News Column

US Congress Takes Deep Breath, Looks Toward Next Cliff Battle

Jan 2, 2013

With dramatic New Year's Day votes in the Senate and House, the US fiscal cliff battle came to a close in Washington, but the next round is only just starting as Congress and the White House look to scrap again in the coming weeks over spending and the debt.

U.S. President Barack Obama resumed his vacation in Hawaii early Wednesday after saying he would sign the bill that a divided House of Representatives passed late Tuesday night in a 257-167 vote. That followed the Senate's 89-8 approval on less divided party lines.

Higher taxes for millions of Americans were averted and the U.S. avoided severe austerity measures, but taxes on the highest earners will go up. In the wake of the bill's passage, Washington not only breathed a sigh of relief, U.S. markets also surged more than 2 percent following rallies on Asian and European markets.

While Obama could claim at least a partial victory in having kept a campaign promise to let tax cuts on the upper 2 per cent of earners expire, he also must now face what is expected to be an even tougher fight on spending.

Obama acknowledged that there would be a lot of work to do in 2013, saying he hoped for "a little bit less drama" in Congress and deliberations that don't "scare the heck out of folks quite as much."

After the Senate's dramatic 2 am vote Tuesday morning, House Republicans started parsing the bill, complaining bitterly that it would raise taxes without making any significant cuts in government spending. As the House deliberated all day Tuesday, at times it appeared the measure wouldn't come to the floor or would be amended and derail the compromise struck by Senate and White House negotiators.

House Speaker John Boehner, who voted yes on the bill, quietly left the Capitol without making any statements. He previously has said he would hold Obama to significant spending reductions and reforms of social programmes when it comes to spending and the debt.

Representatives of the anti-tax Tea Party meanwhile called it a disaster because it continues what they call frivolous spending.

The president started setting the stage for the upcoming discussions by reiterating his view that the deficit needs to be reduced in a balanced way in which "everyone pays their fair share."

The new deadline for dealing with the debt ceiling is the end of February, and Obama vowed he would refuse to have another debate over whether Congress has to pay bills already incurred. If it doesn't pay the bills on time, he said, the consequences for the entire global economy would be catastrophic - far worse than the impact of a fiscal cliff. "We can't go down that path again," Obama said.

The bill passed Tuesday fails to address the question of the nation's debt ceiling of $16.4 trillion, which was reached on New Year's Eve. It was disagreement over the debt ceiling that brought the U.S. to the brink of default in August 2011 - and produced the harsh fiscal cliff deal.

That deal drawn up then by Congress was meant to develop a more reasonable approach to spending by the last day of 2012. But work on that approach was disrupted by elections in November and prolonged political bickering.

The nation's debt has ballooned due to several factors over the past decade, including the Bush-era tax cuts, the wars in Iraq and Afghanistan, a recession, growing Medicare costs and the financial and housing crises.

Republicans also acknowledged that there was much work to be done in the coming weeks on spending and the debt.

Senator John Hoeven, speaking on broadcaster MSNBC, called the two matters a "real challenge" and said Congress and the White House must

approach the debt ceiling in a way that produces real savings and also reforms on entitlement reform, meaning spending on things such as Medicare and Social Security, to save those programmes for the long term.

Source: Copyright 2013 dpa Deutsche Presse-Agentur GmbH

Story Tools Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters