Fiscal cliff bill okayed, US house in order

New York, Jan 2: US President Barak Obama got most of what he sought as he braced for another fight with the lawmakers on raising borrowing limit. The Republican-controlled House of Representatives voted by 257 to 167 on Tuesday night to approve a deal that shatters two decades of Republican anti-tax orthodoxy by raising rates on the wealthiest even as it makes cuts for everybody else permanent. But many liberals feel that Obama could have negotiated more higher tax rate for the wealthy.

The Senate had passed the measure earlier in a rare New Year's Day session and Obama said he will sign it into law shortly that will prevent the world's largest economy off the "fiscal cliff" into recession.

Lawmakers had struggled to find a way to head off across-the-board tax hikes and spending cuts worth $600 billion that began to take effect at midnight on January 1, a legacy of earlier failed budget deals that is known as the fiscal cliff.

Speaking shortly after the vote, Obama said he hoped future deals would "not scare the heck out of folks quite as much." At the same time, he told Republicans that he expected them to approve an increase in the nation's borrowing authority without the brinksmanship that has marked other showdowns.

"While I will negotiate over many things, I will not have another debate with this Congress about whether or not they should pay the bills they have already racked up," he said.

Why Republicans agreed?

Tuesday's vote came in as the Republicans were unable to unite behind any alternative to Obama's proposal. It became clear that Obama has the vote as House Speaker John Boehner and other Republican House leaders stayed silent during the debate on the House floor which was unusual for a major vote. Boehner backed the deal, but many of his top lieutenants voted against it.

Even though many Republicans were uneasy with the tax hikes for the wealthy and wanted more spending cuts, they came around to realize that the fiscal cliff would damage the economy. Opinion polls show the public would blame Republicans if a deal were to fall apart.

Income tax rates will now rise on families earning more than $450,000 per year and the amount of deductions they can take to lower their tax bill will be limited.

Low temporary rates that have been in place for the past decade will be made permanent for less-affluent taxpayers, along with a range of targeted tax breaks put in place to fight the 2009 economic downturn.

However, workers will see up to $2,000 more taken out of their paychecks annually with the expiration of a temporary payroll tax cut. Planned cuts of $109 billion to domestic and military programs were put off for two months.

The non-partisan Congressional Budget Office said the bill would increase budget deficits by nearly $4 trillion over the coming 10 years, compared to the budget savings that would occur if the extreme measures of the cliff were to kick in.

OneIndia News