The U.S. stock market soared this morning as investors welcomed the last-minute Congressional approval of a bill to avoid sending the federal government over the fiscal cliff.
Shortly before midnight on New Year’s Day, the House of Representatives approved emergency bipartisan legislation that freezes the federal income tax for 98 percent of Americans and 97 percent of small business owners.
The bill was approved by a 257-to-167 vote, as enough Republicans joined their Democratic colleagues to affirm the compromise bill, which was previously approved by the U.S. Senate after a deal was brokered by Vice President Joe Biden with Senate Majority Leader Mitch McConnell (R-Kentucky).
In the end, House Speaker John Boehner (R-Ohio) also voted for the bill.
The bill was seen in Washington as a political victory for President Barack Obama.
“This agreement will also grow the economy and shrink our deficits in a balanced way – by investing in our middle class, and by asking the wealthy to pay a little more. What’s more, today’s agreement builds on previous efforts to reduce our deficits. Last year, I worked with Democrats and Republicans to cut spending by more than $1 trillion. Tonight’s agreement does even more by asking millionaires and billionaires to begin to pay their fair share for the first time in 20 years. As promised, that increase will be immediate, and it will be permanent,” Obama said. “There’s more work to do to reduce our deficits, and I’m willing to do it. But tonight’s agreement ensures that, going forward, we will continue to reduce the deficit through a combination of new spending cuts and new revenues from the wealthiest Americans. And as we address our ongoing fiscal challenges, I will continue to fight every day on behalf of the middle class and all those fighting to get into the middle class to forge an economy that grows from the middle out, not from the top down.”
The legislation will let tax rates rise on households earning more than $450,000 per year and renews federal tax credits for the costs of college education.
The bill also extends unemployment benefits for 2 million Americans for another year.
Critics of the bill said it failed to address the debt ceiling and the cuts in expenditures that will be needed to balance the budget.
Among the Wisconsin delegation, Senators Herb Kohl (D-Wis.) and Ron Johnson (R-Wis.) each voted for the bill.
In the House, GOP U.S. Reps. Paul Ryan and Reid Ribble joined all three Democrats – Tammy Baldwin, Gwen Moore and Ron Kind – in the state’s delegation to support the bill.
Republicans Sean Duffy, Tom Petri and Jim Sensenbrenner voted against the deal.
Ryan, the House Budget chair, praised his colleagues for “limiting the damage as much as possible” despite his concerns with other provisions in the bill. He added Americans chose divided government and elected officials have to apply their principles and weigh the benefits and costs of action and of inaction.
“In H.R. 8, there are clearly provisions that I oppose,” Ryan said. “But the question remains: Will the American people be better off if this law passes relative to the alternative? In the final analysis, the answer is undoubtedly yes. I came to Congress to make tough decisions — not to run away from them.”
Moore (D-Milwaukee) said she was pleased the bill extends unemployment benefits and hoped Republicans would not “try to take a hatchet to the much needed social programs that will be necessary in keeping our economy moving forward” in addressing the debt ceiling.”
Johnson issued the following statement: “Although I strongly prefer extension of current tax rates for all Americans, I supported the compromise bill that protects 99 percent of Wisconsinites from an income tax increase, limits the death tax, and prevents a dramatic increase in milk prices. It is by no means a perfect piece of legislation. The revenue raised by this legislation will equal approximately 7 percent of projected deficits. It is now time for President Obama and his Democrat colleagues to show the American public their plan to close the other 93 percent of the deficit. Our nation’s debt now stands at $16.4 trillion, and has reached its statutory limit. We blew through the $2.1 trillion increase in the debt ceiling granted in August 2011 in only 17 months. This is clearly unsustainable, and President Obama must begin to work with Congress to reduce the size, scope, and cost of government. We are mortgaging our children’s future. This is immoral and it must stop.”
On Wall Street this morning, the Dow Jones Industrial Average rose by more than 250 points in the first trading day of the new year.
Steve Jagler is executive editor of BizTimes.
