Congress Steps Back from “Fiscal Cliff”
Wednesday, January 2nd, 2013January 2, 2013
The United States House of Representatives passed legislation on January 1 that averted the so-called “fiscal cliff”–dramatic increases in federal income taxes and drastic cuts in federal spending, which theoretically went into effect at 12:01 a.m. on January 1. Eight-five Republicans joined 172 Democrats to vote to raise the federal income tax from 35 percent to 39.6 percent on household income above $400,000 a year for individuals and $450,000 for couples. Earlier in the day, the Senate passed the bill by a vote of 89 to 8. Senate Minority Leader Mitch McConnell and Vice President Joe Biden forged the “fiscal cliff” deal after negotiations between President Barack Obama and House Speaker John Boehner broke down after days of discussion.
Certain tax deductions and credits will also be phased out on income above $250,000. For income below those levels, the bill makes permanent the tax cuts implemented during the George W. Bush presidency. The measure also extends unemployment insurance to 2 million unemployed workers who were on the verge of losing federal assistance. The bill delays for two months the automatic cuts, the so-called sequestered funds, to the Department of Defense and other federal agencies that would otherwise have kicked in on January 2. It does not, however, extend the 2-percent cut to the payroll tax that was enacted to stimulate the economy after the 2008 credit crisis and recession.
Political experts regard the legislation as a clear victory for President Obama, who ran for reelection vowing to impose higher taxes on the wealthy. House Republicans were unhappy that the legislation did not significantly cut spending on Medicare, Medicaid, and other social programs that Republicans maintain must be trimmed to bring the national debt under control.
Additional World Book articles:
- Congress of the United States
- Economic Crisis: The Banking Meltdown (a special report)
- Entitlements—Benefit of Doubt (a special report)
- Medicaid in Distress (a special report)
- Tempest in a Tea Party (a special report)