I’m a little under the weather today — a drag when you have family visiting from out of town — so we’re a little late getting a thread started on the Biden-McConnell fiscal-cliff deal. The Senate voted overwhelmingly in favor of the package, which deals with tax rates but pushes spending decisions out another two months:
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.
John Boehner warned people not to expect a rubber stamp on the deal:
The House Speaker, John A. Boehner, and the Republican House leadership said the House would “honor its commitment to consider the Senate agreement.” But, they added, “decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members — and the American people — have been able to review the legislation.”
What did the deal include? It made permanent the Bush-era tax rates for everyone earning below $400,000 (and couples earning $450,000), while raising the marginal rate for everyone else to the Clinton-era 39.6%. Some deductions will begin phasing out at $250,000, though, which gives Obama a win in the deal. Estate taxes will go back up again, and unemployment insurance will get another extension. The bill will also apply a permanent patch to the AMT. However, the payroll-tax holiday will expire, which means that FICA withholding will return to the 2010 levels.
The deal did not include any resolution on either the sequester or the debt limit. 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.
With the Senate voting 89-8 in favor of the bill, I’d guess that House Republicans will grudgingly go along with the deal, with a big assist from House Democrats this time around. They have until tomorrow to get the deal done in this session of Congress, though, so expect to hear plenty of debate first.