March 28, 2024

Tentative Accord Reached to Raise Taxes on Wealthy

While the Senate moved toward a vote on legislation to avoid the so-called fiscal cliff, the House was not going to consider any deal until Tuesday afternoon at the earliest, meaning that a combination of tax increases and spending cuts would go into effect as 2013 began. If Congress acts quickly and sends the legislation to President Obama, the economic impact could still be very limited.

Under the agreement, tax rates would jump to 39.6 percent from 35 percent for individual incomes over $400,000 and couples over $450,000, while tax deductions and credits would start phasing out on incomes as low as $250,000, a clear win for President Obama, who campaigned on higher taxes for the wealthy.

“Just last month Republicans in Congress said they would never agree to raise tax rates on the wealthiest Americans,” Mr. Obama said at a hastily arranged news briefing, with middle-income onlookers cheering behind him. “Obviously, the agreement that’s currently being discussed would raise those rates and raise them permanently.”

Democrats also secured a full year’s extension of unemployment insurance without strings attached and without offsetting spending cuts, a $30 billion cost.

As negotiators tied up the last points of dispute, officials said that the two top Democrats on Capitol Hill — Senator Harry Reid of Nevada and Representative Nancy Pelosi of California — had signed off on the agreement. In an effort to win over other Democrats uneasy with the proposal, Vice President Joseph R. Biden Jr., who had bargained directly with Republican leaders, traveled to the Capitol on Monday night for a 90-minute meeting with his former Senate colleagues.

“I feel very, very good,” Mr. Biden said after the meeting. “I think we’ll get a very good vote.”

In one final piece of the puzzle, negotiators agreed to put off $110 billion in across-the-board cuts to military and domestic programs for two months while broader deficit reduction talks continue. Those cuts begin to go into force on Wednesday, and that deadline, too, might be missed before Congress approves the legislation.

To secure votes, Mr. Reid also told Democrats the legislation would cancel a pending congressional pay raise — putting opponents in the politically difficult position of supporting a raise — and extend an expiring dairy policy that would have seen the price of milk double in some parts of the country.

Anticipating Senate approval of the deal, Speaker John A. Boehner late Monday said the House would “honor its commitment to consider the Senate agreement if it is passed. 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.”

The nature of the deal ensured that the running war between the White House and Congressional Republicans on spending and taxes would continue at least until the spring. Treasury Secretary Timothy F. Geithner formally notified Congress that the government reached its statutory borrowing limit on New Year’s Eve. Through some creative accounting tricks, the Treasury Department can put off action for perhaps two months, but Congress must act to keep the government from defaulting just when the “pause” on pending cuts is up. Then in late March, a law financing the government expires.

And the new deal does nothing to address the big issues that Mr. Obama and Mr. Boehner hoped to deal with in their failed “grand bargain” talks two weeks ago: booming entitlement spending and a tax code so complex that few defend it anymore.

Jennifer Steinhauer and Robert Pear contributed reporting.

Article source: http://www.nytimes.com/2013/01/01/us/politics/tentative-deal-is-reached-to-raise-taxes-on-the-wealthy.html?partner=rss&emc=rss

Senate Struggles to Muster Republican Support for a New Fiscal Compromise

“We now have a level of seriousness with the right people at the table,” Senator Mitch McConnell, the Republican leader in the Senate, said during a news conference he held with Speaker John A. Boehner. He said that Republicans were now “fully engaged” in discussions with the White House and that he expected a deal soon.

Both men expressed confidence they could find an acceptable resolution to a crisis that has nerves frayed on Capitol Hill, a tension illustrated in a heated House debate where House Republicans pre-emptively rejected the latest debt limit proposal from Senator Harry Reid, the Nevada Democrat and majority leader.

Just how they would get a resolution remained unclear given the months of partisan fighting over the debt limit and the fact that any deal would have to clear a Senate controlled by Democrats and a House dominated by Republicans who as recently as last Thursday had rebelled against Mr. Boehner’s own proposal.

In another indication of some possible movement toward an agreement, President Obama called Mr. Reid and Representative Nancy Pelosi, the House Democratic leader, to the White House on Saturday afternoon to confer over the situation. The burst of activity came as Senate Democrats struggled to round up Republican support for Mr. Reid’s plan, which is scheduled for a vote early Sunday morning.

Their efforts were set back Saturday when 43 of the 47 Republican senators signed a letter to Mr. Reid saying they would not back his proposal that would allow a $2.4 trillion increase in the debt ceiling in two stages while establishing a new Congressional committee to explore deeper spending cuts. The numbers signaled that without changes in the plan, Mr. Reid would not be able to overcome a Republican filibuster, which requires 60 votes.

House Republicans signaled their disapproval of the Reid plan by holding a symbolic vote on Saturday, rejecting it by a 246 to 173 vote, in a move intended to show it had no chance of passing in that chamber. About a dozen Democrats joined Republicans in rejecting the Reid plan.

The pre-emptive vote could strengthen the hand of Mr. McConnell as he seeks additional concessions from Mr. Reid.

Mr. Reid, for his part, said Mr. McConnell was dragging his feet on beginning talks to find a compromise solution, and he called on Republicans to offer their plans to alter his measure.

“We have heard very little from the Republicans,” Mr. Reid said on the floor. “My friend the Republican leader must generate some more action on the part of his Republicans.”

But Mr. McConnell, in a floor exchange with his Democratic counterpart, indicated that Republicans wanted to first have a chance to oppose Mr. Reid’s measure before entering new talks. He also demanded that the president take part in any final negotiations.

“We’ve got a couple of days to work this out and we can’t do it without the president,” Mr. McConnell said.

The unusual Saturday session came after a week of brinkmanship on Capitol Hill. On Friday, Mr. Boehner managed to pass his own House bill, along party lines, just a day after suspending the vote as the Republican leadership tried frantically to line up enough votes for passage. But that plan was swiftly rejected by the Senate late Friday.

While some of the back-and-forth between the House and Senate and the party leaders was typical of the late stages of a negotiation, the combative and unyielding tone in both chambers of Congress was creating more pessimism about the prospects that a final agreement could be struck and cleared before Tuesday.

Mr. Obama, who has warned that the government could run short of money as soon as Wednesday morning, laid the blame for the impasse squarely on House Republicans in his weekly address, which largely repeated remarks he made on Friday as the stalemate gripped Washington.

“Democrats in Congress and some Senate Republicans have been listening and have shown themselves willing to make compromises to solve this crisis,” he said. “Now all of us — including Republicans in the House of Representatives — need to demonstrate the same kind of responsibility.”

In the Republican video response, Senator Jon Kyl of Arizona said that “Republicans have tried to work with Democrats” to raise the debt ceiling, “but we need them to work with us.”

Though the current Senate plan was in serious trouble, Democrats and the administration were exploring ways to adjust it to win some Republican backing and send it back to the House as a final offer to raise the debt limit and avert a default after Tuesday.

If a measure is able to win significant bipartisan endorsement in the Senate, the reception in the House could be different with the Treasury Department’s Aug. 2 deadline for increasing the debt limit imminent.

Jackie Calmes contributed reporting from Washington, and Thom Shanker from Kandahar, Afghanistan.

Article source: http://feeds.nytimes.com/click.phdo?i=3bd08865264e67df9311c9d7d10d6651