WASHINGTON—Manoeuvred into a political corner, House Republicans abandoned demands for changes in emergency legislation to prevent widespread tax increases and painful across-the-board spending cuts and cleared the way for a final, climactic New Year’s night vote.
The decision capped a day of intense political calculations for conservatives who control the House. They had to weigh their desire to cut spending against the fear that the Senate would refuse to consider any changes they made in the “fiscal cliff” bill, sending it into limbo and saddling Republicans with the blame for a whopping middle class tax increase.
It wasn’t the first time that the Tea Party-infused House Republican majority has rebelled against the party establishment since the party took control of the chamber 24 months ago. But with the two-year term set to end Thursday at noon, it was likely the last.
And as was true in earlier cases of a threatened default and government shutdown, the brinkmanship came on a matter of economic urgency, leaving the party open to a public backlash if tax increases do take effect on tens of millions.
Instead, they canvassed Republicans to see if they wanted simply to vote on the Senate measure, or whether they wanted first to try to add spending cuts totalling about $ 300 billion over a decade. The cuts had passed the House twice earlier in the year but are opposed by most if not all Senate Democrats.
“We’ve gone as far as we can go,” said Republican Rep. Jack Kingston. “I think people are ready to bring this to a conclusion, and know we have a whole year ahead of us” for additional fights over spending.
The economic as well as political stakes were considerable.
Economists have warned that without action by Congress, the tax increases and spending cuts that technically took effect with the turn of the new year at midnight could send the economy into recession.
A 2 percentage point temporary cut in the payroll tax, originally enacted two years ago to stimulate the economy, expired with the end of 2012. Neither Obama nor Republicans have made a significant effort to extend it.
The Senate-passed bill was designed to prevent that while providing for tax increases at upper incomes, as Obama campaigned for in his successful bid for a second term.
It would also prevent an expiration of extended unemployment benefits for an estimated two million jobless, block a 27 per cent cut in fees for doctors who treat Medicare patients, stop a $ 900 pay increase for lawmakers from taking effect in March and head off a threatened spike in milk prices.
At the same time, it would stop $ 24 billion in spending cuts set to take effect over the next two months, although only about half of that total would be offset with spending reductions elsewhere in the budget.
The non-partisan Congressional Budget Office said the measure would add nearly $ 4 trillion over a decade to federal deficits, a calculation that assumed taxes would otherwise have risen on taxpayers at all income levels. There was little or no evident concern among Republicans on that point, presumably because of their belief that tax cuts pay for themselves by expanding economic growth and do not cause deficits to rise.
The relative paucity of spending cuts was a sticking point with many House Republicans. Among other items, the extension of unemployment benefits costs $ 30 billion, and is not offset by savings elsewhere.
“I personally hate it,” said Rep. John Campbell of California. “The Speaker the day after the election said we would give on taxes and we have. But we wanted spending cuts. This bill has spending increases. Are you kidding me? So we get tax increases and spending increases? Come on.”
“There’s a concern about the markets, but there’s a bigger concern, which is getting this right, which is something we haven’t been very good at over the past two years,” said Rep. Steve LaTourette of Ohio.
“That is what we expect. That is what the American people deserve,” she said.
With the Treasury expected to need an expansion in borrowing authority by early spring, and funding authority for most government programs set to expire in late March, Republicans have made it clear they intend to use those events as leverage with the administration to win savings from Medicare and other government benefit programs.
“We’ve taken care of the revenue side of this debate. Now it’s time to get serious about reducing Washington’s out-of-control spending,” he said. “That’s a debate the American people want. It’s the debate we’ll have next. And it’s a debate Republicans are ready for.”
The 89-8 vote in the Senate was unexpectedly lopsided.
Despite grumbling from liberals that Obama had given way too much in the bargaining, only three Democrats opposed the measure.
Among the Republican supporters were Sen. Pat Toomey of Pennsylvania, an ardent opponent of tax increases, as well as Sen. Ron Johnson of Wisconsin, elected to his seat two years ago with Tea Party support.
It marked the first time in two decades that Republicans willingly supported higher taxes, in this case on incomes over $ 400,000 for individuals and $ 450,000 for couples. Taxes also would rise on estates greater than $ 5 million in size, and on capital gains and dividend income made by the wealthy.