President Obama signs the health care bill(Photo: Charles Dharapak, AP)
HONOLULU -- The White House and a divided Congress can now move
on to the next fiscal crisis after a last-minute deal to avert the
"fiscal cliff" laid the foundation for more combustible struggles over
taxes, spending and debt in the next few months.
victory on taxes this week was the second, grudging round of a
piecemeal battle in as many years over mountainous U.S. deficits.
the length and intensity of the debate, the deal to raise the top
income tax rate on families earning over $450,000 a year - about 1% of
households - and including only $12 billion in spending cuts turned out
to be a relatively easy vote for many members of Congress. This was
particularly so because the alternative was to raise taxes on everyone.
Obama signed the bill Wednesday night.
banking $620 billion in higher taxes over the coming decade from
wealthier earners, Obama and his Republican rivals have barely touched
deficits still expected to be in the $650 billion range by the end of
his second term. And those calculations assume policymakers can find
more than $1 trillion over 10 years to replace automatic
across-the-board spending cuts known as a sequester.
do any of the tough stuff," said Erskine Bowles, chairman a 2010 deficit
commission. "We've taken two steps now, but those two steps combined
aren't enough to put our fiscal house in order."
In 2011, the
government adopted tighter caps on day-to-day operating budgets of the
Pentagon and other Cabinet agencies to save $1.1 trillion over 10 years.
measure passed Tuesday prevents automatic tax hikes for everyone but
higher-income earners. It also blocks severe across-the-board spending
cuts for two months, extends unemployment benefits for the long-term
jobless for a year, stops a 27 percent cut in fees paid to doctors
treating patients under the Medicare program for the elderly, and
prevents a possible doubling of milk prices.
The alternative was
going over the cliff, an economy-punching half-trillion-dollar
combination of sweeping tax increases and spending cuts. Despite the
deal, the government partially went over the brink anyway with the
expiration of a two-year cut in payroll taxes for the Social Security
Action inside a dysfunctional Washington now only
comes with binding deadlines. So, naturally, this week's hard-fought
bargain sets up another crisis in two months, when painful
across-the-board spending cuts to the Pentagon and domestic programs are
set to kick in and the government runs out of the ability to juggle its
$16.4 trillion debt without having to borrow more money.
Congress increases or allows Obama to increase that borrowing cap, the
government risks a first-ever default on U.S. obligations. Republicans
will use this as an opportunity to leverage more spending cuts from
Obama, just like they did in the summer of 2011.
Representatives Speaker John Boehner, the top Republican in Washington,
vows that any increase in the debt limit - which needs to be enacted by
Congress by the end of February or sometime in March - must be
accompanied by an equal amount in cuts to federal spending. That puts
him on yet another collision course with Obama, who has vowed anew that
he won't let haggling over spending cuts complicate the debate over the
The cliff compromise represented the first time since
1990 that Republicans condoned a tax increase. That has whipped up a
fury among lawmakers from the conservative tea party movement and
increased the pressure on Boehner to adopt a hard line in coming
confrontations over the borrowing cap and the spending cuts that won
only a two-month reprieve in this weeks' deal.
Put simply, House
Republicans are demanding new spending cuts - possibly through changes
in Social Security and Medicare benefit formulas - as a scalp, and
they're dead set against raising more revenues through anything less
than an overhaul of the tax code now that Obama has won higher taxes on
"Now the focus turns to spending," Boehner said after
Tuesday's vote, promising that future budget battles will center on
"significant spending cuts and reforms to the entitlement programs that
are driving our country deeper and deeper into debt."
just as adamant on the other side, saying higher revenues have to be
part of any formula for further diverting the automatic spending cuts.
refusal of Republicans to consider additional new taxes is sure to stir
up resistance among Democrats when they're asked to consider
politically painful cuts to so-called entitlement programs like
Medicare. Democratic protests led Obama and Boehner to take a proposal
to increase the Medicare eligibility age off the table in the recent
round of talks.
The upshot? More scorched-earth politics on the
budget will probably dominate the initial few months of Obama's second
term, when the president would prefer to focus on legacy accomplishments
like fixing the immigration problem and implementing his overhaul of