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Today: Tuesday, October 24, 2017
 

United States avoids calamity in fiscal cliff drama
 
(Reuters) - The United States averted economic calamity on Tuesday when lawmakers approved a deal

to prevent huge tax hikes and spending cuts that would have pushed the world's largest economy off a

fiscal cliff and into recession.

The agreement hands a clear victory to President Barack Obama, who won re-election on a promise to

address budget woes in part by raising taxes on the wealthiest Americans. His Republican antagonists

were forced to vote against a core tenet of their anti-tax conservative faith.

The deal also resolves, for now, the question of whether Washington can overcome deep ideological

differences to avoid harming an economy that is only now beginning to pick up steam after the

deepest recession in 80 years.

Consumers, businesses and financial markets have been rattled by the months of budget

brinkmanship. The crisis ended when dozens of Republicans in the House of Representatives buckled

and backed tax hikes approved by the Democratic-controlled Senate.

Asian stocks hit a five-month high and the dollar fell as markets welcomed the news.

While the vote averted immediate pain like tax hikes for almost all U.S. households, it did nothing to

resolve other political showdowns on the budget that loom in coming months. Spending cuts of $109

billion in military and domestic programs were only delayed for two months.

Obama urged a little less drama when the Congress and White House next address thorny fiscal

issues like the government's rapidly mounting $16 trillion debt load.

There was plenty of drama on the first day of 2013 as lawmakers scrambled to avert the fiscal cliff of

across-the-board tax hikes and spending cuts that would have punched a $600 billion hole in the

economy this year.

As the rest of the country celebrated New Year's Day with parties and college football games, the

Senate stayed up past 2 a.m. on Tuesday and passed the bill by an overwhelming margin of 89 to 8.

When they arrived at the Capitol at noon, House Republicans were forced to decide whether to accept a

$620 billion tax hike over 10 years on the wealthiest or shoulder the blame for letting the country slip

into budget chaos.

The Republicans mounted an effort to add hundreds of billions of dollars in spending cuts to the

package and spark a confrontation with the Senate.

RELUCTANT REPUBLICANS

For a few hours, it looked like Washington would send the country over the fiscal cliff after all, until

Republican leaders determined that they did not have the votes for spending cuts.

In the end, they reluctantly approved the Senate bill by a bipartisan vote of 257 to 167 and sent it on to

Obama to sign into law.

We are ensuring that taxes aren't increased on 99 percent of our fellow Americans, said Republican

Representative David Dreier of California.

The vote underlined the precarious position of House Speaker John Boehner, who will ask his

Republicans to re-elect him speaker on Thursday when a new Congress is sworn in.

Boehner backed the bill but most House Republicans, including his top lieutenants, voted against it.

The speaker had sought to negotiate a grand bargain with Obama to overhaul the U.S. tax code and

rein in health and retirement programs that are due to balloon in coming decades as the population

ages.

But Boehner could not unite his members behind an alternative to Obama's tax measures.

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.

The non-partisan Congressional Budget Office said the bill will 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.

But the measure will actually save $650 billion during that time period when measured against the tax

and spending policies that were in effect on Monday, according to the Committee for a Responsible

Federal Budget, an independent group that has pushed for more aggressive deficit savings.
 
 
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