Both House Republicans and Democrats will hold closed party meetings Tuesday to decide the fate of the fiscal cliff deal
First, House Democrats will meet with Vice President Joe Biden in the Capitol at 12:15 p.m. It's Biden's second appearance in the Capitol in as many days, after meeting with Senate Democrats late Monday before they passed his tax package early Tuesday morning. House Democrats are certain to provide a good number of votes to ease the bill's passage.
House Republicans will hold a closed party meeting at 1 p.m. Tuesday, as they try to gauge the temperature of their membership, less than 12 hours after the Senate cleared a bill by a margin of 89-8 that would hike tax rates to 39.6 percent for income above $450,000.
Speaker John Boehner (R-Ohio) has promised that the House would consider the legislation, but said Monday night that "decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members -- and the American people -- have been able to review the legislation."
The House hasn't yet scheduled a vote.
House Republicans, who on the whole are more conservative than their Senate counterparts, are presented with a unique scenario Jan. 1. As of Tuesday, income above $250,000 is taxed at 39.6 percent, as the Bush-era tax rates have officially expired. So if GOP lawmakers vote for the Senate bill, it technically cuts taxes, instead of raising them on income above $450,000.
But there are items that are already causing some concern inside the House Republican Conference. The lack of spending cuts in the legislation is worrying to some. Unemployment benefits, which were extended in the Senate bill, are extended for a year with no corresponding spending reductions.
Some members of the House Republican Conference have already come out against the legislation. Reps. Jason Chaffetz of Utah and Justin Amash of Michigan have taken to their Twitter feeds to announce that they would vote against the legislation.
Until Thursday afternoon, when the 112th Congress ends, there are 241 Republicans in the House and 191 Democrats. The 113th Congress will have 200 Democrats and 233 Republicans.
Although Republican leaders have been noncommittal about when the bill will come to the floor, and whether it will be amended, there could be implications if a vote slips to Wednesday. Financial markets are closed Tuesday for New Year's Day and reopen Wednesday. If the Senate bill isn't signed into law, that could shake market confidence.
For the time being, Congress has sent the nation over the fiscal cliff. The Senate passed its bill after 2 a.m. on New Year's Eve, so over the cliff the country went -- though perhaps for only a day or two and, assuming no snags, without incurring the double whammy of another recession and higher unemployment.
The $620 billion agreement was a major breakthrough in a partisan standoff that has dragged on for months, spooking Wall Street and threatening to hobble the economic recovery. It turned back the GOP's two-decade refusal to raise tax rates, delivering a major win for President Barack Obama, who has said he would sign this legislation.
"Leaders from both parties in the Senate came together to reach an agreement that passed with overwhelming bipartisan support today that protects 98 percent of Americans and 97 percent of small business owners from a middle-class tax hike," Obama said in an early morning statement. "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."
In addition to raising tax rates on annual family income above $450,000, the bill delays deep across-the-board spending cuts for two months, canceled pay raises for members of Congress and averted an expected hike in the price of milk by extending expiring dairy policy.
The bill contains winning items for both parties. Democrats get a yearlong extension of unemployment benefits and business-friendly tax provisions. In a major win for the Obama administration, tax cuts for families first enacted in the 2009 stimulus -- an expanded earned income tax credit, child tax credit and college tax credit -- would be extended for five years.
The deal would also prevent rate cuts to doctors who treat Medicare patients, sources said. Dividends and capital gains on family income above $450,000 would be taxed at 20 percent, up from the current 15 percent rate.
But as big a deal as it was, it did little to address the nation's long-term deficit problem -- there's nothing in it to pare back entitlement spending -- or to defuse a potential crisis over raising the debt ceiling that could come as early as February.
"Each of us could spend the rest of the week discussing what a perfect solution would have looked like, but the end result would have been the largest tax increase in American history," Minority Leader Mitch McConnell (R-Ky.) said on the Senate floor before the vote. "The president wanted tax increases, but thanks to this imperfect agreement, 99 percent of my constituents won't be hit by those hikes. So it took an imperfect solution to prevent our constituents from very real financial pain. But in my view, it was worth the effort."
The deal was crafted by McConnell and Vice President Joe Biden -- old friends from decades of Senate service -- after two months of talk between other leaders collapsed.
Biden served as the conduit to the president and Democratic congressional leaders, while McConnell did the same for Republicans. It was the third year in a row that they played an instrumental role in a major policy battle -- in 2010, they hashed out a tax deal, and in 2011, they helped secure the debt limit agreement.
McConnell and Biden negotiated by phone until about 12:45 a.m. Monday, then the president met with Biden in the Oval Office with other key aides until 2 a.m., talking over the emerging deal. When that meeting ended, White House legislative director Rob Nabors headed to the Hill to draft legislative language with Senate staff.
The direct negotiations started back up only a few hours later, when Biden and McConnell spoke before 7 a.m. and dragged on through the day, as Democrats and Republicans wrangled over how to pay for a short delay in the across-the-board spending cuts known as the sequester.
Shortly before 9 p.m. Monday, with only hours to spare before the deadline, Obama called Senate Majority Leader Harry Reid (D-Nev.) and House Minority Leader Nancy Pelosi (D-Calif.) to get their sign-off on the agreement, although they had been looped in all along.
Reid thanked McConnell for his work on the agreement and said it's now up to Boehner to usher it through the House.
"I'm disappointed that we weren't able to make the grand bargain, as we have tried to do for so long, but we tried," Reid said. "If we do nothing the threat of a recession is very real, and passing this agreement does not mean negotiations halt. Far from it. We can all agree there is more work to be done."
It's not the grand bargain that Wall Street and corporate CEOs wanted to see -- and spent millions advocating . But it is still fairly broad in scope. And it reflects significant concessions by both sides, but particularly for McConnell.
McConnell's first offer on Friday night was far from where the deal ended up, according to sources familiar with the talks. That proposal included raising the income threshold to $750,000, instituting means testing for Medicare, reverting to a less generous inflation calculator for government programs, no extension of middle class tax credits and continuing the current estate tax rates, which many Democrats opposed. None of those elements made it into the bill.
Three Democrats -- Sens. Michael Bennet of Colorado, Tom Harkin of Iowa and Tom Carper of Delaware voted against the bill. They joined Republicans Marco Rubio of Florida, Richard Shelby of Alabama, Chuck Grassley of Iowa, Rand Paul of Kentucky and Mike Lee of Utah in opposition.
Harkin said just prior to the vote that the deal fell short of his goal to help "real middle-class families." Bennet is chairman of the Democratic Senatorial Campaign Committee -- his role is to hang on to the Democratic majority in 2014 so his "no" vote is also significant.
Democrats needed Biden to make the final sell. He traveled to the Capitol around 9:15 p.m. with other top White House officials to press his former Senate Democratic colleagues to get behind the plan, which they did in big numbers.
Monday saw both sides hurrying to finalize an accord before 2013. The final sticking point was over delaying the so-called sequester, across-the-board spending cuts slated to begin Jan. 2. Those cuts will be replaced in equal parts by fresh government revenues and other targeted spending reductions.
Obama appeared at the White House on Monday to say a deal was "within sight, but it's not yet done."
The president ribbed lawmakers during his remarks, saying he had hoped for a comprehensive deficit-reduction deal "so we can put all of this behind us and just focus on growing our economy."
"With this Congress, that was obviously a little too much to hope for at this time" Obama said as he urged them to approve the scaled-down deal before the deadline. "One thing we can count on with respect to this Congress is that if there's even one second left before you have to do what you're supposed to do, they will use that last second."
-- Seung Min Kim contributed to this report
CORRECTION: This story has been corrected to show that Sen. Tom Carper of Delaware was a "no" vote.
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