US President Barack Obama departs the White House after delivering a statement on the fiscal cliff deal, before departing to Hawaii to resume his family holiday. Source: AFP
AMERICA'S not going over the fiscal cliff, as the House of Representatives passed the last-minute deal to pull the nation away from the brink of economic chaos, 257-167.
US stocks shot up overnight in opening trade on news of a fiscal-cliff deal in Congress that prevented most tax increases and delayed sharp spending cuts.
The Dow Jones Industrial Average was up 1.8 per cent in the first minutes of trade, while the Nasdaq Composite topped 2.8 per cent. The broad-market S&P 500 gained nearly 2 per cent.
In the first trading day of the new year, Wall Street joined a global equities rally celebrating the passage of a bill that avoids the "fiscal cliff" of automatic spending cuts and tax increases.
Traders work on the floor of the New York Stock Exchange overnight, as US stocks shot up on news of a fiscal-cliff deal in Congress.
But the higher taxes and brinksmanship in Washington are likely to sap strength from the fragile economy well into 2013.
A months-long political standoff over fiscal policy has already taken its toll, adding uncertainty that has discouraged consumers from spending and businesses from hiring and investing.
US President Barack Obama announces he has averted the fiscal cliff crisis late January 1 at the White House as Vice President Joe Biden listens.
The squabbling seems sure to persist after lawmakers postponed tough decisions on government spending, giving themselves a reprieve from cuts that were scheduled to begin yesterday. That just sets the stage for more hard-bargaining later. Spending cuts, when they come, could crimp growth even more.
Mr Obama, who is expected to emergency legislation into law tomorrow, told Republicans that when it comes to spending cuts, the US must find a fair way to spread its economic burden across the economy.
"We can't cut our way to prosperity," Mr Obama said, speaking in the White House press briefing room after the historic vote which ended days of tense negotiations.
House Speaker John Boehner (R-OH) walks to the House Chamber to vote in Washington DC on January 1. After fervent New Year brinkmanship, the US Congress finally backed a deal to avert a "fiscal cliff" of tax hikes and slashing spending cuts that had threatened to unleash economic calamity.
"The one thing that I think hopefully in the New Year we'll focus on is seeing if we can put a package like this together with a little bit less drama, a little bit less brinksmanship, not scare the heck out of folks quite as much," he said.
Mr Obama also warned that he would not bargain with Republicans in Congress or offer spending cuts in return for lifting the government's borrowing limit, known as the debt ceiling, in the coming months.
"While I will negotiate over many things, I will not have another debate with this Congress over whether or not they should pay the bills that they've already racked up through the laws that they passed," the president said.
House Majority Leader Eric Cantor walks to a closed-door Republican caucus meeting on January 1.
"Let me repeat. We can't not pay bills that we've already incurred. If Congress refuses to give the United States government the ability to pay these bills on time, the consequences for the entire global economy would be catastrophic, far worse than the impact of a fiscal cliff."
Reluctant House Republicans had been concerned today's bill had too few spending cuts and not enough meaningful debt reduction, had threatened to stymie the plan. Their fury was fueled further by a new report from the nonpartisan Congressional Budget Office that the package would add $US3.97 trillion to deficits over the next decade.
But they also came to realize that scuttling the package could instantly put the nation's slowly improving economy in jeopardy. Tax rates had already gone up, and automatic spending cuts were scheduled to kick in today.
Barack Obama says agreement by Congress to raise taxes on the wealthy will avert tax hikes on the middle class and government spending cuts.
In private meetings, Republicans expressed concern that once domestic financial markets re-open after the New Year's Day holiday, reaction to legislative gridlock could be severe.
It's a risk, said Representative John Fleming, "we all recognise.''
As a result, the debate became a virtual celebration of bipartisan agreement.
A day late and trillions of dollars short, Congress passed a hard-won deal to ease large portions of the fiscal cliff
"After more than a decade of criticising these tax cuts, Democrats are finally joining Republicans in making these tax cuts permanent,'' said House Ways and Means Committee Chairman Dave Camp.
The new legsilation also ties the alternative minimum tax to inflation, a relief for an estimated 30 million taxpayers who could have been hit with higher bills. Other measures include an extension of jobless benefits for the long-term unemployed and avoiding a huge cut in Medicare payments to doctors for a year.
The vote in the House came after a day of furious closed-door lobbying-and arm-twisting. US Vice President Joe Biden met for two hours with House Democrats. At the same time, Republicans met privately twice, for a total of nearly three hours. They heard opposition from Majority Leader Eric Cantor, who has a strong following among conservatives.
Republican Senators Mitch McConnell and Pat Roberts (second from right), leave the Senate chamber to meet with fellow Republicans in a closed-door session to avert the "fiscal cliff".
"There was a lot of discontent in that room,'' said Representative Steven LaTourette.
The congressional turmoil was no surprise. Republicans have long been unhappy with Democrats' reluctance to agree to big spending cuts, and were not pleased the latest deal delayed the automatic cuts.
"This does nothing about getting the $16.4 trillion debt under control", said Republican Steve Chabot from Ohio.
Republicans made a last-ditch effort to pass more spending cuts, offering to consider the same package of $US328 billion in cuts that passed on a party-line vote December 20, but could not muster enough support.
Many Republicans worried that attaching the measure would never make it through the Senate, putting the entire fiscal cliff deal at risk.
"We don't want to do anything in the House that would create a poison pill for the Senate,'' said Raul Labrador.
Few lawmakers in either party seemed happy with the plan, as the unease crossed party and ideological lines.
"This punts the problem,'' said Rep. Raul Grijalva, D-Ariz. "It just sets us up for more fights.''
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