'Fiscal cliff' bill to House, but doubts on spending cuts

US House meets at noon New Year's Day

The Senate-approved compromise to avert the "fiscal cliff" ran headlong into opposition from the No. 2 House Republican and other GOP lawmakers Tuesday, raising questions about how - and in what form - Congress might be able to give final approval to the measure.

"I do not support the bill," Majority Leader Eric Cantor, R-Va., told reporters after Republicans held a lengthy closed-door meeting to gauge support for the compromise. Cantor is an influential leader of conservatives and younger Republicans in the House.

Rep. Steve LaTourette, R-Ohio, and other participants said the overwhelming sentiment among House Republicans was to amend the bill to incorporate more spending cuts and send it back to the Senate. Several lawmakers and aides said such a move was likely, and on balance the GOP reaction seemed to seriously complicate efforts to enact a new law before the current Congress expires on Thursday.

"The speaker and leader laid out options to the members and listened to feedback," said Brendan Buck, spokesman for House Speaker John Boehner, R-Ohio. "The lack of spending cuts in the Senate bill was a universal concern amongst members in today's meeting. Conversations with members will continue throughout the afternoon on the path forward."

Exiting the meeting, Rep. Spencer Bachus, R-Ala., said he was among lawmakers who wanted the deal to include more spending cuts.

"I'd be shocked if this does not go back to the Senate" with changes by the House, Bachus said.

Boehner has pointedly refrained from endorsing the agreement, though he's promised a vote on it or on a GOP alternative right away.

A Senate Democratic aide said the Democratic-run Senate would not immediately return to take up any changed House version of the legislation. He spoke only on condition of anonymity because he was not authorized to publicly address the matter as the House Republicans considered their next move.

Vice President Joe Biden tried rallying House Democrats behind the deal in a separate meeting. When that session ended, Minority Leader Nancy Pelosi, D-Calif., and other top Democrats called on Boehner to allow the House to vote on the Senate-approved accord.

"That is what we expect. That is what the American people deserve," Pelosi told reporters.

The two closed-door gatherings of House lawmakers came just hours after the Senate used an overnight vote to easily approve the bipartisan compromise, which would negate across-the-board tax increases and sweeping spending cuts to the Pentagon and other government agencies.

In a New Year's drama that climaxed in the middle of the night, the Senate endorsed the legislation by 89-8 early Tuesday. That vote came shortly after Biden pushed Democratic senators to back the agreement that he and Senate Minority Leader Mitch McConnell, R-Ky., had brokered hours earlier.

Doing the "right thing"

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.

A late night in Washington

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 would

send 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, issued a statement saying that when legislation clears 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.

On the edge of the cliff

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.

What else? No spilled milk

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.
  • 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.
  • Leave untouched a scheduled 2 percentage point increase in the payroll tax, ending a temporary reduction enacted two years ago to help revive the economy.
  • Gain a one-year extension of long-term unemployment benefits about to expire on an estimated two million jobless.
  • Delay for one year a 27 percent cut in fees for doctors who treat Medicare patients.
  • 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."

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