US President Barack Obama and congressional Republicans looked ahead on Wednesday toward the next round of even bigger Budget fights after reaching a hard-fought fiscal cliff deal that narrowly averted potentially devastating tax hikes and spending cuts.
The 257-167 vote just after 11 pm yesterday capped a tension-filled final push as Republicans balked at a bipartisan Senate Bill. House Speaker John Boehner ordered a vote even though 151 of 236 Republicans, including Majority Leader Eric Cantor, ultimately voted no. Obama said he’d sign it into law.
“The deficit needs to be reduced in a way that’s balanced,” Obama said at the White House. He said top earners and corporations should pay even more and that Congress must raise the debt ceiling. “Everyone pays their fair share. Everyone does their part,” he said.
The agreement was a victory for Obama, who had won re-election on a promise to address budget woes in part by raising taxes on the wealthiest Americans.
But it set up political showdowns over the next two months on spending cuts and on raising the nation's limit on borrowing. Republicans, angry the deal did little to curb the federal deficit, promised to use the debt ceiling debate to win deep spending cuts next time.
“Our opportunity here is on the debt ceiling,” Republican Senator Pat Toomey of Pennsylvania said on MSNBC, adding Republicans would have the political leverage against Obama in that debate. “We Republicans need to be willing to tolerate a temporary, partial government shutdown, which is what that could mean.”
Republicans, who acknowledged they had lost the fiscal cliff fight by agreeing to raise taxes on the wealthy without gaining much in return, vowed the next deal would have to include significant cuts in government benefit programs like Medicare and Medicaid health care for retirees and the poor that were the biggest drivers of federal debt.
“This is going to be much uglier to me than the tax issue... this is going to be about entitlement reform,” Republican Senator Bob Corker of Tennessee said on CNBC.
“This is the debate that's going to be far more serious. Hopefully, now that we have this other piece behind us — hopefully — we'll deal in a real way with the kinds of things our nation needs to face,” he said.
Obama urged “a little less drama” when the Congress and White House next address thorny fiscal issues like the government's rapidly mounting $16 trillion debt load.
| IMPACT OF THE TAX DEAL How the Bill passed by Congress on Tuesday is estimated to change taxes at each income level, on top of the effects of the expiring payroll tax cut and new taxes from health care law | ||||||
| Average income before taxes ($) | Average federal tax burden ($) | Tax change in 2013 | Change in after-tax income (%) | |||
| Impact of tax bill ($) | Payroll tax hike & new health care taxes on the wealthy ($) | Total ($) | ||||
| Top 0.1% | 7,985,826 | 2,720,367 | +322,528 | +121,382 | +443,910 | –8.4 |
| Top 1% | 1,671,536 | 542,927 | +50,508 | +23,125 | +73,633 | –6.5 |
| Top 20% | 244,576 | 63,256 | +2,483 | +3,091 |
+5,574
| –3.1 |
| Fourth 20% | 84,355 | 14,891 | +–2 | +1,149 | +1,147 | –1.7 |
| Middle 20% | 52,294 | 7,457 | +0 | +679 | +679 | –1.5 |
| Second 20% | 30,031 | 2,483 | +1 | +366 | +367 | –1.3 |
| Bottom 20% | 11,290 | 99 | +0 | +120 | +120 | –1.1 |
| Sources: NYT, Tax Policy Center, Congressional Budget Office, Joint Committee on Taxation | ||||||
The fiscal cliff showdown had worried businesses and financial markets, and US stocks soared at the opening after lawmakers agreed to the deal.
The Dow Jones industrial average surged 262.45 points, or 2.00 percent, at 13,366.59. The Standard & Poor's 500 Index was up 29.79 points, or 2.09 per cent, at 1,455.98. The Nasdaq Composite Index was up 77.45 points, or 2.57 per cent, at 3,096.97.
The crisis ended when dozens of Republicans in the House of Representatives buckled and backed a bill passed by the Democratic-controlled Senate that hiked taxes on households earning more than $450,000 annually. Spending cuts of $109 billion in military and domestic programs were delayed only for two months.
Economists had warned the fiscal cliff of across-the-board tax hikes and spending cuts would have punched a $600 billion hole in the economy this year and threatened to send the country back into recession.
