USA Africa Dialogue Series - Note of Happiness : U.S.: Deal Reached to Avert 'Fiscal Cliff'

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U.S.: Deal Reached to Avert 'Fiscal Cliff'
The White House and top Republicans have struck a deal to avert huge
New Year tax hikes and spending cuts known as the "fiscal cliff".

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By Elad Benari

First Publish: 1/1/2013, 5:13 AM

Obama delivers a speech on the economy
Obama delivers a speech on the economy
Reuters

The White House and top Republicans have struck a deal to avert huge
New Year tax hikes and spending cuts known as the "fiscal cliff" that
had threatened to send the U.S. economy into recession, AFP reports.

The pact would raise taxes on the richest Americans -- those earning
over $450,000 a year -- but exempt everyone else, and will put off
$109 billion in budget cuts across the government for two months, top
congressional aides said, according to the report.

Vice President Joe Biden, who negotiated the deal with Republican
Senate Majority leader Mitch McConnell, was on Capitol Hill to sell it
to Democratic senators, a White House source added.

Tax hikes and spending cuts were due to come into force on January 1.
But as global markets, sure to be rocked by a failure to head off the
fiscal cliff, are closed for New Year's day, lawmakers have time to
vote the deal into law.

A Senate vote was expected overnight on Monday while the House of
Representatives was expected to follow suit on Tuesday after a display
of dramatic New Year's Eve brinkmanship.

The deal would mean a return to Bill Clinton-era tax rates for top
earners to 39.6 percent, starting at a threshold of annual household
earnings of $450,000 and above.

President Barack Obama had originally campaigned for tax hikes to kick
in for those making $250,000 and above and his acceptance of a higher
threshold has already angered liberals, though still represents a
political victory.

The president said it would extend tax credits for clean energy firms
and also unemployment insurance for two million people due to expire
later Monday.

It was also expected to include an end to a temporary two percent cut
to payroll taxes for Social Security retirement savings and Medicare
health care programs for seniors and changes to inheritance and
investment taxes.

Both sides were Monday already gearing up for the next legislative
showdown over the need to lift the government's statutory borrowing
limit of $16.4 trillion, which was reached Monday.

The Treasury will now take extraordinary measures to keep the
government afloat for an undisclosed period of time until the ceiling
is raised. Republicans are already demanding spending cuts in return.

Obama said earlier Monday that a deal to avert the fiscal cliff budget
crisis was in sight, but hinted that the proposed pact would not deal
with complementary and punishing cuts to government spending also due
to take place in the New Year, which he said would have to be dealt
with down the line.

Last week, Democratic and Republican leaders traded blame over the
fiscal cliff. In the weekly Republican Party radio address, House
Speaker John Boehner, the top Republican in Congress, said that that
President Barack Obama's proposal to solve the crisis by raising taxes
"would still leave red ink as far as the eye can see."

Obama, meanwhile, seemed frustrated that Republicans were not willing
to offer him a compromise after, in his eyes, he made major
concessions to his opponents.


Tags: Republican party ,Joe Biden ,Democratic Party ,us
economy ,tax ,Fiscal Cliff

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