1 January 2013 Last updated at 23:51 ET
Barack Obama: “The deficit is still too high”
Barack Obama has hailed a deal reached to stave off a “fiscal cliff” of drastic taxation and spending measures as “just one step in the broader effort to strengthen the economy”.
The US president was speaking after the House of Representatives passed a Senate-backed bill by 257 votes to 167.
It raises taxes for the wealthy and delays spending cuts for two months.
There had been intense pressure for the vote to be passed before financial markets reopened on Wednesday.
In Tuesday night’s house vote, 172 Democrats and 85 Republicans voted in favour of the bill.
It had been passed in the Senate less than 24 hours earlier by 89 votes to eight after lengthy talks between Vice-President Joe Biden and Senate Republicans.
Economists’ warnings
At the scene
In the end, it was settled after a tense meeting of House Republicans in a basement conference room.
When a stony-faced Speaker John Boehner left the room an hour later, one Congressman was overheard telling someone on the phone it was “looking like a long night”. Out of the basement, the smell of pizza wafted through the ornate House corridors. If the fiscal cliff was going to hurt ordinary Americans, the threat of it did no harm to one pizza parlour just a short hop down Pennsylvania Avenue.
Before the final vote, dissenters and supporters lined up to make their point. “Common sense has prevailed,” one Democrat declared; a prominent Republican said he simply did not believe spending cuts would eventually be delivered. But as the votes rolled in, House members stood on the floor and watched as the scoreboard lit up, and applauded – briefly – when the crucial 217th vote was cast.
Speaking before returning to Hawaii for his interrupted Christmas holiday, Mr Obama said that in signing the law he was fulfilling a campaign pledge.
“I will sign a law that raises taxes on the wealthiest 2% of Americans… while preventing a middle-class tax hike,” he told a White House press conference.
The US deficit was still too high, he said: While open to compromise on budgetary issues, he would not offer Congress spending cuts in return for lifting the government’s borrowing limit, known as the debt ceiling.
“There is a path forward, if we focus not on politics, but on what’s right for the country,” added Mr Obama.
The “fiscal cliff” measures – cutting spending and increasing taxes dramatically – came into effect automatically at midnight on Monday when George W Bush-era tax cuts expired.
The 1 January deadline triggered tax increases of about $ 536bn and spending cuts of $ 109bn from domestic and military programmes.
What is the fiscal cliff?
- On 1 January 2013, tax rises and huge spending cuts come into force – the so-called fiscal cliff
- The deadline was put in place in 2011 to force the president and Congress to reach agreement on the budget over the next 10 years
- Date coincides with expiry of Bush-era tax cuts
- There are fears that raising taxes while massively cutting spending will have a huge impact on households and businesses
- The fiscal squeeze could also push the US into recession, and have a global impact
Economists had warned that if the full effects of the fiscal cliff were allowed to take hold, the resulting reduction in consumer spending could have sparked a new recession.
The compromise deal extends the tax cuts for Americans earning under $ 400,000 (£246,000) – up from the $ 250,000 level Democrats had originally sought.
In addition to the income tax rates and spending cuts, the package includes:
- Rises in inheritance taxes from 35% to 40% after the first $ 5m for an individual and $ 10m for a couple
- Rises in capital taxes – affecting some investment income – of up to 20%, but less than the 39.6% that would prevail without a deal
- One-year extension for unemployment benefits, affecting two million people
- Five-year extension for tax credits that help poorer and middle-class families
BBC News – Business
Title Post: Obama praises ‘fiscal cliff’ deal
Rating:
100%
based on 99998 ratings.
5 user reviews.
Author:
Thanks for visiting the blog, If any criticism and suggestions please leave a comment
