New Year's Reprieve: Senate Passes Fiscal Cliff Deal in Post-Midnight Vote

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Fiscal Cliff Deal Reached in Senate(Updated: 3:26 a.m., Jan. 1, 2013)

By DAVID ESPO


WASHINGTON -- Hours past a self-imposed deadline for action, the Senate passed legislation early New Year's Day to neutralize a fiscal cliff combination of across-the-board tax increases and spending cuts that kicked in at midnight. The pre-dawn vote was a lopsided 89-8.

Senate passage set the stage for a final showdown in the House, where a vote was expected later Tuesday or perhaps Wednesday on the measure, which also raises tax rates on wealthy Americans.

Even by the recent dysfunctional standards of government-by-gridlock, the activity at both ends of historic Pennsylvania Avenue was remarkable as the administration and lawmakers spent the final hours of 2012 haggling over long-festering differences.

"It shouldn't have taken this long to come to an agreement, and this shouldn't be the model for how we do things around here," said Senate Republican leader Mitch McConnell, who negotiated the agreement with Vice President Joe Biden.

Shortly after the Senate vote, President Barack Obama said, "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."

Under the deal, taxes would remain steady for the middle class and rise at incomes over $400,000 for individuals and $450,000 for couples -- levels higher than Obama had campaigned for in his successful drive for a second term in office.

Spending cuts totaling $24 billion over two months aimed at the Pentagon and domestic programs would be deferred. That would allow the White House and lawmakers time to regroup before plunging very quickly into a new round of budget brinkmanship certain to revolve around Republican calls to rein in the cost of Medicare and other government benefit programs.


Officials also decided at the last minute to use the measure to prevent a $900 pay raise for lawmakers due to take effect this spring.

"One thing we can count on with respect to this Congress is that if there's even one second left before you have to do what you're supposed to do, they will use that last second," the president said in a mid-afternoon status update on the talks. Yet when the roll was called nearly 12 hours later, only six Republicans and two Democrats opposed the measure.

As darkness fell on the last day of the year, Obama, Biden and their aides were at work in the White House, and lights burned in the House and Senate. Democrats complained that Obama had given away too much in agreeing to limit tax increases to incomes over $450,000, far above the $250,000 level he campaigned on. Yet some Republicans recoiled at the prospect of raising taxes at all.

Democratic senators said they expected a post-midnight vote on the measure. They spoke after a closed-door session with Vice President Joseph Biden, who brokered the deal with Senate Republican leader Mitch McConnell.

"The argument is that this is the best that can be done on a bipartisan basis," said Sen. Dianne Feinstein (D-Calif.) when asked about the case the vice president had delivered behind closed doors.

Passage in the Senate sends the measure to the House, where Speaker John Boehner (R-Ohio) refrained from endorsing a package as yet unseen by his famously rebellious rank-and-file. He said the House would not vote on any Senate-passed measure "until House members -- and the American people -- have been able to review" it.

Numerous GOP officials said McConnell and his aides had kept the speaker's office informed about the progress of the talks.

The House Democratic leader, Rep. Nancy Pelosi of California, had issued a statement saying that when legislation cleared the Senate, "I will present it to the House Democratic caucus."

Without legislation, economists in and out of government warned of a possible recession if the economy were allowed to fall over a fiscal cliff of tax increases and spending cuts.

And while the nominal deadline for action passed at midnight, Obama's signature on legislation by the time a new Congress takes office at noon on Jan. 3, 2013 -- the likely timetable -- would eliminate or minimize any inconvenience for taxpayers.

A late dispute over the estate tax produced allegations of bad faith from all sides.

After hours of haggling, Biden headed for the Capitol to brief the Democratic rank and file.

Earlier, McConnell had agreed with Obama that an overall deal was near. In remarks on the Senate floor, he suggested Congress move quickly to pass tax legislation and "continue to work on finding smarter ways to cut spending" next year.

The White House and Democrats initially declined the offer, preferring to prevent the cuts from kicking in at the Pentagon and domestic agencies alike. A two-month compromise resulted.

Officials in both parties said the agreement would prevent tax increases at incomes below $400,000 for individuals and $450,000 for couples.

At higher levels, the rate would rise to a maximum of 39.6 percent from the current 35 percent. Capital gains and dividends in excess of those amounts would be taxed at 20 percent, up from 15 percent.

The deal also would also raise taxes on the portion of estates exceeding $5 million to 40 percent. At the insistence of Republicans, the $5 million threshold would rise each year with inflation.

Much or all of the revenue to be raised through higher taxes on the wealthy would help hold down the amount paid to the Internal Revenue Service by the middle class.

In addition to preventing higher rates for most, the agreement would retain existing breaks for families with children, for low-earning taxpayers and for those with a child in college. Also, the two sides agreed to prevent the alternative minimum tax from expanding to affect an estimated 28 million households for the first time in 2013, with an average increase of more than $3,000. The law originally was designed to make sure millionaires did not escape taxes, but inflation has gradually exposed more and more households with lower earnings to its impact.

The legislation leaves untouched a scheduled 2 percentage point increase in the payroll tax, ending a temporary reduction enacted two years ago to help revive the economy.

Officials said the White House had succeeded in gaining a one-year extension of long-term unemployment benefits about to expire on an estimated two million jobless.

The legislation would delay for one year a 27 percent cut in fees for doctors who treat Medicare patients.

Also included is a provision to prevent a threatened spike in milk prices after the first of the year.

Even as time was running out, partisan agendas were evident.

Obama used his appearance not only to chastise Congress, but also to lay down a marker for the next round of negotiations early in 2013, when Republicans intend to seek spending cuts in exchange for letting the Treasury to borrow above the current debt limit of $16.4 trillion.

"Now, if Republicans think that I will finish the job of deficit reduction through spending cuts alone -- and you hear that sometimes coming from them ... then they've got another think coming. ... That's not how it's going to work at least as long as I'm president," he said.

"And I'm going to be president for the next four years, I think," he added.

Obama's remarks irritated some Republicans.

Sen. John McCain of Arizona they would "clearly antagonize members of the House."

___

Associated Press writers Julie Pace, Andrew Taylor, Alan Fram and Ben Feller contributed to this report.


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35 Comments

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ragtopdaz

So our Government borrows money from the Bank of China, then hits the debt limit so it needs to get more from them in order to pay them the interest we owe them. And this keeps going on every few years..

The Government needs to cut spending and stop borrowing money to spend on wars and to give to other countries. Its not their money to freely squander on things the middle class cant afford.

January 01 2013 at 5:11 PM Report abuse +2 rate up rate down Reply
ragtopdaz

One thing I'm curious about is what will all the members of congress do when they are all laid off/fired by the American people. Will they seek unemployment and food stamps??
Or just apply for SSI as they all have mental disability.

January 01 2013 at 3:41 PM Report abuse +2 rate up rate down Reply
1 reply to ragtopdaz's comment
mrspelosi

I will probably go back to my insider trading deals dear. And perhaps have to get rid of a few of the illegals that work in my vineyards darling.

January 01 2013 at 3:48 PM Report abuse +2 rate up rate down Reply
1 reply to mrspelosi's comment
icantgetnosatisfaction

You know you aren't going to give up your illegals, they work too hard for what you pay them.

January 01 2013 at 4:10 PM Report abuse +2 rate up rate down
ragtopdaz

With this last election its like the changing of the guard with Obama as President. But with our history of Politicians, it's more like the changing of the crooks..
The tax payers are paying these people huge salaries to do a job. They have let us down in so many ways, broke a bunch of laws, yet no one is held accountable, and no one goes to jail. They fill up their puppet masters bank accounts as well as their off shore ones as well. All the Republicans will do for the next 4 years is fight over stupid things, acting like they are doing the peoples work, and wait for the next election.
The Democrats will fight the Republicans with the same promises in order for them to get elected.
Its like having hope in one hand and more empty promises in the other.
ITS SICKENING...
Then the Government sends Billions over seas to take care of more people relying on US welfare.
Then we give people from other countries a free education, a place to stay, and money to live on while here in the Us. (Get rid of these stupid grants..)

January 01 2013 at 3:13 PM Report abuse +2 rate up rate down Reply
icantgetnosatisfaction

Obama's poor leadership and bad economic policies will continue kill the American economy, it's been part of his agenda all along. Worst president since the likes of Woodrow Wilson and Jimmy Good Ole Boy Carter. ObamaHellCare will finish off the middle class as he caters to the do nothings in this country along with the illegals.

January 01 2013 at 2:54 PM Report abuse +2 rate up rate down Reply
1 reply to icantgetnosatisfaction's comment
attyacampbell

What was so bad about Woodrow Wilson? Most Presidential historians consider him to be one the United States' great Presidents.

January 01 2013 at 3:50 PM Report abuse -3 rate up rate down Reply
2 replies to attyacampbell's comment
icantgetnosatisfaction

Why ?

January 01 2013 at 4:11 PM Report abuse +2 rate up rate down
icantgetnosatisfaction

* Federal Reserve Act *

January 01 2013 at 4:17 PM Report abuse rate up rate down
democrackso

partyofnohastogo
The tea party is just a flash in the pan. Tea party members were fired in the 2012 elections. The tea party also has a lower approval rating than the dems. If you vote for the tea party you'll be voting for a dying party........LOL!
______________________________________________________________________

Comments like this prove that Obamites will continue to make fools of themselves going into 2013 and throughout the year. Anyone who is happy to see people that want responsible government to be non-existent
are just dopes.

January 01 2013 at 2:13 PM Report abuse +3 rate up rate down Reply
1 reply to democrackso's comment
icantgetnosatisfaction

Responsibility and government should never be used in the same sentence.

January 01 2013 at 2:43 PM Report abuse +3 rate up rate down Reply
gwng99

No raises for our Congress and those work in Capitol either for theri incompetency and most non productive bunch in our country history. They should get the same pension and benefit just like us with social security until they get deficit in control.
So called Joe Biden to help to cut the deal for the two partisans does not impress any one. It is just their stupidity play likes little kids. They do not know how to compromise and work as a team for their constituents and country.
Hope American public will remember this when the election comes , if these incumbents still get reelected then we the voters are stupid. No one else to blamebut ourselves as we are controlled and manipulated by
by the idiotic politicians.

January 01 2013 at 11:16 AM Report abuse +2 rate up rate down Reply
2 replies to gwng99's comment
icantgetnosatisfaction

This country will continue to be run like this as long as they keep amendent 28 on ice.
The other problem was turning the Social Security fund into a slush fund for what ever they see fit to blow money on. The other thing that needs to stop is foreign aid to countries that want Americans dead.
This will be very interesting to see how fast the rich accelerate their migration to other countries for the tax breaks and lack of business regulations.

January 01 2013 at 11:44 AM Report abuse +2 rate up rate down Reply
theycallmeroy3

Some pundits ( whatever that means) believe the reason the economy is slowly improving is because Congress is doing less. But ' the little kids' were up to putting that to rest last night. The Senate bill is 157 pages long. And race car drivers made out like bandits. Among others. They did what they do best, stuffed it to the gills.

January 01 2013 at 11:50 AM Report abuse -1 rate up rate down Reply
2 replies to theycallmeroy3's comment
icantgetnosatisfaction

===============PUNDIT=================

1 : Pandit
2 : A learned man : Teacher
3 : A person who gives opinions in an authorative manner ususally through the mass media : Critic.

January 01 2013 at 3:05 PM Report abuse +5 rate up rate down
theycallmeroy3

I walked right into that door, that's a good one.

January 01 2013 at 4:38 PM Report abuse -1 rate up rate down
nelsonblairdogg

THE PRESIDENT AND EVERY ON AROUND HIM ARE LOOSERS,LETS KICK THE CAN DOWN THE ROAD

January 01 2013 at 10:32 AM Report abuse -4 rate up rate down Reply
radicalrebelron

Forget about raising tax's just cut spending first then maybe a little more tax. And forget about a raise until you get things done correctly and in a timely fashion!

January 01 2013 at 10:06 AM Report abuse -4 rate up rate down Reply
Davie2743

If you invested $5000 in the Dow or S&P indexes last year your investment would be worth approximately $5,500.00 not bad.

January 01 2013 at 9:55 AM Report abuse +3 rate up rate down Reply
hatgasbill

What a joke. The one thing they did do however is make sure that they would not get a tax increase on themselves. LOL

January 01 2013 at 9:14 AM Report abuse +7 rate up rate down Reply
2 replies to hatgasbill's comment
theycallmeroy3

You should copywrite this one. Best summary sentence I've read.

January 01 2013 at 9:53 AM Report abuse +5 rate up rate down Reply
democrackso

Of course Obama, Pelosi and Reid don't want tax increases on themselves. That's why they didn't roll the tax rates back when they controlled both houses and the White House. This was just more politcals games from the Obama administration.

January 01 2013 at 2:16 PM Report abuse +3 rate up rate down Reply
1 reply to democrackso's comment
mrspelosi

Well darling we want taxes to go up on everyone else just not on me, Harry, and President Obama dear.

January 01 2013 at 3:45 PM Report abuse +3 rate up rate down