WASHINGTON – The Democratic White House and Republican congressional leaders struck a last-minute agreement Monday night to avoid most of the tax hikes in the “fiscal cliff,” while putting off a series of draconian spending cuts for two months.
A day of tempered optimism and frayed tempers at both ends of Pennsylvania Avenue ended with a late-night meeting where Vice President Biden was trying to sell the deal to Senate Democrats. A vote on the plan was expected shortly afterwards, either very late Monday or early today.
The House, meanwhile, planned to reconvene at noon today – after the nation technically fell off the fiscal cliff – to consider the plan.
Word of the final deal leaked hours after President Obama and Senate Republican Leader Mitch McConnell announced they were nearing agreement.
“There are still issues left to resolve, but we’re hopeful that Congress can get it done,” Obama said at a White House event in the mid-afternoon. “But it’s not done.”
Minutes later, McConnell, of Kentucky, took to the Senate floor to urge his colleagues to support the coming compromise.
“We will continue to work on finding smarter ways to cut spending, but let’s not let that hold up protecting Americans from the tax hike,” McConnell said. “We can do this. We must do this.”
Hours slipped by without an announcement of a final agreement, prompting the House to abandon its plans to meet late into the evening.
“Attn. Capitol Hill reporters: It is impossible for the House to schedule a vote on a deal that does not exist,” Doug Heye, spokesman for House Majority Leader Eric Cantor, tweeted in the middle of the afternoon. “Thank you.”
Finally at about 9 p.m., congressional aides said that Biden and McConnell had finalized a deal that would:
• Keep tax rates steady for most Americans, while increasing the rate on individual income of more than $400,000 and household income of more than $450,000. For those higher earners, tax rates would increase from the current 35 percent to 39.6 percent – the level it was at during the Clinton administration.
• Permanently raise the tax rate on dividends and capital gains to 20 percent, up from 15 percent, for upper-income earners in the new top tax bracket.
• Preserve the child tax credit and a tax credit for college tuition.
• Fix the alternative minimum tax so that 30 million Americans would not have to pay it.
• Increase the estate tax for individual estates of more than $5 million and family estates of more than $10 million from the current 35 percent to 40 percent.
• Allow the 2 percent, two-year cut in the payroll tax to lapse, restoring the rate to 6.2 percent.
• Extend unemployment benefits for 2 million unemployed Americans.
• Preserve current Medicare payments for doctors.
• Delay the automatic budget cuts, which were set to take effect today, for two months – thereby setting up a second late-February fiscal cliff where those budget cuts will have to be dealt with along with another extension of the federal debt ceiling.
• Congressional leaders also planned to move separate legislation extending current federal dairy policy for a month to prevent a doubling of milk prices early this year.
But the big news was agreement on a deal that, if approved by both houses of Congress, would avert a tax increase for more than 90 percent of Americans.
The deal came despite a great deal of renewed partisan acrimony, much of it stemming from the president’s appearance at a podium in front of middle-class families who supposedly would be affected if the nation were to fall off the fiscal cliff.
Obama signaled at the event that he may push for additional higher taxes on the wealthy, beyond those in the current deal, rather than accept a future budget deal based on budget cuts alone.
“If (Republicans) think that’s going to be the formula for how we solve this thing, then they’ve got another thing coming,” Obama said. “That’s not how it’s going to work. We’ve got to do this in a balanced and responsible way.”
Hearing that, several Republicans took to the floor of the Senate to express their anger.
“If the desire was to offend me, the speech did, but if the desire was to deter me, it did not,” said Sen. Johnny Isakson, R-Ga.
In the coming talks over the debt ceiling, “the president’s not going to make a deal by poking us in the eye,” Isakson added.
The dust-up over the president’s comments came as the outcome of the current fight over the fiscal cliff remains anything but certain.
Sen. Tom Harkin, a liberal Democrat from Iowa, said he, for one, was dismayed at the deal that was taking shape.
Complaining that taxes should increase on households earning more than $250,000, Harkin took to the floor of the Senate to say: “No deal is better than a bad deal.”
Sen. Rand Paul, R-Ky., agreed, but for different reasons.
“The Republican Party should have no fingerprints on this and in no way support anything that raises taxes, because it’s bad economic policy,” Paul said on the Senate floor.
Given such concerns, Senate passage of the measure was still not absolutely certain – and House passage may be less so.
Rep. Mike Rogers, R-Mich., told reporters that if the deal were to put off the automatic spending cuts, it would have to include other provisions aimed at taming federal spending.
“When it comes here we’ll figure out what we can pass,” Rogers said. “If we don’t have real spending cuts, I don’t think it could pass the House of Representatives.”
Congressional aides said, though, that the Senate’s delay actually might win additional votes for the passage of the compromise in the House.
That’s because nearly all House Republicans have signed a pledge not to raise taxes – a pledge they would have to violate by voting for the compromise in 2012.
But with the tax hikes technically taking effect at midnight, the same vote today will actually be a vote for a tax cut, which makes it much more politically palatable for conservative Republicans.
Another potential area of concern, though, was the fact that the deal pulling the nation from the precipice of the fiscal cliff will push the nation back to the edge of trouble in only two months.
The deal only delays budget cuts adding up to $1.2 trillion over 10 years, including $109 billion in 2013, that are evenly split between defense and domestic programs – meaning they are so draconian that Republicans and Democrats alike loath them.
Coming up with a plan to replace them with other cuts – most likely to entitlement programs such as Medicare and Social Security, among other programs – will be controversial, especially when paired with an increase in the federal debt ceiling.
But lawmakers such as Rep. Brian Higgins, D-Buffalo, were inclined to go along with the deal nevertheless.
“It moves of off the fiscal cliff, and that is good,” Higgins said. “But it only deals with half the problem.”
News wire services contributed to this report. Email: email@example.com.