House OKs Senate’s Partial ‘Cliff’ Solution
WASHINGTON (AP) – Past its own New Year’s deadline, a weary Congress sent President Barack Obama legislation to avoid a national “fiscal cliff” of middle class tax increases and spending cuts late Tuesday night in the culmination of a struggle that strained America’s divided government to the limit.
The bill’s passage on a 257-167 vote in the House sealed a partial political triumph for the president less than two months after he secured re-election while calling for higher taxes on those he calls the wealthy.
In addition to neutralizing middle class tax increases and spending cuts taking effect with the new year, the legislation will raise tax rates on incomes over $400,000 for individuals and $450,000 for couples. That was higher than the thresholds of $200,000 and $250,000 that Obama campaigned for. But in a party that swore off tax increases two decades ago, dozens of Republicans supported the bill at both ends of the Capitol.
The Congressional Budget Office said the measure would add nearly $4 trillion over a decade to federal deficits, a calculation that assumed taxes would otherwise have risen on taxpayers at all income levels.
The Senate approved the measure on a vote of 89-8 less than 24 hours earlier, and in the interim, House conservatives demanded a vote to add significant spending cuts to the measure. But in the end they retreated.
Supporters of the bill in both parties expressed regret that it was narrowly drawn, and fell far short of a sweeping plan that combined tax changes and spending cuts to reduce federal deficits. That proved to be a step too far in the two months since Obama called congressional leaders to the White House for a postelection stab at compromise.
Majority Republicans did their best to minimize the bill’s tax increases, just as they abandoned their demand from earlier in the day to add spending cuts to the package.
“By making Republican tax cuts permanent, we are one step closer to comprehensive tax reform that will help strengthen our economy and create more and higher paychecks for American workers,” said Rep. Dave Camp of Michigan, chairman of the tax-writing House Ways and Means Committee.
He urged a vote for passage to “get us one step closer to tax reform in 2013” as well as attempts to control spending.
The bill would also prevent an expiration of extended unemployment benefits for an estimated two million jobless, block a 27 percent cut in fees for doctors who treat Medicare patients, stop a $900 pay increase for lawmakers from taking effect in March and head off a threatened spike in milk prices.
It would stop $24 billion in across-the-board spending cuts set to take effect over the next two months, although only about half of that total would be offset with savings elsewhere in the budget.
The economic as well as political stakes were considerable.
Economists have warned that without action by Congress, the tax increases and spending cuts that technically took effect with the turn of the new year at midnight could send the economy into recession.
Even with enactment of the legislation, taxes are on the rise for millions.
A 2 percentage point temporary cut in the Social Security payroll tax, originally enacted two years ago to stimulate the economy, expired with the end of 2012. Neither Obama nor Republicans made a significant effort to extend it.
“I personally hate it,” Rep. John Campbell of California, said of the measure, giving voice to the concern of many Republicans that it did little or nothing to cut spending.
“The speaker the day after the election said we would give on taxes and we have. But we wanted spending cuts. This bill has spending increases. Are you kidding me? So we get tax increases and spending increases? Come on.”
House Majority Leader Eric Cantor told reporters at one point, “I do not support the bill. We are looking, though, for the best path forward.”
Within hours, Republicans abandoned demands for changes and agreed to a simple yes-or-no vote on the Senate-passed bill.
They feared that otherwise the Senate would refuse to consider any alterations, sending the bill into limbo and giving Democrats a political opportunity to try saddling Republicans with the blame for a middle class tax increase. One Senate Democrat leadership aide said Majority Leader Harry Reid would “absolutely not take up the bill” if the House changed it.
The relative paucity of spending cuts was a sticking point with many House Republicans. Among other items, the extension of unemployment benefits costs $30 billion, and is not offset by savings elsewhere.
Others said unhappiness over spending outweighed fears that the financial markets would plunge today if the fiscal cliff were not averted.