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Tuesday 1 January 2013

Congress prepares to reverse fiscal cliff fallout

Congress is preparing to reverse the effects of America's fall over the "fiscal cliff", giving the world's largest economy a temporary respite from the political crisis. 







  
The US missed the deadline to prevent taxes rises on every family at midnight on Monday but within hours the Senate overwhelmingly voted to cut them back for households making less than $450,000 (£277,000).

The emergency legislation, passed at 2.07am, was due to go to the Republican-controlled House of Representatives where it looked likely to pass despite opposition from conservatives. Joe Biden, the vice-president, was due to meet with fellow Democrats in the House to discuss the deal he forged with Senate Republican leader Mitch McConnell.

However, the frantically-drafted compromise will not permanently insulate the economy from the political chaos in Washington. The bill delays deep spending cuts by only two months, meaning Republicans and Democrats are likely to face a new crisis at the end of February.
At the same time the US is due to hit its debt ceiling, when Congress will have to vote to legally raise the amount of money the government can borrow to service its $16 trillion national debt. Republicans have already said they will use the debt ceiling negotiations as leverage to demand fresh spending cuts.

The Senate voted 89-8 to pass the compromise, with only a handful of conservative Republicans and liberal Democrats objecting to the bill.

In order to secure Republican support, President Barack Obama was forced to abandon his campaign pledge to raise taxes on households making more than $250,000 a year and settle for a threshold nearly twice as high.


The concession enraged liberals and Senator Tom Harkin, one of the Democrat dissenters, said the bill was "grossly unfair to middle class Americans".

Mr Obama praised the Senate's actions, saying: "While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country and the House should pass it without delay."

Among the Republicans who balked at the compromise was Marco Rubio, the young Florida senator who is expected to be a front-runner for the party's 2016 presidential nomination.

"I just couldn't vote for it," Mr Rubio said. "I ran, just two years ago, on the idea that I wanted to be part of solving the long-term problems this country faces."

Congressman Tom Cole, an Oklahoma Republican close to the party leadership, urged his colleagues in the House to pass the Senate's bill before financial markets reopened.


"We ought to take this deal right now, and we'll live to fight another day, and it's coming very soon on the spending cut," he told MSNBC.

Read More: http://www.telegraph.co.uk/news/worldnews/us-politics/9774408/Congress-prepares-to-reverse-fiscal-cliff-fallout.html

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