Like a good 30’s serial, Congress seems to enjoy brinkmanship and 11th hour rescues. And it was historic. For the first time in 20 years, Republicans voted to raise income taxes (the last time was when George H.W. Bush broke his “read my lips, no new taxes” pledge). The Senate’s “fiscal cliff” bill passed 257-167. The Bush-era tax cuts will expire for people making $450,000 and up on earned and investment income. They will see their top rate go back to where it was during the Clinton era – from 35 percent to 39.6 percent. The deal also delays implementation of the sequester – $110 billion in automatic spending cuts set to begin Jan. 2—by two months. Ultimately, it comes down to gamesmanship and how the issues poll. Higher taxes on the middle class poll badly for Republicans as opposed to refusing to raise the debt ceiling. That’s why Republicans fared better in August of 2011 during the debt ceiling talks than in January of 2013.
Not that the Democrats won a clear victory. Left-leaning house and senate members decried the deal for sparing people earning between $250,000 and $450,000 from higher taxes. And the administration faces three new cliffs in short order – when the sequester comes back in two months; followed by a new debt ceiling deadline and expiration of the continuing budget resolution at the end of March. We are now in an era of cliffhangers.
One clear winner is Joe Biden who burnished credentials as a wily tactician and a master of backroom deals. After the Obama-Boehner impasse, it was Biden and Senate minority leader, Mitch McConnell who made the deal happen (by a landslide 89-8 vote). With Biden set to lead the campaign for gun control, it seems clear that the administration sees him as their chief negotiator.
All told, the fiscal-cliff deal produces $620 billion in deficit reduction over 10 years. Stay tuned.