ourselves back,” Rep. David Dreier, California Republican, said on the House floor.
As the Huff Post reports, the Senate-crafted compromise was far smaller than the $4 trillion “grand bargain” that many lawmakers have sought since 2010, and lawmakers on both sides of the aisle expressed disappointment with a deal that angered both the left and right.
Democrats also were pleased that for the first time in decades Republicans signed onto a measure that leaves taxes higher this year than the year before.
There was discussion about amending the Senate bill by adding spending cuts, but in the end, House lawmakers voted on the bill as written – a so-called up or down vote, says the CNN.
The legislation would raise roughly $600 billion in new revenues over 10 years, according to various estimates.
According to the Wall Street Journal, at the heart of the deal are some of the biggest tax changes in years, including an increase in tax rates for couples with incomes over $450,000, to 39.6%. For those same households, capital-gains and dividend taxes would increase to 20%, from 15%. Estate taxes would increase from 35% to 40%.
The bill is a tremendous victory for President Obama, who won almost everything he sought in the deal, and halted the GOP’s momentum of the last two years on spending cuts.
The Congressional vote amounts to only a partial victory for Obama. He had promised the new taxes would kick in at $250,000 but, to the dismay of leftwing Democrats, agreed to compromise, in the face of Republican opposition, on $450,000. The Republicans had wanted the threshold set at $1m.
President Barack Obama appeared in the White House press briefing room minutes after the House passed the bill.
With Vice President Joe Biden standing behind his right shoulder, he said: “Thanks to the votes of Democrats and Republicans in Congress I will sign a law that raises taxes on the wealthiest 2% of Americans while preventing a middle-class tax hike that could have sent the economy back into recession and obviously had a severe impact on families all across America.”
Mr. Obama said he would like to take additional steps to reduce the nation’s deficit.
The deal includes low investment-tax rates sought by Republicans and an extension of tax credits for the working poor that are Democratic priorities
The bill is a short-term, messy compromise. Without the bill, every taxpayer in America would have faced rises from 1 January. Instead, the increases are confined to the wealthiest 2% of the population, says the Guardian.
The bill also blocked automatic cuts in federal programs from defense to welfare due to kick in on 1 January. A decision on cuts has been postponed for two months.
Had the House not acted, and the tax cuts enacted last decade expired fully, broad tax increases would have kicked in, as would $110 billion in automatic cuts to domestic and military spending.
The fiscal cliff crisis has been running since Obama won the election in early November. Attempts by Obama and the Republican House Speaker John Boehner to do a deal before Christmas collapsed. So too did negotiations between the Democratic Senate leader Harry Reid and his Republican counterpart McConnell.