Bigger fights loom after 'fiscal cliff'
WASHINGTON -President Barack Obama and congressional Republicans face even bigger budget battles in the next two months after a hard-fought "fiscal cliff" deal narrowly averted devastating tax increases and spending cuts.
The agreement, approved late on Tuesday by the Republican-led House of Representatives and signed by Obama on Wednesday, was a victory for the president, who had won re-election in November on a promise to address budget woes, partly by raising taxes on the wealthiest Americans.
Republican Frank Guinta was the only member of the New Hampshire delegation to vote against the bill, which passed 257-167.
The vote was seen as a victory for Obama, who had won re-election in November on a promise to address budget woes, partly by raising taxes on the wealthiest Americans.
But it set up potentially bruising showdowns over the next two months on spending cuts and an increase in the nation's limit on borrowing. Republicans, angry the fiscal cliff deal did little to curb the federal deficit, promised to use the debt-ceiling debate to win deep spending cuts next time.
'Our opportunity here is on the debt ceiling," Republican Sen. Pat Toomey of Pennsylvania said on MSNBC. "We Republicans need to be willing to tolerate a temporary, partial government shutdown, which is what that could mean."
Republicans believe they will have greater leverage over Obama when they must consider raising the borrowing limit in February because failure to close a deal could mean a default on. debt or another downgrade in the credit rating. A similar showdown in 2011 led to a credit downgrade.
But Obama and congressional Democrats may be emboldened by winning the first round of fiscal fights when dozens of House Republicans buckled and voted for major tax hikes for the first time in two decades.
"We believe that passing this legislation greatly strengthens the President's hand in negotiations that come next," House Minority Leader Nancy Pelosi told NBC.
Bemoaning the intensity of the fiscal cliff fight, Obama urged "a little less drama" when the Congress and White House next address budget issues like the government's rapidly mounting $16 trillion debt load. He vowed to avoid another divisive debt-ceiling fight before the late-February deadline for raising the limit.
"While I will negotiate over many things, I will not have another debate with this Congress about whether or not they should pay the bills they have already racked up," Obama said before he headed to Hawaii to resume an interrupted vacation.
Rating agencies Moody's Investors Service and Standard & Poor's said the "fiscal cliff" measure did not put the budget on a more sustainable path. The International Monetary Fund said raising the debt ceiling would be a critical move.
"More remains to be done to put U.S. public finances back on a sustainable path without harming the still fragile recovery," said Gerry Rice, a spokesman for the IMF.
Financial markets that had been worried about the fiscal cliff showdown welcomed the deal, with U.S. stocks recording their best day in more than a year.
The S&P 500 achieved its biggest one-day gain since Dec. 20, 2011, pushing the benchmark index to its highest close since Sept. 14.
The debate over "entitlement" programs is also bound to be difficult. Republicans will be pushing for significant cuts in government health care programs like Medicare and Medicaid for retirees and the poor, which are the biggest drivers of federal debt. Democrats have opposed cuts in those popular programs.
"This is going to be much uglier to me than the tax issue ... this is going to be about entitlement reform," Republican Sen. Bob Corker of Tennessee said on CNBC.
"Now that we have this other piece behind us - hopefully " we'll deal in a real way with the kinds of things our nation needs to face," he said.
The fiscal cliff crisis ended when dozens of Republicans in the House relented and backed a bill passed by the Democratic-controlled Senate that hiked taxes on household income above $450,000 a year. Spending cuts of $109 billion in military and domestic programs were delayed for two months.
Economists had warned that the fiscal cliff of across-the-board tax hikes and spending cuts would have punched a $600 billion hole in the economy this year and threatened to send the country back into recession.
Peter Huntsman, chief executive of chemical producer Huntsman Corp, said the vote did little to reduce the U.S. budget deficit and would hinder growth.
"We haven't even begun to address the basic issues behind this,: Huntsman told Reuters. "We haven't fixed anything. All we've done is addressed the short-term pain."