Although Congress dipped into the first day of the New Year, the Senate and House concluded voting on Tuesday to pass a measure that averted the fiscal cliff. The package maintained both tax cuts that were set to expire yesterday as well as spending measures in governmental areas deemed necessary.
President Obama still needs to sign the bill for it to go into effect, but his signing is considered a foregone conclusion as he has already indicated he will sign the bill.
The House passed the measure by a 257-167 vote. On Monday, many Republicans in the House expressed concern that the measure coming before them did not do enough to execute spending cuts in an effort to reduce the budget deficit. But once they realized they did not have enough votes to change the bill as written, the voting moved forward.
President Obama offered his thanks late Tuesday night to those who worked to get a measure in place. The President noted that this bill was a first step in discussions that would likely continue throughout 2013 as to how to best reduce the deficit.
“This law is just one step in the broader effort to strengthen our economy and broaden opportunity for everybody,” President Obama said.
John Boehner, the Speaker of the House, echoed President Obama’s sentiments.
“The American people re-elected a Republican majority in the House, and we will use it in 2013 to hold the President accountable for the `balanced’ approach he promised, meaning significant spending cuts and reforms to the entitlement programs that are driving our country deeper and deeper into debt,” Boehner said.
The bill that was passed maintained 2012 income tax rates for those who make less than $450,000. Those making more than $450,000 will see an increase in income taxes. But Americans will see their paychecks reduced by an increased Social Security tax, as the two percent reduction that was in place in 2012 was allowed to expire.
In addition, the bill extended unemployment benefits for
approximately 2 million people whose benefits were set to expire in the early weeks of January, and spending cuts that were going to impact various governmental programs—especially programs associated with the military—were prevented.
The approximately $600 billing in expiring tax cuts and spending measures had been creating uncertainty in the markets. When the stock markets open Wednesday morning for the first time in the New Year, economists are expecting to see an initial jump in the markets now that the uncertainty has been address for at least a time.
The final votes on the measure came from the Senate on Tuesday morning and the House on Tuesday evening. Although there was talk of taking a bi-partisan approach to addressing the fiscal cliff, Senate Democrats made it clear during the day on Tuesday they would blame the Republican-led House if the bill did not pass.
However, the blame-game and need to address the fiscal cliff may continue in a matter of months, as the bill that was passed only stands in most areas for approximately two months, so Congress will need to continue to work to get a more permanent solution in place to extended the fixes.
Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.