Fiscal cliff averted, Obama victorious, House caves

The House voted to pass the Senate compromise on taxes to avert the fiscal cliff. The president responded by signaling that there will be further tax hikes and new spending. Photo: Associated Press

WASHINGTON, DC, January 1, 2013 — The House voted tonight to pass the Senate’s fiscal cliff deal. Eighty-five Republicans, feeling that they’d take the blame if a bill didn’t pass, joined 171 Democrats to vote for the Senate compromise.

The largest projected drivers of budget deficits over the next decade – entitlements – weren’t touched by the bill. Nor was there any attempt at tax reform. That wasn’t due to lack of time. Congress knew that the fiscal cliff was coming for over a year, and in that year there were no serious attempts to create a coherent, balanced deal to avert it.

Republicans had undercut House Speaker John Boehner’s efforts to put the onus on the Senate to reject or amend a House bill when they rejected his Plan B. As a result, the House was put in that very position, having to decide whether to pass, reject or amend the Senate’s bill. And they flinched.

They also got less than the President had previously offered. The odds are slim that there will be entitlement reform. The opportunity for that has passed. Having obtained a tax hike and put off sequestration, the President and Senate Democrats have no strong incentives to defy their base, which is vehemently opposed to entitlement reform.

Former Senator Alan Simpson (R-Wyo.) and Erskine Bowles, former chief of staff for President Clinton, issued a detailed statement on the tax bill. “The deal approved today is truly a missed opportunity to do something big to reduce our long term fiscal problems, but it is a small step forward in our efforts to reduce the federal deficit. Washington missed this magic moment to do something big to reduce the deficit, reform our tax code, and fix our entitlement programs.”

The two men who chaired Obama’s commission to reduce the deficit argued that tax code and entitlement reform are essential if the country is to move forward to avert the real fiscal cliff, the nation’s exploding debt. They noted, “We have all known for over a year that this fiscal cliff was coming. In fact Washington politicians set it up to force themselves to seriously deal with our Nation’s long term fiscal problems. Yet even after taking the Country to the brink of economic disaster, Washington still could not forge a common sense bipartisan consensus on a plan that stabilizes the debt.”

President Obama delivered a statement after the House vote, starting by thanking Vice President Biden, Mitch McConnell, John Boehner, and other congressional leaders. He noted, “the deficit is still too high,” and said that he and Boehner had agreed that more has to be done. He promised that there will be more deficit reduction, and recognized that Medicare will be the biggest contributor to the deficit.

Signaling his priorities, Obama added that cutting won’t be enough, and that with further cuts there will have to be more taxes raised. He also listed programs on which he wants to spend more. His clear message was, “yes, I’ll consider some cuts here and there, but we’re going to spend more and tax more.”

Obama stated bluntly that he will not negotiate over the debt ceiling, drawing a line that the current GOP leadership will find hard to cross. Republicans who talk of tying a debt ceiling vote to spending cuts are going to be put on the defensive, and they’ve demonstrated that they don’t have the spine for that.

The markets are expected to respond with relief that the drama is over, as are most Americans. The “fiscal cliff” is gone, but that doesn’t mean America isn’t heading fast for the rocks. 


James Picht is the Senior Editor for Communities Politics and teaches economics at the Louisiana Scholars’ College in Natchitoches, La., where he went to take a break from working in Moscow and Washington. But he fell in love with the town and with the professor of Romance languages, so there he stayed. Now he teaches, annoys his children, and makes jalapeno lemonade. He wonders, if we haven’t gone over the fiscal cliff, why does it feel like we’re falling? He tweets, hangs out on Facebook, and has a blog he totally neglects at 


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Jim Picht

James Picht is the Senior Editor for Communities Politics and teaches economics and Russian at the Louisiana Scholars' College in Natchitoches, La. After earning his doctorate in economics, he spent several years working in Moscow and the new independent states of the former Soviet Union for the U.S. government, the Asian Development Bank, and as a private contractor. He returned to Ukraine recently to teach principles of constitutional law and criminal procedure at several Ukrainian law schools for a USAID legal development project. He has been writing at the Communities since 2009.

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