US President Barack Obama greets invited guests before making a statement about fiscal cliff negotiations from the White House December 31, 2012. The White House and top Republicans
The White House and top Republicans struck a dramatic deal to
avert huge New Year tax hikes and postpone automatic spending cuts that had
threatened to send the US economy into recession.
After months of agonizing over the crisis, weeks of debate about a possible
solution, and days of intense, closed-door negotiations, members of the US
Senate voted overwhelmingly 89-8 early Tuesday to pass a controversial bill that
averts the so-called "fiscal cliff."
It now goes to the House of Representatives, which could hold a vote on the
measure later New Year's Day.
If agreed by Congress, it would hand President Barack Obama a victory by
hiking tax rates on households earning over $450,000 a year, but exempt everyone
else from a planned tax increase on Tuesday.
"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 after the vote.
The deal puts off $109 billion in budget cuts across the government for two
months, but in the process sets the stage for a new showdown between Obama's
Democrats and Republicans in dysfunctional Washington at the end of
February.
"There's more work to do to reduce our deficits, and I'm willing to do it,"
Obama said.
Vice President Joe Biden, who negotiated the deal with top Senate Republican
Mitch McConnell, trooped to Capitol Hill to sell it to Democratic senators, some
of whom wanted tax hikes to kick in at a lower threshold.
Had no deal been struck, experts warned that the fragile US economy could
have been sent spinning back into recession by the $500 billion combined whack
from spending cuts and tax hikes.
In the end, the deal was clinched a few hours before a midnight deadline. The
Senate vote came just after 2:00 am (0700 GMT), while the House was not due back
into session until Tuesday.
Now it remains for Republican House Speaker John Boehner to rally his restive
conservative coalition around the pact, which will likely need some Democratic
votes in the House to pass.
For two decades, Republicans have fought any attempt to raise taxes so White
House officials will see vindication in a deal that enshrines one of Obama's top
pledges in his re-election campaign.
In a terse statement, Boehner said his chamber would pick up the legislation
if it passed the Senate.
"Decisions about whether the House will seek to accept or promptly amend the
measure will not be made until House members -- and the American people -- have
been able to review the legislation," he said.
Democrats suggested that the deal, like many congressional bargains, was not
perfect, but that it was preferable to the alternative.
"It's not that this proposal is regarded as great or is loved in any way. But
it's a lot better than going over the cliff," Senator Chuck Schumer told
reporters.
World stock markets, expected to be thrown into turmoil by a failure to beat
the deadline, are closed New Year's Day, so lawmakers have a few extra hours of
breathing room to get the deal concluded.
The deal means a return to Bill Clinton-era tax rates for top earners to 39.6
percent, starting for couples who make $450,000 a year and above.
Obama had originally campaigned for tax hikes to kick in on household income
about $250,000.
The president said earlier that the deal would extend tax credits for clean
energy firms and also unemployment insurance for two million people that had
been due to expire.
It also includes an end to a temporary two percent cut to payroll taxes for
Social Security retirement savings and changes to inheritance and investment
taxes.
A source familiar with the deal said that the delay to spending cuts -- known
as the sequester -- was financed by increased revenues and spending cuts from
defense and non-defense spending.
Earlier, on a day of drama and brinkmanship, Obama had angered Republicans
when he warned that he was not done with seeking higher taxes on the rich to pay
down the US budget deficit.
"I know the president has fun heckling Congress. It's unfortunate he doesn't
spend as much time solving problems as he does with campaigns and pep rallies,"
said Republican Senator Bob Corker, fuming over the remarks.
Signs that a deal could be close cheered investors as US markets rose before
closing for the year. The Dow Jones Industrial Average closed up 1.28 percent at
13,104.14.
Relief seemed to course through the Senate during and after the vote, but
both sides were already gearing up for the next legislative showdown, over the
need to lift the government's statutory borrowing limit of $16.4 trillion,
reached Monday.
The Treasury will take extraordinary measures to keep the government afloat
for an undisclosed period of time until the ceiling is raised. Republicans are
already demanding spending cuts in return.
That fight will now be doubled, with the deadline for the two-month sequester
postponement set up by the fiscal cliff agreement.
