Just a few short hours ago, while many of us were sleeping or ringing in the new year, the Senate passed the fiscal cliff bill 89-8.
The Senate, in a pre-dawn vote two hours after the deadline passed to avert automatic tax increases, overwhelmingly approved legislation on Tuesday that would allow tax rates to rise only on affluent Americans while temporarily suspending sweeping, across-the-board spending cuts.
The deal, worked out in furious negotiations between Vice President Joseph R. Biden Jr. and the Republican Senate leader, Mitch McConnell, passed 89 to 8, with just three Democrats and five Republicans voting no. Although it lost the support of some of the Senate’s most conservative members, the broad coalition that pushed the accord across the finish line could portend swift House passage as early as New Year’s Day.
Quick passage before the markets reopen on Wednesday would likely negate any economic damage from Tuesday’s breach of the so-called “fiscal cliff” and largely spare the nation’s economy from the one-two punch of large tax increases and across-the-board military and domestic spending cuts in the New Year.
“This shouldn’t be the model for how to do things around here,” Mr. McConnell said just after 1:30 a.m. “But I think we can say we’ve done some good for the country.”
Now it moves to the House were its fate remains uncertain.
The fate of a hard-fought early-morning Senate deal on tax hikes and spending cuts now rests with the House of Representatives where it faces a tough sell.
Members of the GOP-controlled House are scheduled to meet at noon and take up the measure. If House lawmakers approve the legislation, it will then go to President Obama to sign. But if the House fails to come to a compromise, Americans could be in for a very rocky start to the new year.
The bottom line:
In short, according to rough calculations forwarded by a source close to the talks, the proposal would include $620 billion in new tax hikes and $15 billion in net spending cuts.
Gruesome, to be sure, but as I noted yesterday, there was nothing the GOP could do to stop Obama’s tax increases since they were scheduled to go into effect — for everyone — at midnight, and Republicans alone would get the blame for raising taxes on the middle class. All the GOP could do was limit the extent of Obama’s money grab, and I was frankly amazed Republicans were able to raise the threshold from $250,000 to $450,000. Now, assuming there are enough votes in the House to pass the Senate’s bill, which permanently extends the Bush tax rates for everyone under $450,000 ($400,000 for single filers), Obama won’t be able to raise taxes again without the Republican House agreeing to it.
Again, last night’s tax increase on productive Americans was already baked into the cake. The only way to stop it was if the House, Senate, and Obama all agreed to do so. That wasn’t going to happen. But once tax rates are made permanent, the only way to raise them is if the House, Senate, and Obama all agree to do so. That’s not going to happen either. If the House holds its nose and passes a “balanced” bill that contains more than 41 dollars in tax increases for each dollar in spending cuts, House Republicans won’t forget that mix. With that in mind, and Obama no longer able use the threat of middle class tax hikes as negotiating leverage, Republicans will be in a much stronger bargaining position when the debt ceiling comes up in two short months. So when Obama says something like this …
If Republicans think I will finish the job of deficit reduction through spending cuts alone,” he said, then “they’ve got another thing coming. That’s not how it’s going to work.”
… it’s clear our most brilliant President “evah” is either ignorant of basic civics, delusional, or believes himself a dictator. Probably all of the above. And that’s if you believe Obama has any intention of ever addressing the deficit in the first place. I don’t. Anyway, at the end of the day, Senator Hatch’s synopsis of last night’s activities in the Senate comes closest to my thoughts on the matter:
“I reluctantly supported it because it sets in stone lower tax rates for roughly 99 percent of American taxpayers,” said Sen. Orrin Hatch, R-Utah. “With millions of Americans watching Washington with anger, frustration and anxiety that their taxes will skyrocket, this is the best course of action we can take to protect as many people as possible from massive tax hikes.”
The House convenes in about 2 hours. Stay tuned.
Update: Ed Morrissey does a much more succinct job of making the point I was trying to make above: specifically, that with tax rates removed from the table by this deal, the GOP will have significantly more leverage to focus solely on spending in future deficit reduction negotiations:
If there is a silver lining for Republicans, it’s that they have successfully delinked tax rates and spending issues in this fight. The next round of bargaining will deal only with government spending, and House Republicans will have the debt ceiling as a powerful card to play.
Update II: I think it’s important to note that as of right now, as I type this, all of our taxes are higher than they were 13 hours ago. The Bush tax rates are officially a thing of the past for everyone in America (who pays taxes). To paraphrase Milton Friedman, I’m for cutting any taxes under any circumstances for any reason, whenever it’s possible. It’s possible now to cut taxes for 99% of the country. I can’t think of a reason not to.
Update III: I associate myself with Allahpundit’s comments regarding the utility, or, more accurately, lack thereof, of the House rejecting the Senate deal:
Just remind me again what “important” goal will be achieved by forcing a new round of negotiations. What sort of spending cuts do you expect to see here? A trillion dollars over 10 years when we’re running trillion-dollar deficits annually? Even if they got Obama to agree to that, why would you believe that future Congresses would allow those cuts to happen down the line? This entire process is an elaborate charade designed to postpone the ultimate reckoning on entitlement reform, and you’re simply not going to wring serious entitlement reform out of the Democrats given the two parties’ current postures. Obama just won reelection; the Democrats expanded their numbers in the House and Senate; entitlement reform remains depressingly unpopular among the public despite attempts to educate them about the role mandatory spending plays in driving the national debt. House Republicans aren’t going to hold out for weeks on end in the futile hope of revamping Medicare against that backdrop while middle-class voters stew over their new, higher tax brackets. Why risk some of the GOP’s small reserve of political capital on a deal that’s only negligibly less terrible than this one? I understand the “let it burn” strategy, to force the public to fully absorb the cost of big government. I don’t understand this one.
A quote from Philip Klein: “There’s a lot to hate in this deal, no doubt. But any honest assessment of it must grapple with the reality of Obama as president, Harry Reid as Senate Majority Leader and $4.5 trillion in automatic tax hikes hitting in the new year. With this in mind, I’d rate the deal as objectively bad, but relatively good.”