Week Ending January 4, 2013
Fiscal Cliff Deal Passes Congress
In dramatic fashion, the House and Senate in the last days of a rare lame duck session passed a compromise fiscal cliff agreement that was negotiated by Vice President Biden and Senate Minority Leader Mitch McConnell (R-KY). After numerous starts and stops, the measure effectively prevented the nation from going over the so-called fiscal cliff. It was cleared by the Senate in the early morning hours of New Year’s Day by a vote of 89-8 and then passed the House late in the evening on New Year’s Day by a vote of 257-167. House passage wasn’t clear until Republican leaders were able to gather a sufficient number of votes to ensure passage and only after demands for further spending cuts were dropped. After both the Senate and the House passed identical versions of the plan, President Obama signed it into law.
Congressional action was not guaranteed until the last minute in both chambers, after numerous earlier negotiations had failed. The final plan was approved in both chambers with strong bipartisan support but in the House most Democrats supported the measure while most Republicans opposed it. In the Senate, it was opposed by just five Republicans: Sens. Marco Rubio (FL), Rand Paul (KY), Chuck Grassley (IA), Mike Lee (UT) and Richard Shelby (AL), and by three Democrats; Sens. Tom Harkin (IA), Thomas Carper (DE), and Michael Bennet (CO). In the House, Democrats voted 172-16 in favor while Republicans voted 151-85 against.
The measure raises $620 billion in new taxes over the next decade. It will make tax cuts for the middle class permanent, continue unemployment assistance for the long-term unemployed, extend key tax credits for working families, and delay for two months the massive across-the-board spending cuts in military and domestic programs for two months, known as “sequestration.” The agreement requires wealthy Americans to pay more in taxes, while offering an economic lifeline to lower income and unemployed Americans and their families. Unfortunately, it did not raise as much new revenue as had been hoped for, and it also sets the stage for major battles over spending cuts in the months ahead.
Here are some of the highlights of the deal:
- Income tax rates: Extends tax cuts on incomes up to $400,000 for individuals, $450,000 for couples. Earnings above those income level would be taxed at a rate of 39.6%, up from the current 35%. Extends Clinton-era caps on itemized deductions and the phase-out of the personal exemption for individuals making more than $250,000 and couples earning more than $300,000.
- Alternative minimum tax: Permanently fixes the alternative minimum tax and indexes it for inflation to prevent nearly 30 million middle- and upper-middle income taxpayers from being hit with higher tax bills averaging almost $3,000.
- Other tax changes: Extends for five years extremely important improvements to the child tax credit and earned income tax credit, and provides a tax credit of up to $2,500 for college tuition. Together, these provisions will benefit 25 million low- and middle-income families.
- Unemployment benefits: Extends emergency jobless benefits for the long-term unemployed for one year. More than two million workers were scheduled to exhaust their unemployment benefits at the start of this year.
- Social Security payroll tax cut: Ends the 2% cut in the payroll tax first enacted two years ago.
- Estate tax: Raises the estate tax rate from 35% to 40%, with the first $5 million in value exempted for individuals and $10 million for couples. These amounts are indexed for inflation.
- Capital gains, dividends: Raises from 15% to 20% the tax on capital gains and dividends for income exceeding $400,000 for individuals and $450,000 for families.
- Across-the-board cuts: Delays for two months the $109 billion in across-the-board cuts in defense and domestic spending. However, the delay is paid in part with $12 billion in additional cuts in domestic spending split between security and non-security spending and $12 billion in new revenue over a ten-year period.
- Medicare physician payments: Eliminates a scheduled cut in Medicare payments to physicians, ensuring that beneficiaries continue to have access to care.
Just as important as what was included in the compromise legislation is what was not. For the most part the compromise plan protects seniors and others from immediate changes in Medicare, Medicaid and Social Security. But those programs are still at grave risk. In the weeks ahead, Republican leaders in Congress have vowed to continue their demands for deep cuts to these vital programs and other services that benefit working families – including funding for public schools, public safety, transportation, medical research and college loans. In particular, looming in the next two months is the need to extend the federal debt ceiling, which Tea Party Republicans have pledged to use as a new opportunity to extract further cuts in spending.
113th Congress Sworn In; Leadership Retained
On Thursday, January 3, new House and Senate members of the 113th Congress were sworn in. This is the first Congress to meet since the redrawing of district lines based on the 2010 census. The U.S. Senate is made up of 53 Democrats, 45 Republicans and 2 Independents. The US House of Representatives is composed of 233 Republicans and 200 Democrats, with 2 vacancies.
The leadership of both chambers remains the same as in the 112th Session of Congress with Harry Reid (D-NV) as Senate Majority Leader and Mitch McConnell (R-KY) as Senate Minority Leader. In the House of Representatives, John Boehner (R-OH) was narrowly re-elected as Speaker. Eric Cantor (R-VA) remains as Majority Leader and Nancy Pelosi (D-CA) as the Minority Leader.
Reid Delays Vote on Filibuster Reform
In the hopes of avoiding a legislative standoff over proposed changes to the Senate’s filibuster rule, Senate Majority Leader Harry Reid (D-NV) delayed a debate on Senate rules until January 22. Reid and Senate Minority Leader Mitch McConnell (R-KY) will use the next two weeks to attempt to negotiate restraints on abuses of the filibuster. Under current rules, a simple majority is not enough to get even routine business through the Senate. Instead, a supermajority – 60 votes – is required since a single Senator can block consideration of legislation on the Senate floor by simply stating his or her intention to block a bill with no requirement for that Senator to be present to speak on the floor. Many commentators have called the 112th Congress the least productive since 1947’s infamous “Do Nothing Congress.”
House Republican Leaders Criticized for Delaying Superstorm Sandy Emergency Spending Relief
Although the Senate approved its $60.4 billion Superstorm Sandy emergency spending bill on December 28, the House Republican leadership ended its 112th Session of Congress on January 3 without calling a House floor vote on any version of this relief package. This failure generated withering bipartisan criticism from key members of Congress and local elected officials. As a result, Speaker Boehner (R-OH) announced two floor votes on related proposals – the first on January 4 for roughly $9 billion in flood assistance which overwhelmingly passed in a 354-67 vote and a second floor vote on January 15 to consider remaining funding for broader relief for housing, transportation, infrastructure, and other needs. The details of this package remain uncertain.
Boehner’s hand was forced by criticism from fellow Republicans. New Jersey Gov. Chris Christie complained, "This was the speaker's decision… There's only one group to blame… The House majority and their speaker, John Boehner.” Rep. Peter King (R-NY) implied war on his own party and urged New Yorkers to stop campaign contributions to Republicans by stating, "I'm saying anyone from New York and New Jersey who contributes one penny to congressional Republicans is out of their minds… What they did last night was put a knife in the back of New Yorkers and New Jerseyans.” Governors Christie and Andrew Cuomo (NY-D) issued a joint statement accusing the House of "dereliction of duty" and "indifference" to "all that New York and New Jersey and our millions of residents and small businesses have suffered and endured."
The Senate’s December 28 vote was 62-32 to approve its package with no Democratic Senators voting against the bill and 12 Republican Senators voting for it. AFSCME strongly supports the Senate bill.
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