Congress OKs cliff deal, signaling future fights

Jan 2, 7:54 AM EST 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 measure.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 at all.

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 California.

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 alone.

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 Bud­get Office.

“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 Medicaid.

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 problems.”