BREAKING NEWS: Fiscal Cliff Averted Before the Thursday Deadline

So, you may have missed it amongst the Kim K. pregnancy news and New Year’s celebrations, but we were still in line to go over the fiscal cliff. Well, technically we went over it. With the 112th Congress still in existence until Thursday at noon, we had about 48 hours to hash out some type of cliff deal that the Republican led House of Representatives could pull themselves together to vote for. Since my last post, President Obama had cajoled House Republicans and the Speaker of the House, John Boehner (R – OH), to protect 99% of the country while raising taxes on the top 1%. House Majority Leader, Eric Cantor (R – VA), had thwarted any compromise between the two parties and the two houses of Congress. But, as I predicted in my last post, a midnight vote on the House floor today successfully kept middle class taxes from increasing drastically and held tax rates constant for the extremely wealthy. Here is a brief rundown of the happenings recently.

A few weeks ago, Rep. Boehner offered a Plan ‘B’ option. This option, once again, attacked spending and did little to meet the demands from Pres. Obama and congressional Democrats that tax rates for the wealthiest Americans go up unilaterally. The Dems had argued consistently that increased revenues in the form of tax hikes for the rich were nonnegotiable options for averting the fiscal cliff. But, with Grover Norquist breathing down their necks about their pledge to never ever ever never increase taxes, Republicans had steadily buckled under the pressure of this recent political debacle. He had repeatedly emphasized that tax increases were not an option. And while many Reps had said that Norquist’s words have no impact on their political decision-making, they held to their pledge. And, even when presented with the option to raise taxes on a small percentage of Americans (with Norquist’s support), Republicans turned it down.

More recently, Mr. POTUS took the fiscal cliff issue to the American public. He had repeated press conferences where he put his foot down demanding that Boehner develop a reasonable plan to avert the fiscal cliff. He laid out a plan to “set $400,000 as the income threshold for a tax rate increase, up from his original plan of $250,000. It also had a new formula for the consumer price index — called chained CPI — that wraps in new assumptions on consumer habits in response to rising prices, such as seeking cheaper alternatives, and would result in smaller benefit increases.” But, what seemed like a foot in the door with House Republicans was ignored when Boehner lost the support of his party.

Then, just yesterday, President Obama stepped out one last time to address the lack of sufficient progress made by Congress on the fiscal cliff deal. Even Vice President Joe Biden had to lend his negotiation techniques and long-time experience in Congress to help our legislative representatives along.

And, in true movie fashion, the Senate answered Pres. Obama’s call for action in a 2AM vote to avert the fiscal cliff. This swift move on New Year’s Day signaled the opportunity to conquer the impasse on the fiscal cliff deal. The deal the Senate passed this morning does several things (per ABC News).

  1. It extends Bush-era tax cuts permanently for individuals making less than $400,000 per year and couples making less than $450,000.
  2. It allows the top marginal tax rate on incomes above those levels to rise to 39.6 percent.
  3. Capital gains taxes would rise to 20 percent from 15 percent.
  4. It raises the estate tax from 35 to 40 percent for estates larger than $5 million.
  5. It prevents the alternative minimum tax from hammering millions of middle-class workers.
  6. Lastly, it extends unemployment benefits for one year.

Some have said President Obama’s rigidity on this issue stems mainly from the fact that he was reelected in November and has no concerns about campaigning again. And, since this is true, it makes sense that he would put his proverbial foot down on this self-inflicted issue.

So what happened next? Well, the House had the power. They attempted to amend the Senate bill to suit their fancy. But, since the bill would have to go back to the Senate no later than tomorrow if that happened, they ended up voting on the bill in its original fashion. The President still has to sign off on the final bill to make it the law of the land. And, the impending danger here was that any work done before the Jan.3rd deadline would have become null and void after noon on Thursday. And even though the bill itself seemed pretty solid, Rep. Cantor had explicitly stated that he did not support the bill in its current form. Since Rep. Cantor is the No.2 Republican in the House, some had said that his opposition came from a desire to dethrone Rep. Boehner who has to survive a vote this week to keep his position as Speaker of the House. Luckily, none of this minutia mattered when Rep. Boehner was able to rally the troops around the Senate bill.

The bill passed the House tonight in a 257-167 bipartisan vote, a majority well over the number of votes needed to pass a bill in Congress’ secondary body. And, in addition to the attributes listed above, the passed bill includes several key pieces of legislation (per CBS News).

  1. A provision called the “Doc Fix” which shields medical care providers from a reimbursement gaps for Medicare services.
  2. An extension on renewable energy subsidies for companies who qualify
  3. A patch for the “milk cliff” which would have resulted in giant increases in milk costs
  4. A freeze on congressional salaries

In a press conference tonight, President Obama praised Congress for passing the bill. But noted that he would like it to be much smoother in the future.

“I am very open to compromise…we can’t simply cut our way to prosperity…while I will negotiate over many things, I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they’ve already passed…if we can put a package like this together with a little bit less drama, a little less brinksmanship…I look forward to working with every single member of Congress to meet this obligation in the New Year.”

In all, there will be a lot to talk about in politics over the next few weeks. Most notably, an issue looming in the distance is the US debt ceiling. Well, we’ve reached it. This means that we have hit our credit limit legally allowed by the federal government. And, we have only got another two months before it has to be raised to meet our current spending levels or patched through cuts and other resolutions. Last year, the debt ceiling conflict rolled on like a cheap soap opera. I’d expect this one to be no different.

These are definitely pocketbook issues. They affect take home pay, spending ability, and social welfare provisions. For now, I say, stay tuned. November was exciting but there’s always something whacky going on in DC.

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