An agreement has been reached between the White House and Senate Republican leader Mitch McConnell (R-Ky.) to avoid the tax side of the "fiscal cliff," President Barack Obama announced Wednesday. He urged members of Congress to back the plan. Congress will not have time to vote on the plan tonight, before the fiscal cliff deadline, but votes could come later this week.
"An agreement to prevent this New Year's tax hike is in sight, but it is not done, there are still issues to resolve," Obama said.
The agreement would prevent taxes from going up on individuals making more than $400,000 and families making more than $450,000, extend unemployment benefits for a year, maintain the current child tax credit, tuition tax credit and clean energy tax credit, delay cuts to doctors who provide services for Medicare patients, and permanently fix the alternative minimum tax, which would otherwise impact many middle income families.
A compromise on the estate tax is also part of the agreement. Inheritances valued at more than $5 million would be taxed at 40 percent. Currently, they are taxed at 35 percent but with the fiscal cliff they were set to go back to 55 percent for inheritances over $1 million. While Republicans dislike the estate tax, Democratic senators representing states with many farmers who would have been impacted were also influential in getting the much smaller estate tax.
The agreement was negotiated through the night by House Minority Leader McConnell and Vice President Joe Biden. The two men worked together for 23 years in the Senate. They were also at the center of the negotiations that led to the Budget Control Act of 2011, which is partly responsible for the fiscal cliff. They spoke at close to 1 a.m. and again around 6:30 a.m. working on the deal.
McConnell also wanted a two month delay in the spending cuts, or sequestration, which is also part of the fiscal cliff. According to Mike Emanuel, chief congressional correspondent for Fox News, McConnell thought that was part of the agreement but then the White House backed off. The main sticking point now appears to be whether there will be a delay in sequestration offset by spending cuts in other parts of the budget.
In a speech on the Senate floor, McConnell seemed consigned to the fact that only taxes would be part of the deal and urged his fellow Republicans to support it.
"The piece that needs to be done now is the tax hikes," McConnell said. ... "We can do this. We must do this."
Obama said that his preference would have been for the "grand bargain" rather than this much smaller agreement. The grand bargain would have raised revenue through tax reform and decreased the long term growth in spending through entitlement reform.
At times, the speech sounded more like a campaign rally, many observers noted. He teased Congress for not agreeing to the grand bargain, which did not go over well with some members.
"With this Congress, that was a little too much to hope for," Obama said as the audience laughed.
"But I must say, at a time of crisis on New Year's Eve, when at midnight at least certain actions take place – or have to be planned to take place – we have a president of the United States go over and have a cheerleading, ridiculing of Republicans," Sen. John McCain (R-Ariz.) complained in a speech on the Senate floor. "... So what did the president of the United States just do? Well, he made a couple of jokes, laughed about how people are going to be here for New Year's, sent a message of confrontation to the Republicans."
Rep. Bill Huizenga (R-Mich.) also complained that Obama's press conference was "void of leadership" and said it was a "campaign rally, not a press conference."
"I know the president has fun heckling Congress ... he probably lost some votes," Sen. Bob Corker (R-Tenn.) added.
University of Virginia political scientist Larry Sabato tweeted that he is "not sure a partisan pep rally helped," but that maybe the purpose was to gather votes from liberal Democrats who are upset with the deal.