Vote saves US from 'fiscal cliff'
Source: Agencies |
January 2, 2013, Wednesday
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The Senate moved the US economy back from the edge of a "fiscal cliff" yesterday, voting to avoid imminent tax hikes and spending cuts in a bipartisan deal that could still face stiff challenges in the House of Representatives.
Senators voted 89-8 to raise some taxes on the wealthy while making low tax rates on the middle class that have been in place for a decade permanent.
But the measure did little to rein in annual budget deficits that have helped push the US debt to US$16.4 trillion.
The agreement came too late for Congress to meet its own deadline of New Year's Eve for passing laws to halt US$600 billion in tax hikes and spending cuts which, strictly speaking, came into force yesterday.
But with the New Year's Day holiday, there was no real world impact and Congress still had time to draw up legislation, approve it and backdate it to avoid the harsh fiscal measures.
That will need the backing of the House where many of the Republicans who control the chamber complain that President Barack Obama has shown little interest in cutting government spending and is too concerned with raising taxes.
All eyes are now on the House which was due to start at noon yesterday.
Obama called for the House to act quickly and follow the Senate's lead.
"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," he said.
"There's more work to do to reduce our deficits, and I'm willing to do it. But tonight's agreement ensures that, going forward, we will continue to reduce the deficit through a combination of new spending cuts and new revenues from the wealthiest Americans."
Members were thankful that financial markets were closed, giving them a second chance to try to head off the fiscal cliff. But if lawmakers cannot pass legislation in the coming days, markets are likely to turn sour.
The US economy, still recovering from the 2008/2009 downturn, could stall again if Congress fails to fix the budget mess.
"If we do nothing, the threat of a recession is very real. Passing this agreement does not mean negotiations halt, far from it. We can all agree there is more work to be done," Majority Leader Harry Reid, a Democrat, told the Senate floor.
A new, informal deadline for Congress to legislate is now today when the current body expires and is replaced by a new Congress chosen last November.
The Senate bill, worked out after long negotiations on New Year's Eve between Vice President Joe Biden and Senate Republican Minority Leader Mitch McConnell, also postpones for two months US$109 billion in spending cuts on military and domestic programs.
It extends unemployment insurance to 2 million people for a year and makes permanent the alternative minimum tax "patch" that was set to expire, protecting middle-income Americans from being taxed as if they were rich.
The tax hikes do not sit easy with Republicans but conservative senators held their noses and voted to raise rates for the rich because not to do so would have meant increases for almost all working Americans.
"It took an imperfect solution to prevent our constituents from a very real financial pain, but in my view, it was worth the effort," McConnell said.
House Speaker John Boehner - the top Republican in Congress - said the House would consider the Senate deal. But he left open the possibility of amendments, which would spark another round of legislating.
Senators voted 89-8 to raise some taxes on the wealthy while making low tax rates on the middle class that have been in place for a decade permanent.
But the measure did little to rein in annual budget deficits that have helped push the US debt to US$16.4 trillion.
The agreement came too late for Congress to meet its own deadline of New Year's Eve for passing laws to halt US$600 billion in tax hikes and spending cuts which, strictly speaking, came into force yesterday.
But with the New Year's Day holiday, there was no real world impact and Congress still had time to draw up legislation, approve it and backdate it to avoid the harsh fiscal measures.
That will need the backing of the House where many of the Republicans who control the chamber complain that President Barack Obama has shown little interest in cutting government spending and is too concerned with raising taxes.
All eyes are now on the House which was due to start at noon yesterday.
Obama called for the House to act quickly and follow the Senate's lead.
"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," he said.
"There's more work to do to reduce our deficits, and I'm willing to do it. But tonight's agreement ensures that, going forward, we will continue to reduce the deficit through a combination of new spending cuts and new revenues from the wealthiest Americans."
Members were thankful that financial markets were closed, giving them a second chance to try to head off the fiscal cliff. But if lawmakers cannot pass legislation in the coming days, markets are likely to turn sour.
The US economy, still recovering from the 2008/2009 downturn, could stall again if Congress fails to fix the budget mess.
"If we do nothing, the threat of a recession is very real. Passing this agreement does not mean negotiations halt, far from it. We can all agree there is more work to be done," Majority Leader Harry Reid, a Democrat, told the Senate floor.
A new, informal deadline for Congress to legislate is now today when the current body expires and is replaced by a new Congress chosen last November.
The Senate bill, worked out after long negotiations on New Year's Eve between Vice President Joe Biden and Senate Republican Minority Leader Mitch McConnell, also postpones for two months US$109 billion in spending cuts on military and domestic programs.
It extends unemployment insurance to 2 million people for a year and makes permanent the alternative minimum tax "patch" that was set to expire, protecting middle-income Americans from being taxed as if they were rich.
The tax hikes do not sit easy with Republicans but conservative senators held their noses and voted to raise rates for the rich because not to do so would have meant increases for almost all working Americans.
"It took an imperfect solution to prevent our constituents from a very real financial pain, but in my view, it was worth the effort," McConnell said.
House Speaker John Boehner - the top Republican in Congress - said the House would consider the Senate deal. But he left open the possibility of amendments, which would spark another round of legislating.
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