WASHINGTON — In a New Year’s Day of intense legislative drama, the hopelessly divided 112th Congress finally came together to pass a partial fiscal-cliff fix.
Late on Tuesday night, after the Senate began 2013 by acting to pave the way for a compromise, the House voted, 257 to 167, to increase tax rates on the wealthy and spare the middle class a significantly harder hit from the Taxman.
Passage of the White House-backed bill delayed for two months the beginning of the cliff’s severe program of across-the-board spending cuts, putting lawmakers on a course for another round of brinksmanship in just a few months that will be compounded by a debt ceiling fight.
After Congress missed its self-imposed Jan. 1 deadline, had both chambers not come through Tuesday, taxes were mandated to rise for almost all Americans, and the federal government would have had to start implementing some $100 billion in slashed spending on domestic and military programs.
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The bill’s passage marked a major victory for President Obama, whose reelection momentum forced congressional Republicans to break more than 20 years of precedent and accept tax hikes on the wealthy. Ever since President George H.W. Bush was hammered in 1990 for breaking his “read my lips” pledge not to raise taxes, Republicans have stood firm against any tax increases.
“Thanks to the votes of Republicans and Democrats in Congress, I will sign a law that raises taxes on the wealthiest 2% of Americans while preventing tax hikes that could have sent the economy back into recession,” Obama declared Tuesday night, before heading back to Hawaii to resume his vacation.
Obama, who pledged he would quickly sign the bill, expressed the need to reform Medicare to help curtail the country’s mounting debt, now north of $16 trillion.
The bill passed after the GOP-controlled House threw in the towel about 11 p.m. on New Year’s Day and passed the measure that had cleared the Senate by an 89-to-8 vote some 20 hours earlier. The House prevailed after leaders dropped objections that had threatened to scuttle the deal at the last minute.
The legislative victory came after a deal was reached Monday by Vice President Biden — who emerged as the White House’s indispensable fixer — and Senate Minority Leader Leader Mitch McConnell (R-Ky.).
The latter is a Senate stalwart denounced by Democrats as an arch-partisan, but who has now cut three major budget and tax deals with Biden, his former colleague and frequent negotiating partner.
Victory for middle class Americans looked hopeless as House Republicans emerged from a conference meeting on Tuesday evening threatening to amend the Senate’s bill to placate conservatives and add $330 billion in spending cuts.
It would have been a potentially disastrous course that would have all but guaranteed the country went over the cliff, with most of its tax rises coming Wednesday.
Amending the bill would have required another Senate vote, but Senate Democrats had said they would not have considered an altered bill, no matter what.
House GOP leaders later dropped efforts to change the bill after determining that, with House Democrats and many fellow Republicans opposed, they lacked the votes to pass it.
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In all 85 Republicans voted yes on a bill that represented a stinging defeat for Republican leaders because of its lack of spending cuts. Votes to approve were delivered by every member of the House from New York who voted.
But Obama, too, made major concessions that angered Democratic rank-and-file.
The bill changes decades-old income tax rates so that they rise on households that earn more than $450,000 a year and individuals who pull in more than $400,000 — in total generating about $600 billion in new revenue per year.
Throughout the course of his reelection campaign, however, Obama had pushed for that threshold to be set in stone at $250,000.
The bill extends federal unemployment benefits for a year, sparing an estimated 2 million jobless Americans from losing payments in early 2013.
It also prevents a 27% cut in fees for doctors who treat Medicare patients that would have hit the books, owing to an obsolete budget formula from the 1990s.
In a win for Republicans and farm state Democrats, the bill ups estate tax rates to 40% on inherited individual estates worth more than $5 million.
It allows the $5 million exemption to rise with inflation, however. Some Democrats complained the bill does not index to inflation other benefits, such as unemployment benefits, that are included in the bill to help poorer Americans.
The deal does not extend a cut in payroll taxes. As a result, working Americans will see those tax rates rise from 4.2% to 6.2% in their next paycheck.
