Manuel Balce Ceneta/AP file photo

Pulling back from the cliff: House passes compromise measure

Move sets stage for potential automatic spending cuts and government shutdown in two months.

The House voted Tuesday night to approve a measure aimed at preventing a series of tax increases and spending cuts from automatically going into effect, putting a temporary end to fears that the nation would drop off the fiscal cliff into a recession.

After hours of political wrangling, House leaders agreed to take up a Senate-passed compromise measure, which ultimately passed with bipartisan -- if reluctant -- support. The vote was 257-167.

The bill’s provisions include:

  • Higher taxes on individuals earning $400,000 or more and families making $450,000 or more.
  • A rise in tax rates on capital gains and dividends for wealthier households. Taxes on capital gains and dividends would be held at their current levels of 15 percent for individuals making less than $400,000 and households with income of less than $450,000. They would rise to 20 percent for taxpayers and households above those thresholds.
  • A delay in automatic spending cuts for two months. The process, known as sequestration, would have imposed steep, across-the-board cuts to domestic and defense programs.

Passage of the bill by both houses of Congress sets the stage for another debate at the end of February over increasing the federal debt ceiling, avoiding the sequester and providing full-year funding for federal agencies. The government is currently operating under a continuing resolution lasting until late March.

“This law is one more step in the broader effort to strengthen our economy and broaden opportunity," President Obama said after the bill's passage.

Federal labor union leaders criticized the agreement.

“The proposed fiscal cliff solution is a bad deal for federal employees,” said William R. Dougan, president of the National Federation of Federal Employees. “The most important federal workforce issue of our generation -- sequestration -- continues to hang over the head of federal employees throughout government. Furthermore, the failure to address the nation’s borrowing limit will likely lead to another prolonged political standoff, leaving federal workers uncertain of whether they will have a job to come back to for a third time in two years.”

American Federation of Government Employees President J. David Cox said, “While we are glad to see a bill that requires the wealthiest Americans begin to pay a fairer share of taxes, AFGE members are very concerned about the use of additional agency funding cuts in order to pay for the delay of the sequester.  How agencies will achieve these amounts is not clear in the language of the bill.”

National Treasury Employees Union President Colleen M. Kelley said, "while the operations of government will not immediately change, federal agencies continue to face reductions in resources for the remainder of fiscal 2013. These cuts will impact federal agencies and their ability to provide services to the American public including food and drug safety, border security, nuclear regulation, and much more."