House votes to avert fiscal cliff

WASHINGTON—With the majority of Republicans voting no, the U.S. House on Tuesday voted to avert the fiscal cliff by adopting a Senate-approved plan that allows tax increases but delays spending cuts.

The House, in its first New Year’s Day vote since 1951, voted 257-167 to raise taxes by $620 billion and increase spending by about $56 billion. Congress has now passed a deal that, according to the Congressional Budget Office, increases the federal deficit over the next decade by close to $4 trillion.

Those are surprising moves by a Republican-led House, and 151 of the body’s 236 Republicans voted against the measure. But, after a long New Year’s Day of debates and threats, enough Republicans joined a majority of Democrats in believing that Congress could not allow the nation to face the combination of scheduled tax increases and spending cuts that have been dubbed the “fiscal cliff.”

After knowing for months about the Jan. 1 deadline for going over the cliff, Congress waited until the final hours before striking a deal. It is far from the sweeping plan that is needed to rein in spending and address the nation’s debt crisis.

The bill prevents a series of tax increases while allowing other tax hikes to take effect. But it also puts off a series of spending cuts established in 2011 and slated to hit the federal government this year and approves a $30 billion extension of unemployment benefits that is not offset by other savings.

House Speaker John Boehner, R-Ohio, voted in favor of the deal as did Rep. Paul Ryan, R-Wis., the former Republican vice presidential nominee. But Majority Leader Eric Cantor, R-Va., and Majority Whip Kevin McCarthy, R-Calif.—two top members on Speaker Boehner’s leadership team—opposed the legislation.

“Now the focus turns to spending,” said Boehner after the vote. “The American people reelected 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.”

But other House Republicans are angry that lawmakers didn’t turn to spending cuts while crafting this fiscal cliff deal.

“This is just another deal by Washington insiders—with no real solutions,” said Rep. Tim Huelskamp, a Kansas Republican who voted against the bill. “Deal after deal, elected officials with principles and convictions are told ‘Wait until next time. We’ll get to the serious business of the nation then.’ But, deal after deal, those elected officials find themselves disappointed with unfulfilled promises.”

Rep. Huelskamp and other House freshmen admitted that the deal was an embarrassing final vote in the congressional session for a highly touted group of new lawmakers elected in 2010 with a voter mandate to cut spending. Huelskamp called it a “disappointing two years.”

Before the House vote, a block of fiscal conservatives tried to add spending cuts to the deal passed overwhelmingly by the Senate in the early hours Tuesday. But the move failed to get enough support, and House Republican leaders decided against bringing an altered bill to the floor for a vote. Democrats in the Senate said they would not take up an amended House version, and House Republican leaders were fearful the GOP would face blame if Washington went over the fiscal cliff.

“If we didn’t address this fiscal cliff issue, every single American would see a tax increase, and it would be a big tax increase,” said Rep. Dave Camp, R-Mich., chairman of the House Ways and Means Committee.

The deal, which President Barack Obama will sign, prevents tax rate increases slated to begin this year for most taxpayers. The deal does allow those rates to increase as scheduled for individuals earning more than $400,000 and households earning more than $450,000. As a result, it makes the George W. Bush-era tax cuts permanent for most Americans—a victory for fiscal conservatives.

But the deal also limits deductions for taxpayers making more than $250,000 and allows the two-year-old payroll tax holiday to expire as scheduled for all workers. That payroll tax now rises by 2 percentage points back to its 2010 levels, costing $1,000 in tax increases for an individual making $50,000 a year.

In total, about 77 percent of households will face a tax increase this year as a result of the fiscal cliff deal, according to the Tax Policy Center.

The $600 billion in revenue increases for the federal government comes with just an estimated $15 billion in eventual spending cuts. That 41-to-1 ratio of additional revenue to spending cuts is one reason why top conservative groups such as the Club for Growth, Heritage Action, FreedomWorks, the Family Research Council, and the American Conservative Union opposed the deal.

“I think what gets lost in the 30-second sound bites on the fiscal cliff is the real cliff facing this country in the form of a massive wave of entitlement obligations,” said Rep. Ed Royce, R-Calif.

Republicans will now push to get spending cuts and entitlement reforms included in pending budget battles, including an expected fight in February over raising the federal debt ceiling. But Democrats believe the Republican support in the House and Senate for the tax increases found in the fiscal cliff deal will make it easier to push for additional revenue hikes.

While Congress debates and deadlocks, small business owners across the nation will deal with new taxes.

“Chances are, they’ll do it by firing employees, cutting back their hours and benefits, or postponing the new hire they were looking to make,” said Sen. Marco Rubio, R-Fla., one of just five Republicans who voted against the fiscal cliff deal in the Senate. “Rapid economic growth and job creation will be made more difficult under the deal reached here in Washington.”