Senate easily approves Biden-McConnell 'fiscal cliff' agreement early Tuesday

The Senate early on New Year's Day voted overwhelmingly in favor of a "fiscal cliff" deal that would extend tax rates on annual household incomes under $450,000 and postpone automatic spending cuts for two months.  

The bill was approved in an 89-8 vote that came after only 10 minutes of formal floor debate and no official score from the Congressional Budget Office. The Joint Committee on Taxation estimated it would reduce federal revenue by $3.93 trillion over the next decade compared to current law.

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Five Republicans and three Democrats voted against the bill: Sens. Michael Bennet (D-Colo.), Tom Carper (D-Del.), Chuck Grassley (R-Iowa), Tom Harkin (D-Iowa), Mike Lee (R-Utah), Rand Paul (R-Ky.), Marco Rubio (R-Fla.) and Richard Shelby (R-Ala.). 

Sens. Jim DeMint (R-S.C.), Mark Kirk (R-Ill.) and Frank Lautenberg (D-N.J.) missed the vote.

The 89-8 vote puts pressure on the GOP-led House to approve the legislation, though it remains to be seen if most House Republicans will back a bill that would add to the deficit and lacks the deep spending cuts that conservatives have been calling for.

It is unclear when the House will vote to pass or possibly amend the Senate-passed measure. House Republicans plan to huddle on the issue at 1 p.m.

House Republican Leader Eric Cantor (R-Va.) told Reuters on Tuesday that no decision had been made on when his chamber will vote on the Senate-passed bill. Cantor said a decision could come later Tuesday. A 90-minute meeting of Senate Democrats ending shortly before midnight sealed the deal negotiated between Vice President Biden and Senate Republican Leader Mitch McConnell (Ky.). The passage of the bill is a significant victory for Biden, who might run for president in 2016, and McConnell, who is up for reelection next year.

The legislation would indefinitely extend the Bush-era income tax rates on individual incomes up to $400,000 and family incomes up to $450,000. Also, it sets the estate tax rate at 40 percent, up from 35 percent, and exempts inheritances below $5 million.  

It would postpone the automatic spending cuts known as the sequester for two months and offset the $24 billion cost of the delay with a mix of spending cuts and new revenues. The measure would also extend unemployment benefits for one year without offsetting their impact on the deficit, preventing 2 million people from losing government assistance.

And it would prevent a hike in congressional pay that was authorized in an executive order from President Obama to raise federal worker pay.

Biden made a late-night visit to Capitol Hill to convince Democrats to back the agreement, but he did not need to do much arm-twisting.  

"I am feeling very, very good. I think we'll get a very good vote tonight,’ Biden said, leaving the meeting with Democrats.  

Obama called on the House to pass the Senate measure "without delay."

"This agreement will also grow the economy and shrink our deficits in a balanced way – by investing in our middle class, and by asking the wealthy to pay a little more," Obama said in a statement following the vote.

"There’s more work to do to reduce our deficits, and I’m willing to do it," he added.

Senate approval sends the bill to the House, where Speaker John Boehner (R-Ohio) said the House will review the Senate bill.

With the stage set for a New Year’s Day vote, it remains unclear if the House will vote on the bill before Thursday, when the 113th Congress will be sworn in.

“The House will honor its commitment to consider the Senate agreement if it is passed,” Boehner said. “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.”

Boehner is not a fan of moving significant legislation in lame-duck sessions, and he has made it a top priority to give members and the public time to read bills before scheduling votes on them.

The bill would appear to be a hard sell with House Republicans, many of whom objected to an earlier bill sought by Boehner that extended tax rates on annual incomes under $1 million as a tax hike. However, unlike Boehner's "Plan B" bill, the Senate-passed measure will attract significant support from House Democrats.

The Senate measure includes few spending cuts, which House Republicans have repeatedly demanded.  

“I don’t see any balance yet, that’s the fundamental problem,” Rep. Jason Chaffetz (R-Utah) told The Hill. “If you don’t cut spending, there’s no way you’re going to pick up Republican votes.”  

Heritage Action for American, a conservative advocacy group, urged lawmakers to oppose the deal.  

“To be clear, this is a tax increase.  In 2013, the top marginal rate, death tax, and taxes on long-term capital gains and dividends will all be higher than in 2012.  Comparing tax rates to hypothetical rates that have hardly any support is nothing more than misleading Washington spin,” the group declared in a statement. 

Liberal groups and labor unions have begun to line up against the deal, as well. They complained the White House and Democrats were giving up too much, particularly after Obama campaigned on a pledge to raise tax rates on households with annual income above $250,000.

“We just finished an election in which the American people made clear that they want the wealthiest 2 percent to finally pay their fair share of taxes, but this agreement fails to meet that test,” said Justin Ruben, executive director of MoveOn.org. “Voters gave President Obama a mandate to end the Bush tax cuts for those making more than $250,000. He has not delivered.”

 
“Its [sic] not a good fiscal cliff deal if it gives more tax cuts to 2 percent and sets the stage for more hostage taking,” AFL-CIO president Richard Trumka wrote in a Twitter post on Monday night.  

House Democratic Leader Nancy Pelosi (Calif.) remained non-committal publicly but has signed off the deal in private, according to a source familiar with the talks.  

“I understand at the present time, Senate Democrats are meeting with the Vice President.  When a final agreement is reached and passed by the Senate, I will present it to the House Democratic Caucus,” she said in a statement.  

Some Senate Democrats balked at the last minute over a Republican demand to index the estate tax exemption for inflation, but finally relented after centrists such as Sen. Max Baucus (D-Mont.) weighed in to support the provision.  

In the end, both Democratic and Republican senators concluded it was better to accept a deal despite their objections than go over the fiscal cliff.  

“There is a feeling, again, that it’s not that this proposal is regarded as great or is loved, in any way, but it’s a lot better than going over the cliff,” Sen. Charles Schumer (D-N.Y.) said.  

Senate Republicans also said an imperfect deal is better than letting middle-class families get hit with income tax increases and $109 billion in domestic and defense spending cuts take place.  

Sen. Kay Bailey Hutchison (R-Texas) said: "It's not something that any of us would say, 'Oh, I love it.' I don't love it, but I think it is a very good job of negotiating where there are some wins and some losses and it's about even."   

The legislation will add trillions of dollars to the federal deficit over the next 10 years compared to current law, under which the Bush-era tax rates expired at midnight. White House officials and Senate Democratic aides said tax increases on the wealthy would raise about $620 billion in revenue compared to current policy.  

The bill includes a host of tax rate extensions, including five-year extensions of the college tuition tax credit, the child tax credit and the earned income tax credit, which were part of the 2009 economic stimulus package.  

It sets the capital gains and dividends tax rate at 20 percent, up from 15 percent. Capital gains and dividend income would be taxed at 23.8 percent for singles earning above $400,000 annually and families earning more than $450,000, according to a White House fact sheet.  

It reinstates the Clinton-era limit itemized deductions for individuals earning more than $250,000 a year and families earning above $300,000.  

It permanently patches the Alternative Minimum Tax and extends a variety of expiring business and energy tax provisions for one year, including the research and experimentation tax credit and 50 percent bonus depreciation.  

The legislation will freeze scheduled cuts to doctors’ Medicare payments for one year, paying for them with spending cuts in other healthcare spending. This avoids a 27 percent cut in reimbursements to doctors treating Medicare patients.  

White House officials argue the agreement leaves substantial opportunity to further reduce tax breaks for high-income households, reform corporate tax rates and reform entitlement programs in the 113th Congress.  

It will also include a one-year extension of the 2008 farm bill without dairy reforms, to the chagrin of Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.).  

"This is Mitch McConnell's farm bill" she said. "I will vote for it but I am on record that I am not happy with what was done to agriculture."  

The farm bill provision stops a possible doubling of milk prices but does not contain reforms and $24 billion in deficit reduction in a Senate passed five-year bill.  


—Erik Wasson, Vicki Needham and Mike Lillis contributed.  

This report was originally published at 2:08 a.m. and last updated at 10:27 a.m.