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| Fiscal cliff: White House and Republicans reach deal to end crisis | Fiscal cliff: White House and Republicans reach deal to end crisis |
| (4 months later) | |
| The White House and Congressional leaders reached a deal on Monday night to resolve the fiscal cliff crisis that threatens the fragile US economic recovery. | The White House and Congressional leaders reached a deal on Monday night to resolve the fiscal cliff crisis that threatens the fragile US economic recovery. |
| With only hours left until a midnight deadline for automatic tax rises and spending cuts, Senate leaders reached a bipartisan compromise to avert some but not all of the austerity measures due to take effect on Tuesday. | With only hours left until a midnight deadline for automatic tax rises and spending cuts, Senate leaders reached a bipartisan compromise to avert some but not all of the austerity measures due to take effect on Tuesday. |
| Two hours after the deadline lapsed the Senate formally approved the legislation. The deal hung in the balance however pending a vote expected later on Tuesday in the Republican-controlled House of Representatives. Members from each side complained the deal conceded too much. | Two hours after the deadline lapsed the Senate formally approved the legislation. The deal hung in the balance however pending a vote expected later on Tuesday in the Republican-controlled House of Representatives. Members from each side complained the deal conceded too much. |
| Without a deal every taxpayer in America faced imminent steep rises. These would be accompanied by deep cuts in federal spending programmes, ranging from defence to welfare, in particular unemployment benefits. | Without a deal every taxpayer in America faced imminent steep rises. These would be accompanied by deep cuts in federal spending programmes, ranging from defence to welfare, in particular unemployment benefits. |
| Technically the US has just gone over the cliff but if the House approves the agreement the economic damage could be fleeting and relatively minor. The goal will be to have full Congressional approval before Wall Street reopens on Wednesday. | Technically the US has just gone over the cliff but if the House approves the agreement the economic damage could be fleeting and relatively minor. The goal will be to have full Congressional approval before Wall Street reopens on Wednesday. |
| The Senate minority Leader Mitch McConnell, a Republican, and vice president Joe Biden, hammered out the accord after two months of talks between president Barack Obama and other Congressional leaders failed. | The Senate minority Leader Mitch McConnell, a Republican, and vice president Joe Biden, hammered out the accord after two months of talks between president Barack Obama and other Congressional leaders failed. |
| The deal would allow tax rates to rise on income over $450,000 and delay automatic federal spending cuts for two months. | The deal would allow tax rates to rise on income over $450,000 and delay automatic federal spending cuts for two months. |
| Tax deductions and credits would start phasing out on incomes as low as $250,000, a defeat for the GOP which had resisted higher taxes for the wealthy. | Tax deductions and credits would start phasing out on incomes as low as $250,000, a defeat for the GOP which had resisted higher taxes for the wealthy. |
| "Just last month Republicans in Congress said they would never agree to raise tax rates on the wealthiest Americans," Obama said at a hastily arranged news briefing. "Obviously, the agreement that's currently being discussed would raise those rates and raise them permanently." | "Just last month Republicans in Congress said they would never agree to raise tax rates on the wealthiest Americans," Obama said at a hastily arranged news briefing. "Obviously, the agreement that's currently being discussed would raise those rates and raise them permanently." |
| Going over the "cliff" makes a deal more palatable to Republicans. With taxes automatically going up at midnight, Republicans, ideologically opposed to tax rises, would in fact be voting to bring them down, at least for all but the top 2% of wealthiest taxpayers. | Going over the "cliff" makes a deal more palatable to Republicans. With taxes automatically going up at midnight, Republicans, ideologically opposed to tax rises, would in fact be voting to bring them down, at least for all but the top 2% of wealthiest taxpayers. |
| Earlier on Monday, surrounded by what the White House described as ordinary Americans, Obama said such people could not afford the tax rises – an average of about $2,000 for every US taxpayer – that would result if a deal was not reached. "The economy can't afford it," he added. | Earlier on Monday, surrounded by what the White House described as ordinary Americans, Obama said such people could not afford the tax rises – an average of about $2,000 for every US taxpayer – that would result if a deal was not reached. "The economy can't afford it," he added. |
| Obama said the framework of the deal was that tax would not go up for most Americans. Unemployment benefits, help with university tuition and tax credits for clean energy companies would all be protected. | Obama said the framework of the deal was that tax would not go up for most Americans. Unemployment benefits, help with university tuition and tax credits for clean energy companies would all be protected. |
| Tax rises would be imposed only on those earning $450,000 a year or more. The Democrats had been pushing for $250,000 while the Republicans had wanted the limit set at those earning $1m or more. | Tax rises would be imposed only on those earning $450,000 a year or more. The Democrats had been pushing for $250,000 while the Republicans had wanted the limit set at those earning $1m or more. |
| The Democrats appear to have secured protection for continued payments of unemployment benefits, which the Republicans had wanted cut. Democrats were pushing for the automatic cuts on spending across the board be postponed for at least a few months. | The Democrats appear to have secured protection for continued payments of unemployment benefits, which the Republicans had wanted cut. Democrats were pushing for the automatic cuts on spending across the board be postponed for at least a few months. |
| Obama said his preference would have for a "grand bargain" that would have dealt more broadly with America's economic problems, especially its huge deficit. But, showing his exasperation with Republicans who control the House, he said this was not possible with this Congress. | Obama said his preference would have for a "grand bargain" that would have dealt more broadly with America's economic problems, especially its huge deficit. But, showing his exasperation with Republicans who control the House, he said this was not possible with this Congress. |
| It is the first time Congress has met on New Year's Eve since 1995 when Washington was confronted by another Democratic-Republican economic showdown. | It is the first time Congress has met on New Year's Eve since 1995 when Washington was confronted by another Democratic-Republican economic showdown. |
| Obama, in spite of having won a second term, desperately needs this victory over the Republicans to prevent that second term being destroyed by repeated stand-offs with Republicans in Congress. | Obama, in spite of having won a second term, desperately needs this victory over the Republicans to prevent that second term being destroyed by repeated stand-offs with Republicans in Congress. |
| The danger for the Obama administration in the present showdown is that a combination of sudden tax rises and government spending cuts would have a negative impact on the country's sluggish rise out of recession. Countries that rely on trade with America could also potentially suffer. | The danger for the Obama administration in the present showdown is that a combination of sudden tax rises and government spending cuts would have a negative impact on the country's sluggish rise out of recession. Countries that rely on trade with America could also potentially suffer. |
| The Democrats had little problem getting a bill through the Senate where they have a majority but the House is much more difficult, given the size of the Republican majority. The Obama administration hopes that a combination of Democrats and moderate Republicans will see it pass. | The Democrats had little problem getting a bill through the Senate where they have a majority but the House is much more difficult, given the size of the Republican majority. The Obama administration hopes that a combination of Democrats and moderate Republicans will see it pass. |
| The Republicans and Democrats have been struggling since Obama's re-election in early November to find a compromise. The Democrats want to see tax rises only for the wealthiest and for the Defense Department to take the brunt of the spending cuts. Republicans have pressed for the onus to be shifted to welfare spending. | The Republicans and Democrats have been struggling since Obama's re-election in early November to find a compromise. The Democrats want to see tax rises only for the wealthiest and for the Defense Department to take the brunt of the spending cuts. Republicans have pressed for the onus to be shifted to welfare spending. |
| Obama and the Republican leader in the House, John Boehner, came close to reaching a "grand bargain" in the run-up to Christmas but the talks collapsed. The Democrats blamed Boehner for being unable to secure the support of Tea Party-backed Republicans in the House, while Boehner blamed Obama for failing to give him enough concessions on tax and spending. | Obama and the Republican leader in the House, John Boehner, came close to reaching a "grand bargain" in the run-up to Christmas but the talks collapsed. The Democrats blamed Boehner for being unable to secure the support of Tea Party-backed Republicans in the House, while Boehner blamed Obama for failing to give him enough concessions on tax and spending. |
| The baton after Christmas was passed to Harry Reid in the Senate, and his Republican counterpart Mitch McConnell. But talks between them broke down over the weekend. | The baton after Christmas was passed to Harry Reid in the Senate, and his Republican counterpart Mitch McConnell. But talks between them broke down over the weekend. |
| Next up were talks between McConnell and vice-president Joe Biden, old friends, who negotiated throughout Sunday and into the early hours of Monday morning, resuming again at dawn. | Next up were talks between McConnell and vice-president Joe Biden, old friends, who negotiated throughout Sunday and into the early hours of Monday morning, resuming again at dawn. |
| Without a deal, a single person earning $100,000 a year will face a $5,314 rise in taxes, and draconian spending cuts will be imposed across the board, in particular military spending and welfare benefits. | Without a deal, a single person earning $100,000 a year will face a $5,314 rise in taxes, and draconian spending cuts will be imposed across the board, in particular military spending and welfare benefits. |
| With the war in Iraq over and US combat involvement in Afghanistan winding down, the Pentagon is vulnerable to spending cuts, in particular expensive equipment programmes. If no deal is in place on 1 January, the Pentagon, as a first step, will have to inform its 800,000 civilian employees to prepare to take mandatory leave to save money. | With the war in Iraq over and US combat involvement in Afghanistan winding down, the Pentagon is vulnerable to spending cuts, in particular expensive equipment programmes. If no deal is in place on 1 January, the Pentagon, as a first step, will have to inform its 800,000 civilian employees to prepare to take mandatory leave to save money. |
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