WASHINGTON | Tue Jan 1, 2013 1:57am EST
The House of Representatives still must approve the measure, possibly on Tuesday.
Showing posts with label Senate. Show all posts
Showing posts with label Senate. Show all posts
Tuesday, 1 January 2013
Senate approves 'fiscal cliff' deal, crisis eased
1 of 9. U.S. Senate Majority Leader Harry Reid (D-NV) (center) departs with an aide, after a senate vote in the early morning hours, from the U.S. Capitol in Washington January 1, 2013.
Credit: Reuters/Jonathan ErnstBy David Lawder and Richard CowanWASHINGTON | Tue Jan 1, 2013 2:59am EST
WASHINGTON (Reuters) - The Senate moved the U.S. economy back from the edge of a "fiscal cliff" on Tuesday, voting to avoid imminent tax hikes and spending cuts in a bipartisan deal that could still face stiff challenges in the House of Representatives.
In a rare New Year's session at around 2 a.m. EST (0700 GMT), senators voted 89-8 to raise some taxes on the wealthy while making permanent low tax rates on the middle class that have been in place for a decade.
But the measure did little to rein in huge annual budget deficits that have helped push the U.S. debt to $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 $600 billion in tax hikes and spending cuts which strictly speaking came into force on Tuesday.
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 is to hold a session on Tuesday starting at noon (1700 GMT).
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 in a statement.
"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," Obama said.
Members were thankful that financial markets were closed, giving them a second chance to return 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 U.S. 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 Wednesday when the current body expires and it is replaced by a new Congress chosen at last November's election.
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 a $109 billion "sequester" of sweeping 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.
'IMPERFECT SOLUTION'
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 the House amending the Senate bill, which would spark another round of legislating.
"The House will honor its commitment to consider the Senate agreement if it is passed. Decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members ... have been able to review the legislation," Boehner and other House Republican leaders said in a statement.
Boehner has struggled for two years to get control over a group of several dozen Tea Party fiscal conservatives in his caucus who strongly oppose tax increases and demand that he force Obama to make savings in the Medicare and Social Security healthcare and retirement programs.
A campaign-style event held by Obama in the White House as negotiations with Senate leaders were taking place on Monday may have made it more difficult for Republicans to back the deal. In remarks to a group of supporters that resembled a victory lap, the president noted that his rivals were coming around to his way of seeing things.
"Keep in mind that just last month Republicans in Congress said they would never agree to raise tax rates on the wealthiest Americans. Obviously, the agreement that's currently being discussed would raise those rates and raise them permanently," he said to applause before the Senate deal was sealed.
Obama's words and tone annoyed Republican lawmakers who seemed to feel that the Democrat was gloating.
"That's not the way presidents should lead," said Republican Senator John McCain, Obama's rival in the 2008 election.
A deal with the House on Tuesday, while uncertain, would not mark the end of congressional budget fights. The "sequester" spending cuts will come up again in February as will the contentious "debt ceiling," which caps how much debt the federal government can hold.
Republicans may see those two issues as their best chance to try to rein in government spending and clip Obama's wings at the start of his second term.
(Additional reporting by Richard Cowan, Mark Felsenthal, Rachelle Younglai, Kim Dixon and Jeff Mason; Writing by Alistair Bell; Editing by Eric Walsh)
Sunday, 30 December 2012
Senate leaders work to avoid New Year's "fiscal cliff"
1 of 12. Senate Majority Leader Harry Reid (D-NV) (2nd L) walks with unidentified aides and security to his office at the U.S. Capitol after returning from a meeting with President Barack Obama at the White House in Washington December 28, 2012.
Credit: Reuters/Mary CalvertBy Richard Cowan and Rachelle YounglaiWASHINGTON | Sat Dec 29, 2012 7:22pm EST
WASHINGTON (Reuters) - Congressional negotiators burrowed into their offices on Saturday to see if they could stop the U.S. economy from falling off of a "fiscal cliff" in just three days when the biggest tax increases ever to hit Americans in one shot are scheduled to begin.
Aides to Senate Majority Leader Harry Reid, a Democrat, and Senate Republican leader Mitch McConnell worked through the day on a possible compromise that would set aside $600 billion in tax increases and across-the-board government spending cuts that are set to kick in next week.
A variety of lower taxes are scheduled to expire at the end of Monday, the last day of the year. If allowed to rise, the approximately $500 billion value of the revenue increases would represent a historic hike when taken together.
The combined punch of the tax increases and spending cuts could push the U.S. economy back into recession.
"We're now at the point where, in just a couple days, the law says that every American's tax rates are going up. Every American's paycheck will get a lot smaller. And that would be the wrong thing to do for our economy," President Barack Obama said in his weekly radio and Internet address, which was broadcast on Saturday.
McConnell left the U.S. Capitol after spending seven hours in his office. "We've been trading paper all day and talks continue into the evening," he told reporters on his way out.
A source with knowledge of the talks, speaking on condition of anonymity, said: "We are still very far apart with almost no time left on the clock."
TEMPORARY PATCHES
One congressional aide close to the talks said that most of what was being discussed late on Saturday would provide temporary patches to the "fiscal cliff" dilemma. The negotiations, the aide said, likely could extend into Sunday.
"They continue to go round and round," the aide said of the negotiations, with ideas constantly in flux.
The aide, who asked not to be identified, said negotiators were discussing the possibility of putting off for a few months the $109 billion in automatic spending cuts due to start on Wednesday. Those cuts would be divided equally between military and non-military programs. It is feared that they could cause severe disruptions inside federal agencies if allowed to occur.
Earlier this week, talk of a temporary delay in the spending cuts was met with derision by some congressional aides.
The extension of the low income tax rates first put in place under Republican former President George W. Bush would also be on a temporary basis, probably one year, the aide said.
No deal had been reached on the most difficult question: Democrats' demand that upper-income earners - families making more than $250,000 a year - see their tax rates go up.
Republicans had been opposed to any rate increase, but lately have signaled a willingness to go along with a higher threshold - and a $400,000 figure has been floating around for days.
Under proposals being discussed, top earners could see their income tax rate rise to 39.6 percent, from the current 35 percent, in order to help tame budget deficits.
The aide added that Republicans still had not agreed to Obama's call for extending long-term unemployment benefits, but that they were demanding some spending cuts to be included in a stop-gap deal.
Disagreements over what to do about low estate taxes that are expiring also had not been worked out, the aide said.
Unless Congress acts, the tax is set to jump on Tuesday - the first day of 2013 - to 55 percent with the first $1 million exempted for individuals. Currently, there is a 35 percent tax and a $5 million exemption.
A Senate Republican leadership aide said that it might not be known until sometime on Sunday whether these talks bear fruit. That is when the leaders are expected to brief their rank-and-file members.
The Senate is scheduled to hold a rare Sunday session beginning at 1 p.m. EST (1800 GMT), but it was not clear whether the chamber would have "fiscal cliff" legislation to act upon.
One Democratic aide was pessimistic that McConnell would come up with a counteroffer that Reid would find acceptable. Such a counteroffer would have to be calibrated in a way that also could attract votes from conservative House of Representatives Republicans, many of whom have balked at tax rate increases on anyone.
'HARD TO SEE'
A senior House Republican aide on Saturday voiced pessimism about prospects for a deal.
"It's hard to see Reid agreeing to anything that can get the votes of the majority of the (Republican) majority in the House, thereby allowing a bipartisan accomplishment," the aide said. A "majority of the majority" refers to the 241 Republicans who are in the 435-member House.
The Republican aide placed the blame squarely on Democrats, as many Republican members have done publicly, saying that going off the "fiscal cliff" is a "policy upside" for them. "Higher taxes, devastating defense cuts. The polls tell them they can win the PR (publican relations) war in January. From their perspective, why stop the cliff dive?"
Democrats, in turn, have publicly accused House Speaker John Boehner, the top Republican in Congress, of preferring to put off any tough "fiscal cliff" votes until after a January 3 House election in which he is expected to win another two-year term as speaker.
If McConnell and Reid can manage to reach a deal on inheritance taxes and raising income tax rates on the wealthiest Americans, they likely would throw into the compromise some other "fiscal cliff" solutions.
Those could include extending an array of other expiring tax breaks such as one that encourages companies to conduct research and development. Also, Congress wants to prevent a steep pay-cut in January for doctors who treat elderly patients under the Medicare health insurance program.
Lawmakers also want to prevent middle-class taxpayers from inadvertently creeping into a higher tax bracket, known as the alternative minimum tax, intended for the wealthiest.
If the Reid-McConnell effort fails, Obama has asked the Senate to hold a vote on Monday on a "basic package" that would stop taxes from going up on the middle class and would extend long-term unemployment benefits that are about to expire. If it passes the Senate, its fate would be in the hands of the Republican-controlled House.
(Additional reporting by Thomas Ferraro and Jeff Mason; Editing by Will Dunham)
Analysis: For Senate leaders, a mission impossible from Obama
U.S. President Barack Obama makes a statement to reporters after meeting with congressional leaders at the White House in Washington December 28, 2012.
Credit: Reuters/Jonathan ErnstBy Richard CowanWASHINGTON | Sat Dec 29, 2012 1:02am EST
WASHINGTON (Reuters) - Following a Friday meeting with congressional leaders, an impatient and annoyed President Barack Obama said it was "mind boggling" that Congress has been unable to fix a "fiscal cliff" mess that everyone has known about for more than a year.
He then dispatched Senate Majority Leader Harry Reid, a Democrat, and Minority Leader Mitch McConnell, a Republican, on a mind-boggling mission: coming up with a bipartisan bill to break the "fiscal cliff" stalemate in the most partisan and gridlocked U.S. Congress of modern times - in about 48 hours.
Reid and McConnell, veteran tacticians known for their own long-running feud, have been down this road before.
Their last joint venture didn't turn out so well. It was the deal in August 2011 to avoid a U.S. default that set the stage for the current mess. That effort, like this one, stemmed from a grand deficit-reduction scheme that turned into a bust.
But they have never had the odds so stacked against them as they try to avert the "fiscal cliff" - sweeping tax increases set to begin on Tuesday and deep, automatic government spending cuts set to start on Wednesday, combined worth $600 billion.
The substantive differences are only part of the challenge. Other obstacles include concerns about who gets blamed for what and the legacy of distrust among members of Congress.
Any successful deal will require face-saving measures for Republicans and Democrats alike.
"Ordinary folks, they do their jobs, they meet deadlines, they sit down and they discuss things, and then things happen," Obama told reporters. "If there are disagreements, they sort though the disagreements. The notion that our elected leadership can't do the same thing is mind-boggling to them."
CORE DISAGREEMENT
The core disagreement between Republicans and Democrats is tough enough. It revolves around the low tax rates first put in place under Republican former President George W. Bush that expire at year's end. Republicans would extend them for everyone. Democrats would extend them for everyone except the wealthiest taxpayers.
The first step for Reid and McConnell may be to find a formula acceptable to their own parties in the Senate.
While members of the Senate, more than members of the House of Representatives, have expressed flexibility on taxes, it's far from a sure thing in a body that ordinarily requires not just a majority of the 100-member Senate to pass a bill, but a super-majority of 60 members.
With 51 Democrats, two independents who vote with the Democrats and 47 Republicans, McConnell and Reid may have to agree to suspend the 60-vote rule.
Getting a bill through the Republican-controlled House may be much tougher. The conservative wing of the House, composed of many lawmakers aligned with the Tea Party movement who fear being targeted by anti-tax activists in primary elections in 2014, has shown it will not vote for a bill that raises taxes on anyone, even if it means defying Republican House Speaker John Boehner.
Many Democrats are wedded to the opposite view - and have vowed not to support continuing the Bush-era tax rates for people earning more than $250,000 a year.
Some senators are wary of the procedural conditions House Republicans are demanding. Boehner is insisting the Senate start its work with a bill already passed by the House months ago that would continue all Bush-era tax cuts for another year. The Democratic-controlled Senate may amend the Republican bill, he says, but it must be the House bill.
For Boehner, it's the regular order when considering revenue measures, which the U.S. Constitution says must originate in the House.
SHIFT BLAME
As some Democrats see it, it's a way to shift blame if the enterprise goes down in flames. House Republicans would be able to claim that since they had already done their part by passing a bill, the Senate should take the blame for plunging the nation off the "cliff."
And that could bring public wrath, currently centered mostly on Republicans, onto the heads of Democrats.
Voters may indeed be looking for someone to blame if they see their paychecks shrink as taxes rise or their retirement savings dwindle as a result of a plunge in global markets.
If Reid and McConnell succeed, there could be political ramifications for each side. For example, a deal containing any income tax hikes could complicate McConnell's own 2014 re-election effort in which small-government, anti-tax Tea Party activists are threatening to mount a challenge.
If Obama and his fellow Democrats are perceived as giving in too much, it could embolden Republicans to mount challenge after challenge, possibly handcuffing the president before his second term even gets off the ground.
It could be a sprint to the finish. One Democratic aide expected "negotiation for a day." If the aide is correct, the world would know by late on Saturday or early on Sunday if Washington's political dysfunction is about to reach a new, possibly devastating, low.
If Reid and McConnell reach a deal, it would then be up to the full Senate and House to vote, possibly as early as Sunday.
Reid and McConnell have been through bitter fights before. The deficit reduction and debt limit deal that finally was secured last year was a brawl that ended only when the two leaders agreed to a complicated plan that secured about $1 trillion in savings, but really postponed until later a more meaningful plan to restore the country's fiscal health.
That effort led to the automatic spending cuts that form part of the "fiscal cliff."
Just months later, in December 2011, Reid and McConnell were going through a tough fight over extending a payroll tax cut.
In both instances, it was resistance from conservative House Republicans that complicated efforts, just as is the case now with the "fiscal cliff."
(Editing by Fred Barbash and Will Dunham)
Senate leaders to make last-ditch "fiscal cliff" effort
1 of 12. U.S. Senate Minority Leader Mitch McConnell (R-KY) speaks to reporters on his way to lunch at the U.S. Capitol in Washington December 28, 2012.
Credit: Reuters/Mary F. CalvertBy Roberta Rampton and Richard CowanWASHINGTON | Fri Dec 28, 2012 8:35pm EST
WASHINGTON (Reuters) - President Barack Obama and U.S. congressional leaders agreed on Friday to make a final effort to prevent the United States from going over the "fiscal cliff," setting off intense bargaining over Americans' tax rates as a New Year's Eve deadline looms.
With only days left to avoid steep tax hikes and spending cuts that could cause a recession, two Senate veterans will try to forge a deal that has eluded the White House and Congress for months.
Obama said he was "modestly optimistic" an agreement could be found. But neither side appeared to give much ground at a White House meeting of congressional leaders on Friday.
What they did agree on was to task Harry Reid, the Democratic Senate majority leader, and Mitch McConnell, who heads the chamber's Republican minority, with reaching a budget agreement by Sunday at the latest.
"The hour for immediate action is here. It is now. We're now at the point where in just four days, every American's tax rates are scheduled to go up by law. Every American's paycheck will get considerably smaller. And that would be the wrong thing to do," Obama told reporters.
A total of $600 billion in tax hikes and automatic cuts to government spending will start kicking in on Tuesday - New Year's Day - if politicians cannot reach a deal. Economists fear the measures will push the U.S. economy into a recession.
Pessimism about the fiscal cliff helped push U.S. stocks down on Friday for a fifth straight day. The Dow Jones industrial average dropped 158.20 points, or 1.21 percent. Retailers are blaming worries about the "fiscal cliff" for lackluster Christmas season shopping.
Under the plan hashed out on Friday, any agreement between McConnell and Reid would be backed by the Senate and then approved in the Republican-controlled House of Representatives before the end of the year.
But the House could well be the graveyard of any accord.
A core of fiscal conservatives there strongly opposes Obama's efforts to raise taxes for the wealthiest as part of a plan to close America's budget deficit. House Republicans also want to see Obama commit to major spending cuts.
Talks between Obama and Republican House Speaker John Boehner collapsed last week when several dozen Republicans defied their leader and rejected a plan to raise rates for those earning $1 million and above.
A Democratic aide said Boehner stuck mainly to "talking points" in Friday's White House meeting, with the message that the House had acted on the budget and it was now time for the Senate to move.
TALKS ON 'BIG NUMBERS'
The two Senate leaders and their aides will plunge into talks on Saturday that will focus mainly on the threshold for raising income taxes on households with upper-level earnings, a Democratic aide said. Analysts say both sides could agree on raising taxes for households earning more than $400,000 or $500,000 a year.
The pair will also discuss whether the estate tax should be kept at current low levels or allowed to rise, the aide said.
Democrat Reid warned of tough talks.
"It's not easy, we're dealing with big numbers, and some of that stuff we do is somewhat complicated," he said.
McConnell described Friday's White House summit, also attended by Democratic House Minority Leader Nancy Pelosi, as "a good meeting."
"So we'll be working hard to try to see if we can get there in the next 24 hours. So I'm hopeful and optimistic," he said.
If things cannot be worked out between the Senate leaders, Obama said he wanted both chambers in Congress to vote on a backup plan that would increase taxes only for households with more than $250,000 of annual income.
The plan would also extend unemployment insurance for about 2 million Americans and set up a framework for a larger deficit reduction deal next year.
There are signs in the options market that investor fear is taking hold. The CBOE Volatility Index, or the VIX, the market's favored anxiety indicator, has remained at relatively low levels throughout this process, but it moved on Friday above 22, the highest level since June.
But some in the market were resigned to Washington going beyond the New Year's Day deadline, as long as a serious agreement on deficit reduction comes out of the talks in early January.
"Regardless of whether the government resolves the issues now, any deal can easily be retroactive. We're not as concerned with January 1 as the market seems to be," said Richard Weiss, a senior money manager at American Century Investments.
Another component of the "fiscal cliff" - $109 billion in automatic spending cuts to military and domestic programs - is set to kick in on Wednesday.
S&P rating agency said on Friday the fiscal cliff impasse did not affect the U.S. sovereign rating.
That lifted the immediate threat of a downgrade from the agency, which cut the United States' triple-A rating in August, 2011 in an unprecedented move after a similar partisan budget fight.
(Additional reporting by David Lawder, Thomas Ferraro, Rachelle Younglai and Mark Felsenthal; Writing by Alistair Bell; Editing by Peter Cooney)
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