WASHINGTON (AP) — Congress' excruciating, extraordinary
New Year's Day approval of a compromise averting a prolonged tumble off
the fiscal cliff hands President Barack Obama most of the tax boosts on
the rich that he campaigned on. It also prevents House Republicans from
facing blame for blocking tax cuts for most American households, though
most GOP lawmakers parted ways with Speaker John Boehner and opposed the
measure.
Passage also lays the groundwork for future battles between the two sides over federal spending and debt.
Capping
a holiday season political spectacle that featured enough high and low
notes for a Broadway musical, the GOP-run House voted final approval for
the measure by 257-167 late Tuesday. That came after the Democratic-led
Senate used a wee-hours 89-8 roll call to assent to the bill, belying
the partisan brinkmanship that colored much of the path to the final
deal.
"A central promise of my campaign for president was to
change the tax code that was too skewed towards the wealthy at the
expense of working middle-class Americans," Obama said at the White
House before flying to Hawaii to resume his holiday break. "Tonight
we've done that."
The bill would boost the top 35 percent income
tax rate to 39.6 percent for incomes exceeding $400,000 for individuals
and $450,000 for couples, while continuing decade-old income tax cuts
for everyone else. In his re-election campaign last year Obama had vowed
to boost rates on earnings at somewhat lower levels — $200,000 for
individuals and $250,000 for families.
Scores of GOP lawmakers
voted for the measure, reversing a quarter-century of solid Republican
opposition to boosting any tax rates at all.
The bill would also
raise taxes top earners pay on dividends, capital gains and inherited
estates; permanently stop the alternative minimum tax from raising
levies on millions of middle-income families; extend expiring jobless
benefits; prevent cuts in Medicare reimbursements to doctors; and delay
for two months billions in budget-wide cuts in defense and domestic
programs slated for this year.
Both sides lamented their failure
to reach a significant deficit-cutting agreement. But neither much
mentioned another omission: The immediate expiration of a two-year,
2-percentage-point cut in the Social Security payroll tax.
That
break, which put an extra $1,000 in the wallets of typical families
earning $50,000 a year, was an Obama priority two years ago as a way to
boost consumer spending and spark the flagging economy, but it fell
victim this time to other priorities.
House Democrats voted by an
overwhelming 172-16 for the agreement, which was crafted over the
weekend by Senate Minority Leader Mitch McConnell, R-Ky., and Vice
President Joe Biden.
But Republicans tilted against it 151-85. It
is rare for leaders to bring a bill to the House floor that will be
opposed by most lawmakers from their own party, and the decision
underscored the pressure GOP leaders felt to approve the legislation.
Boehner,
R-Ohio, took no public stance on the measure before the vote. But he
guided the compromise to the House floor after an unsuccessful attempt
by many conservatives to persuade leaders to add spending cuts to the
bill.
Had the House inserted those budget cuts and the Senate
refused to consider them, the legislation could have died. That left
House Republicans worried that voters might blame them for a huge,
sweeping tax increase and for any swoon the nation's financial markets
might take when they reopened Wednesday.
"You can be right and you
can be dead right. Which is it?" said Rep. Rich Nugent, R-Fla., of the
quandary Republicans faced. "Right now you need to take the tax issue
off the table" and move on to a focus on curbing spending, he said.
Boehner
voted for the bill, an unusual step because speakers seldom vote, and
he was joined by Rep. Paul Ryan, R-Wis., the GOP's vice presidential
candidate last fall. Voting "no" were the other two top GOP leaders,
Reps. Eric Cantor of Virginia and Kevin McCarthy of California.
Passage
came nearly 24 hours after a decade's worth of tax cuts enjoyed by tens
of millions of Americans expired with the stroke of the new year,
technically raising taxes by more than $500 billion in 2013 alone.
Those
tax increases — plus $109 billion in defense and domestic spending cuts
that were to be automatically triggered Wednesday — became known as the
fiscal cliff. Economists warned that their combined impact would hurl
the economy back into recession, but Obama's signature on the bill would
prevent the "cliff" from taking hold.
Obama can sign the bill remotely using a machine called an "autopen," or the bill can be flown to Hawaii for his signature.
Overall,
the legislation would add nearly $4 trillion to federal deficits over
the next decade compared with what would have happened had all the tax
cuts expired, according to the nonpartisan Congressional Budget Office.
"I'm embarrassed for this generation. Future generations deserve better," complained one foe, Rep. Louie Gohmert, R-Texas.
The
agreement's journey to passage was a tortured one. It included
negotiations between Obama and Boehner on a larger, deficit-cutting deal
that collapsed, and a failed effort by the speaker to drum up enough
GOP votes to pass a "Plan B" that would have limited tax boosts to
incomes exceeding $1 million.
It took weekend talks between
McConnell and Biden, former Senate colleagues, to craft the more modest
package that focused on averting the worst impacts of the fiscal cliff
while postponing any deficit reduction efforts to coming months.
Those
first showdowns will come over the next three months, when the
government's legal ability to borrow money will expire and temporary
financing for federal agency budgets will expire. Republicans have
already said that, as they did in 2011, they will demand spending cuts
as a condition for extending the debt ceiling.
"Now the focus
turns to spending" and overhauling the tax code, Boehner said in a
written statement after the vote. He said the GOP will fight for
"significant spending cuts and reforms to the entitlement programs that
are driving our country deeper and deeper into debt," a reference to
costly benefit programs like Medicare, Social Security and Medicaid.
In
his White House remarks, Obama said that while he was open to
compromise, he would demand deficit-cutting savings from added revenue
on the well-off, not just spending cuts.
He also pointedly said he would "not have another debate with this Congress" over extending the federal borrowing limit.
"If
Congress refuses to give the United States government the ability to
pay these bills on time, the consequences for the entire global economy
would be catastrophic — far worse than the impact of a fiscal cliff," he
said.
Though its focus was on taxes, the measure approved Tuesday
would prevent a potential doubling of milk prices and prevent a $900
salary increase for members of Congress in March. Its extension of
jobless benefits would help 2 million people out of work at least six
months, and it would prevent a 27 percent cut in reimbursements doctors
get for treating Medicare patients.
Weighing in with criticism of
the compromise were the chief authors of an influential bipartisan
deficit-cutting proposal, former GOP Sen. Alan Simpson and Democrat
Erskine Bowles, a former White House chief of staff under President Bill
Clinton. They called the measure "truly a missed opportunity to do
something big to reduce our long term fiscal problems."
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AP reporters David Espo, Charles Babington, Andrew Taylor and Larry Margasak contributed to this report.
