Fiscal Cliff deal

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

the Guardian,

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

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.