Politics

December 31, 2012

Democratic officials: Fiscal 'cliff' deal reached

The measure would extend Bush-era tax cuts for family incomes below $450,000, and spending cuts would be delayed two months while Republicans and Democrats try to reach an agreement.

The Associated Press

WASHINGTON — Racing the clock, the White House reached a New Year's Eve accord with Senate Republicans late Monday to block across-the-board tax increases and spending cuts in government programs due to take effect at midnight, according to administration and Senate Democratic officials.

click image to enlarge

President Barack Obama gestures as he speaks about the fiscal cliff, Monday, Dec. 31, 2012, in the South Court Auditorium at the White House in Washington. The president said it appears that an agreement to avoid the fiscal cliff is "in sight," but says it's not yet complete and work continues. (AP Photo/Charles Dharapak)

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Under the deal, taxes would remain steady for the middle class and rise at incomes over $400,000 for individuals and $450,000 for couples — levels higher than President Barack Obama had campaigned for in his successful drive for a second term in office.

Spending cuts aimed at the Pentagon and domestic programs would be deferred for two months. That would allow the White House and lawmakers time to regroup before plunging very quickly into a new round of budget brinkmanship certain to revolve around Republican calls to rein in the cost of Medicare and other government benefit programs.

Democratic officials said that barring opposition from majority Democrats, a late-night Senate vote was possible on the deal, which was brokered by Vice President Joseph Biden and Senate Republican leader Mitch McConnell.

Passage would send the measure to the House, where Speaker John Boehner, R-Ohio, refrained from endorsing a package as yet unseen by his famously rebellious rank-and-file.

The House Democratic leader, Rep. Nancy Pelosi of California, issued a statement saying that when legislation clears the Senate, "I will present it to the House Democratic caucus."

Democratic senators were still in a meeting with Biden less than 2 hours before midnight, with no votes officially scheduled. Republicans were scarce around the Capitol.

Maine's two Republican senators, Susan Collins and Olympia Snowe, had both indicated in recent weeks that they would be willing to go along with a tax increase on upper-income families in order to protect the middle class. Snowe reiterated again Sunday that she could support a tax hike on those making more than $250,000 to avoid going off of the cliff.

Collins, meanwhile, had expressed concerns about not addressing the sequestration spending cuts as part of a deal.On Monday afternoon she emerged from a Republican caucus meeting and said she was encouraged by what she was hearing.

Collins declined to discuss specific aspects of the deal, saying that the details were still being worked out.

“I don’t want to jinx the negotiations by talking about it in more detail,” Collins said with a laugh, “but I am optimistic.”

Without legislation, economists in and out of government warned of a possible recession if the economy were allowed to fall over a fiscal cliff of tax increases and spending cuts.

And while the deadline to act was technically midnight, Obama's signature on legislation by the time a new Congress takes office at noon on Jan. 3, 2013 — the likely timetable — would eliminate or minimize any inconvenience for taxpayers.

Even by the dysfunctional standards of government-by-gridlock, the activity at both ends of historic Pennsylvania Avenue was remarkable as the administration and lawmakers spent the final hours of 2012 haggling over long-festering differences.

"One thing we can count on with respect to this Congress is that if there's even one second left before you have to do what you're supposed to do, they will use that last second," the president said in a mid-afternoon status update on the talks.

As darkness fell on the last day of the year, Obama, Biden and their aides were at work in the White House, and lights burned in the House and Senate. Democrats complained that Obama had given away too much in agreeing to limit tax increases to incomes over $450,000, far above the $250,000 level he campaigned on. Yet some Republicans recoiled at the prospect of raising taxes at all.

(Continued on page 2)

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