Lawmakers in the Republican-controlled House of Representatives were late yesterday considering legislation to stave off America’s fiscal crisis after a last-gasp deal on taxes passed the Senate overnight.
Meanwhile Vice President Joe Biden was dispatched to Capitol Hill to win over reluctant Democrats and Republican House Speaker John Boehner huddled with members of his restive caucus.
The White House and top Republicans struck a deal after dramatic 11th-hour negotiations to avert huge New Year tax hikes and postpone automatic spending cuts that had threatened to send the US economy back into recession.
If the legislation passes the House, it will represent a win for President Barack Obama as it raises taxes on the richest Americans – albeit above an income threshold higher than he and other Democrats had wanted.
But the victory will be hollow as it fails to tackle the deep spending cuts needed to resolve America’s austerity crisis, setting up the prospect of another bitter Washington battle at the start of Obama’s second term.
After months of agonising over the crisis, weeks of debate about a possible solution, and days of intense, closed-door bartering, the US Senate voted overwhelmingly 89-8 early on Tuesday to pass a controversial bill that averts the so-called “fiscal cliff.” Although the midnight deadline was technically missed, any serious impact on the world’s biggest economy will be avoided as long as legislation passes the House of Representatives in the coming days.
Obama issued a statement shortly after the 2am Senate vote, urging House lawmakers to “pass it without delay.”
If the measure is agreed by both chambers of Congress, tax rates will be hiked on households earning over $450,000 a year but remain where they are for everyone else. While not matching Obama’s campaign threshold of $250,000, it would represent a major concession from Republicans who have stuck solidly to a pledge of no higher taxes since then president George H.W. Bush failed to win re-election in 1992 after breaking a promise not to raise rates. “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 his statement.
The deal puts off $109 billion in budget cuts across the government for two months, setting the stage for a new showdown between Obama’s Democrats and Republicans in dysfunctional Washington at the end of February, weeks after the president is sworn in for a second term.
Had no deal been struck, experts warned that the fragile US economy could have been sent spinning back into recession due to the $500 billion combined whack of spending cuts and tax hikes.
It remains for Boehner to rally his conservative coalition around the pact, which will likely need a large share of Democratic votes in the House to pass.
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 the deal, like many congressional bargains, was not perfect, but that it was preferable to the alternative.