The White House and the U.S. Senate reached a tentative deal late Dec. 31 that would delay by two months the onset of nearly $1 trillion in across-the-board spending cuts scheduled to take effect Jan. 2.
But as the Senate prepared to vote on the measure early on the morning of Jan. 1, House leaders were noncommittal about whether they could deliver the votes to pass it and avoid the so-called fiscal cliff from taking effect.
The Pentagon’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.) buys two more months of negotiations to change the amount 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.
The House will meet Jan. 1 at noon to begin considering the deal. House Speaker John Boehner (R-Ohio) says in a statement the House will “honor its commitment to consider” the legislation but did not sign off on the agreement. “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,” he says. Before Christmas, Boehner was unable to get Republicans to agree to a deal that extended the tax cuts.
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.”