Weary House lawmakers pushed toward a final vote late Tuesday night
on emergency legislation to avoid the "fiscal cliff" of widespread tax
increases and painful across-the-board spending cuts before financial
markets reopen after the New Year's holiday. Passage would send
the measure to President Barack Obama for his signature and hand him a
political triumph less than two months after he secured re-election
while campaigning for higher taxes on the wealthy. 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. The extraordinary late-night
House vote was coming nearly 24 hours after the Senate passed the
measure in the pre-dawn hours on New Year's Day. The legislation cleared
the Senate hours after Vice President Joe Biden and Senate Republican
Leader Mitch McConnell, veteran negotiators, sealed a deal.
In
addition to neutralizing middle class tax increases and spending cuts
that technically took effect Monday at midnight, the legislation raises
tax rates on incomes over $400,000 for individuals and $450,000 for
couples. Remarkably, in a party that swore off tax increases two decades
ago, dozens of Republicans supported the bill in both houses of
Congress. The bill would also raise the top tax rate on large
estates to 40 percent, from 35 percent, and taxes on capital gains and
dividends over $400,000 for individuals and $450,000 for couples would
be taxed at 20 percent, up from 15 percent.
The bill would also
prevent an expiration of extended unemployment benefits for an estimated
two million jobless, renew tax breaks for businesses and renewable
energy purposes, block a 27 percent cut in fees for doctors who treat
elderly 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 spending cuts set to take effect over the
next two months, although only about half of that total would be offset
with spending reductions elsewhere in the budget.
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originally enacted two years ago to stimulate the economy, expired with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. The fiscal cliff measure had cleared the Senate on a
lopsided pre-dawn New Year's vote of 89-8, and House Republicans spent
much of the day struggling to escape a political corner they found
themselves in. "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.
Majority
Leader Eric Cantor, the No. 2 House Republican, 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 to add
spending cuts to the bill 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
saddling Republicans with the blame for a whopping middle class tax
increase. One Senate Democratic leadership aide said Majority Leader
Harry Reid would "absolutely not take up the bill" if the House changed
it.
The aide spoke on condition of anonymity, citing a requirement to
keep internal deliberations private. If the House failed to pass
the Senate bill it would mean that any fiscal deal would have to start
all over when a new Congress, with dozens of new members, is seated
Thursday. And any change in the legislation would require the Senate to
re-pass the measure before it could go to Obama for his signature. Despite
Cantor's remarks, Speaker John Boehner took no public position on the
bill as he sought to negotiate a conclusion to the final crisis of a
two-year term full of them.
Republicans did their best to minimize the tax increases in the measure. Rep.
David Dreier of California, in the final days of a 32-year-career in
Congress, said the legislation was "not the grand bargain we'd hoped
for" to reduce federal deficits. "But it is an essential bridge to what I
hope will be a comprehensive and long-term solution. It will bring us
back from the edge of the fiscal cliff and implement tax cuts for 99% of
taxpayers." Declared Rep. Marcy Kaptur, an Ohio Democrat: "This
is a great victory for the middle class, whose taxes will not go up
tomorrow."
House Democrats met privately with Biden for their
review of the measure, and the party's leader, Rep. Nancy Pelosi of
California, said afterward that Boehner should permit a vote. "That is what we expect. That is what the American people deserve," she said. The
non-partisan 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. There was little or no evident concern among Republicans on that
point, presumably because of their belief that tax cuts pay for
themselves by expanding economic growth and do not cause deficits to
rise.
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. For all the struggle involved in the legislation, even
its passage would merely clear the way for another round of controversy
almost as soon as the new Congress convenes. With the Treasury
expected to need an expansion in borrowing authority by early spring,
and funding authority for most government programs set to expire in late
March, Republicans have made it clear they intend to use those events
as leverage with the administration to win savings from the Medicare
health care program for the elderly and other government benefit
programs.
McConnell said as much moments before the 2 a.m. Tuesday vote in the Senate — two hours after the advertised "cliff" deadline. "We've
taken care of the revenue side of this debate. Now it's time to get
serious about reducing Washington's out-of-control spending," he said.
"That's a debate the American people want. It's the debate we'll have
next. And it's a debate Republicans are ready for." Obama, who had
campaigned for re-election on the promise of protecting households
making under $250,000 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 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," 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 "fiscal cliff" came about because tax rate cuts
enacted in 2001 and 2003 during President George W. Bush's
administration were set to expire at the end of the year.
The threatened
across-the-board reductions in government spending, which would slice
money out of everything from social programs to the military, were put
in place last year as an incentive to both parties to find ways to cut
spending. That solution grew out of the two parties' inability in 2011
to agree to a grand bargain that would have taken a big bite out of the
deficit which has averaged about $1 trillion a year. If Obama and
Congress failed to act, about $536 billion in tax increases, touching
nearly all American workers, and about $110 billion in spending cuts,
about 8 percent of the annual budgets for most federal departments, were
scheduled to start going into effect beginning in January.
source : the jakarta post
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