The U.S. Senate approved a deal early Jan. 1 that would delay by two months the onset of nearly $1 trillion in across-the-board spending cuts scheduled to take effect the next day.
Throughout the day, House Republicans remained noncommittal about whether they could deliver the votes to pass it and avoid the so-called fiscal cliff from taking effect. Rather they discussed the possibility of amending the legislation.
After a lengthy meeting with Vice President Joe Biden, House Democrats calling for a vote on the bill without changes. “The
112th Congress has about 46 hours left to go,” says House Minority Whip Steny Hoyer (D-Md.). “This Congress unfortunately has been most known for an unwillingness to compromise.”
If the deal fails to pass and taxes increase on the vast majority of Americans, economists have warned of a recession.
The’s share of the across-the-board government cuts is about $55 billion for fiscal 2013. The agreement negotiated by Vice President Joe Biden and Senate Minority Leader Mitch McConnell (R-Ky.) allows lawmakers to negotiate until March 1 to change the amount of cuts targeted at defense or allow the administration to direct where the reductions will come from.
The agreement also would permanently extend Bush-era tax cuts for Americans making less than $400,000 a year. But it sets up another showdown over government spending and the debt ceiling in February.
But a vote in the House did not seem assured. Republicans emerged from a meeting on Capitol Hill with a “universal concern” about the lack of spending cuts in the Senate bill, according to Brendan Buck, spokesman for House Speaker John Boehner (R-Ohio.) “Conversations with members will continue throughout the afternoon on the path forward.”
Fueling discontent about the bill was a Congressional Budget Office report that showed extending tax cuts would add nearly $4 trillion to the federal deficit at a time when lawmakers are trying to reduce it.
Before the agreement was announced, investment analysts were urging caution. Even with a possible deal, Charles Gabriel of Capital Alpha Partners foresees a continued battle over spending and the debt ceiling “that could continue to weigh on investors and the economy well into February or beyond.”
Senators may have acted at the last minute to avoid what economists had predicted would cause another recession, but they were hardly celebrating the milestone. “This marks another sad chapter in what has been the least productive Congress since 1947,” says Sen. John McCain (R-Ariz.) in a statement. “Critical issues remain to be resolved, particularly the $500 billion in defense budget cuts looming over our nation’s military.”