With the entire nation about to face higher taxes, including the middle class, the Republican House majority compromised Tuesday night and accepted President Obama’s plan for dealing temporarily with funding government. The rich would have been hit hard by the ending of tax cuts passed under President George Bush, even if the Senate-passed tax hikes were not approved.
Obama appeared to try to avoid gloating, but made it clear he felt he had kept his central campaign promise.
"A central premise of my campaign for president was to change the tax code that was too skewed towards the wealthy at the expense of working, middle class Americans. Tonight we've done that. Thanks to the votes of Democrats and Republicans in Congress, I will sign a law that raises taxes on the wealthiest 2% of Americans while preventing a middle class tax hike that could have sent the economy back into recession and obviously had a severe impact on families all across America," Obama said after the vote.
“Under this law, more than 98 percent of Americans and 97 percent of small businesses will not see their income taxes go up.... Everybody worked hard on this, and I appreciate it,’’ Obama said.
Many media sites called it a victory for Obama, although they said it was achieved at great cost and new battles were on the horizon.
The Dow surged 200 points when it opened Wednesday morning. Markets worldwide had already risen.
At least 76 House Republicans voted for the Senate bill, which effectively raises taxes on people who make more than $400,000 as well as on inheritances. It makes what were intended to be temporary tax cuts passed under the Bush Administration permanent for the middle class, however.
“House Republicans reversed course Tuesday evening and moved toward the likely passage of the bipartisan agreement struck in the Senate to avoid the worst effects of the ‘fiscal cliff’, setting up a late night vote to complete a wild day in which the critical legislation appeared to be on its political deathbed for several hours,” the Washington Post reported. It was a measure of House Speaker John Boehner's underestimated ability to get his members to compromise.
Grover Norquist, the Republican tax, sealed the deal when he said on CNN that he would vote for the debt deal because it is such a retreat for Democrats.
The Senate had passed the “American Taxpayer Relief Act of 2012” plan 89-9 Monday night after Obama conceded on several major issues, particularly taxes on the rich.
But the Republican House leadership had refused to even vote on the deal all day Tuesday, saying there were not enough cuts on spending, particularly on the so-called entitlements like Medicare and Social Security.
Early in the evening, the GOP house leadership met and apparently decided it would be blamed by the country for causing a possible collapse of the economy. Its refusal also would result in a big tax hike on the rich and those who will be inheriting wealth by allowing measures adopted under Bush to expire.
Boehner had given his party members two choices: pass the bill the Senate passed, or send back an amended version with more spending cuts. It became clear the latter choice would fail.
Obama was already risking his credibility with Democrats by agreeing to not raise taxes on anyone making less than $450,000. His party and the President had wanted to raise taxes on anyone making more than $250,000.
Also at stake were measures continuing unemployment payments to the jobless. Medicare and Social Security payments seemed likely to avoid cuts, though the details remained unclear.