US Senate approves fiscal cliff legislation

Senate passage set the stage for a final showdown in the House of Representatives, where a vote was expected later Tuesday or perhaps Wednesday U.S. time, which raises tax rates on wealthy Americans. The Senate vote came hours after the White House reached a compromise deal with Senate Republicans.

Without legislation, economists in and out of government had warned of a possible new recession and spike in unemployment if the fragile U.S. economy were allowed to fall over the so-called fiscal cliff of tax increases and spending cuts.

Shortly after the Senate vote, U.S. President Barack Obama said, “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.”

Obama said the bill takes a balanced approach to shrinking the U.S. deficit by “investing in (the) middle class” while “asking the wealthy to pay a little more.”

Even by the recent dysfunctional standards of government-by-gridlock, the activity at both ends of historic Pennsylvania Avenue was remarkable as the Obama administration and lawmakers spent the final hours of 2012 haggling over long-festering differences.

“It shouldn't have taken this long to come to an agreement, and this shouldn't be the model for how we do things around here,” said Senate Republican leader Mitch McConnell, who negotiated the agreement with Vice President Joe Biden, a former senator.

Higher Income Tax Rates

Under the deal, taxes would remain steady for the middle class and rise at incomes over US$400,000 for individuals and US$450,000 for couples — levels higher than Obama had campaigned for in his successful drive for a second term in office.

Spending cuts totaling US$24 billion over two months aimed at the Defense Department and domestic programs would be deferred. That would allow the White House and lawmakers time to regroup before plunging very quickly into a new round of budget brinkmanship certain to revolve around Republican calls to rein in the cost of the Medicare health care program for the elderly and other government benefit programs.

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