Fiscal
cliff deal under threat from hardline conservative Republicans
Senate
compromise to avert crisis meets hostile reception from Republican
majority in House of Representatives
House
majority leader Eric Cantor, left, said he does not support the bill
while John Boehner, right, is coming up for re-election as speaker
and will not want to alienate conservative Republicans. Photograph:
Jacquelyn Martin/AP
1
January, 2013
Congress
was thrown into fresh disarray over the fiscal cliff crisis on
Tuesday night after House Republicans expressed hostility towards a
bill passed overwhelmingly only hours earlier by the Senate.
President
Barack Obama had hailed the Senate vote and called on the House of
Representatives to act "without delay".
But
House Republicans, after two meetings behind closed doors at
Congress, were almost unanimous in opposition to the bill, which
would raise taxes on the wealthiest. Republicans oppose the rise but
their anger is mainly over the failure of the bill to include cuts in
federal spending.
On
Tuesday night, the Republican House Speaker John Boehner proposed to
put two options in front of the House – a straight vote on the
Senate bill, or a vote to amend the bill to include spending cuts.
The second option would effectively kill the deal as Senate Democrats
said they would not consider any amendments.
If
the House votes for the Senate bill, the likeliest outcome, the
legislation would be place before the markets open on Wednesday.
Obama
has been hoping for a deal to be in place to calm Wall Street before
it re-opens.
A
Democratic Congressman, Steve Cohen, in a speech from the floor of
the House, expressed the risk if there is no agreement before the
markets open. "My district cannot afford to wait a few days and
have the stock market go down 300 points tomorrow if we don't get
together and do something," Cohen said.
Hopes
that the crisis had been averted rose when the Senate voted 88-9 in
favour of the bill in the early hours of New Year's Day.
The
Senate bill was intended to bring an end to the fiscal cliff crisis
that confronts all American taxpayers with tax rises from 1 January.
As well as the tax rises, deep cuts kick in to federal programmes
from defence to welfare.
Without
legislation, the tax rises and spending cuts stand. The White House
has warned this could send the country's fragile recovery into
reverse.
House
Republicans, in particular hardline conservatives backed by the Tea
Party movement, were taking a gamble in opposing the Senate: if the
bill fails, they are in danger of being blamed by voters for the
resulting tax rises.
Even
senior Republicans in the House, in particular the Houe majority
leader Eric Cantor, expressed dissatisfaction with the Senate bill,
though he stopped short of pledging to vote against it.
The
bill passed by the Senate, with 89 senators in favour and eight
against, is a messy, short-term deal that raises taxes on the
wealthiest but postpones for two months any consideration of spending
cuts. The vote came at 2am on Tuesday, too late to prevent the
country breaching the midnight fiscal cliff deadline.
The
bill confines tax rises to individuals earning $400,000 or more a
year and households earning $450,000 or more. It postpones spending
cuts for two months, to allow further negotiations. Estate tax also
rises, to 40% from 35%, but inheritances below $5m are exempted from
the increase. Benefits for the unemployed are extended for another
year.
The
House presents a much bigger hurdle than the Senate, not only because
the Republicans have a majority but because of the presence of a bloc
of Tea Party-backed Republicans. The Republicans have 241 members to
the Democrats' 191.
Boehner's
instinct is towards compromise but he has had trouble keeping the Tea
Party bloc under control. Theoretically, he has enough votes to push
a bill through, but he is coming up for re-election as speaker and
will not want to alienate conservative Republicans. Complicating the
situation further, his main rival is Cantor.
The
Senate deal was thrashed out in the past few days between
vice-president Joe Biden and the Republican leader in the Senate,
Mitch McConnell. It partly fulfils one of Obama's election campaign
promises: to raise taxes on the wealthiest. But Obama was forced to
compromise: he wanted higher taxes to kick in at $250,000 a year.
Democrats
too are unhappy with the bill, regarding Obama as having given too
much ground and seeing the $400,000 threshold as too high.
The
White House dispatched Biden to Congress to persuade liberal
Democrats in the House to back the bill. Democrats in the House
emerged from the briefing with Biden pledging support, and urging
Republican colleagues to accept the bill unamended.
Nancy
Pelosi, the Democratic minority House leader, said the legislation
sent from the Senate represented a "historic" bipartisan
compromise. She also put added pressure on Boehner to allow the
measures to go to a vote in the House, noting that he had previously
suggested any bill from the Senate would be put in front of
Representatives.
"That
is what he said, that is what we expect. That is what the American
people deserve," Pelosi said.
Hardening
the resolve of House Democrats, the congressional budget office on
Tuesday said the tax cuts and other measures in the Senate-passed
bill would add nearly $4tn to federal deficits over a decade.
UPDATE
UPDATE
House
approves Senate's fiscal cliff deal
CNN,
2
January, 2013
Washington
(CNN) -- The House of Representatives voted Tuesday night to approve
a Senate bill to avert a feared fiscal cliff.
The
measure that sought to maintain tax cuts for most Americans but
increase rates on the wealthy passed the Democratic-led Senate
overwhelmingly early in the day.
There
was discussion about amending the Senate bill by adding spending
cuts, but in the end, House lawmakers voted on the bill as written --
a so-called up or down vote.
Cole: House will pass
Senate fiscal bill Can deal be reached before congress ends? GOP
House members blast cliff bill Pelosi: 'Gigantic' progress on talks
Get
the latest updates from CNN's political team
The
legislation would raise roughly $600 billion in new revenues over 10
years, according to various estimates.
"I'd
say let's take the Senate deal, fight another day," Rep. Tom
Cole, R-Oklahoma, told CNN before the House vote. He predicted the
House would pass the bill with a "pretty strong bipartisan
majority."
"I'm
a very reluctant yes," said Rep. Nan Hayworth, an outgoing
Republican representative from New York.
"This
is the best we can do given the Senate and the White House sentiment
at this point in time, and it is at least a partial victory for the
American people," she said. "I'll take that at this point."
The
timing of the vote was crucial, as a new Congress is set to be sworn
in Thursday.
The
legislation averted much of the fiscal cliff's negative near-term
economic impact by extending the Bush-era tax cuts for the majority
of Americans. It also extends long-term unemployment benefits that
were set to expire.
Had
the House not acted, and the tax cuts enacted last decade expired
fully, broad tax increases would have kicked in, as would $110
billion in automatic cuts to domestic and military spending.
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