PRESIDENT BARACK Obama was to sign into law yesterday afternoon the tax cut deal he negotiated with Republicans, in the first legislative compromise of the new era of divided government.
The law was passed by the house at midnight on Thursday, after a failed attempt by Democrats to change provisions on estate tax. The final vote was 277 to 148, with nearly equal numbers of Republicans (138) and Democrats (139) supporting the law.
Democrats were nearly three times as numerous as Republicans in opposing the Bill, with 112 Democrats against, compared to only 36 Republicans.
On December 9th, House Democrats had vowed to prevent the Bill coming to a vote in its present form. But the senate passed it on December 15th, and the changes demanded by Democrats could have dragged the process out beyond the December 31st deadline.
“This is very difficult,” said outgoing speaker of the house Nancy Pelosi. “Nobody wants taxes to go up for the middle class. We just don’t see why we have to give an extra tax cut to the wealthiest.”
Ms Pelosi accused Republicans of forcing Democrats “to pay a king’s ransom in order to help the middle class”. The law will extend Bush-era tax cuts going back as far as 2001 for another two years.
The tax cuts were a major issue in the 2008 presidential election and in this year’s mid-terms. Leaders from both sides have spoken of the possibility of achieving lasting tax reform, which would lower rates permanently and simplify the tax code, in the 112th congress which will begin on January 5th.
This would be the only way to prevent the tax cuts polarising debate yet again in the 2012 presidential election.
Republicans campaigned against deficit spending in the midterms, where they wrested 63 house seats from Democrats.
Yet the tax cuts will add $801 billion to the deficit – a contradiction which appears to have been lost on the American public.
Some Republicans opposed the deal because the tax cuts were not made permanent, because it reinstates the inheritance tax (albeit at lower rates than those which were due to take effect), or because $57 billion in long-term unemployment benefits – the main Republican concession to Obama in exchange for tax cuts for the rich – were not funded by cuts elsewhere in government spending.
Also on Thursday night, senate majority leader Harry Reid abandoned attempts to pass a comprehensive $1.2 trillion government funding Bill.
Instead, a temporary “continuing resolution” is likely to pass today.
Mr Reid has also scheduled cloture motions on the Dream Act (which would legalise immigrants who arrived in the US as children and subsequently attended university or join the military), and on repeal of the military’s “Don’t Ask Don’t Tell” policy this weekend. The Dream Act is expected to fail.
If Don’t Ask Don’t Tell obtains the 60 votes needed to avoid a filibuster, it could face a final senate vote on Monday.
Senate Democrats hope to ratify the “New Start” arms control treaty with Russia by December 22nd.
The treaty obtained only 66 votes in a cloture motion on December 15th, and will require 67 votes for ratification.