Obama Divides Republicans With “Fiscal Cliff” Deal

Fewer than half of Republican congressmen vote to raise taxes to stave off the “fiscal cliff.”

The House of Representatives on Tuesday accepted a Senate bill that extends low-income tax rates for the vast majority of Americans to avert a “fiscal cliff” that could have seen tax revenue increase by $440 billion next year. Republicans, who control the lower chamber of Congress, were divided in the vote.

Fewer than half of Republican House members voted for the deal that was negotiated by Vice President Joe Biden and the Republican leader in the Senate Mitch McConnell late Monday night. It lets tax cuts on individual incomes over $400,000 expire and phases out tax deductions and credits for incomes as low as $250,000. A payroll tax cut that was signed into law by President Barack Obama in February of last year also expires while unemployment benefits for some two million Americans are extended another year.

As a result, more than 80 percent of households with incomes between $50,000 and $200,000 will pay higher taxes, according to preliminary estimates from the Tax Policy Center in Washington. Among the households facing higher taxes, the average increase will be $1,635 per year.

The Congressional Budget Office estimates that the law will yield some $620 billion in revenue over the next ten years. It is estimated to raise spending by $330 billion over the same period and increase the deficit by nearly $4 trillion.

For Republicans, who insisted that there should be tax relief and deeper spending cuts, it’s difficult to see the deal as anything but defeat. Many therefore voted against it, including deputy leader Eric Cantor of Virginia, while Speaker John Boehner and Wisconsin congressman Paul Ryan, who chairs the House budget committee and was Mitt Romney’s vice presidential candidate in November’s election, voted in favor.

Conservative commentators are outraged by what they see as defection. RedState‘s editor Erick Erickson writes,

The Republican establishment in Washington DC should be burned to the ground and salt spread on the remains. Republicans who saw Mitch McConnell and John Boehner destroy the last plank of the Republican Party are going to need to look elsewhere for a savior for their party. Boehner and McConnell have declared they will survive. Their party? They don’t really care.

Charles Krauthammer, a columnist for The Washington Post, described the deal as “a complete surrender on everything” on Fox News’ Special Report on Tuesday night before pointing out that the ratio of tax increases to spending cuts is roughly forty to one. “So, I mean, it’s a complete rout by the Democrats.”

In the Senate, Florida’s Marco Rubio, Kentucky’s Rand Paul and Utah’s Mike Lee, the former two of whom are considered potential Republican candidates for the 2016 presidential election, were among few to oppose the measure. All three were elected with strong Tea Party support, the movement that sprung up in opposition to the president’s expansionary fiscal policy and health-care reform law. It argues that only spending should be cut, not taxed raised, to reduce the deficit and ultimately the debt.

The United States have posted deficits over $1 trillion for the last four years. The national debt has risen to over $16 trillion, double from where it was six years ago. Indeed, it’s already hit the legal borrowing limit, the “debt ceiling,” which Congress will have to raise within two months’ time or risk the country defaulting on its debt obligations.

Republicans will want to leverage their support for raising the debt ceiling on austerity measures. In a press conference on Tuesday, President Obama signaled little willingness to accept that. “While I will negotiate over many things, I will not have another debate with this Congress about whether or not they should pay the bills they have already racked up,” he said.

Technically, raising the debt ceiling is indeed necessary to allow spending that has already been committed. But neither President Obama nor his Democratic Party have offered a credible plan to limit deficit spending in the last four years while they denounced every Republican attempt to do so.

With conservative voters dissatisfied about the compromise that was reached to stave off the fiscal cliff and the more right-wing members of the party insisting on budget cuts and reforms, the president is unlikely to persuade Republicans to raise the debt ceiling without pledging spending cuts in return.