Fiscal Cliff Deal Approved
WASHINGTON — — A bipartisan plan to avoid federal spending reductions and tax increases that would hit Maryland especially hard won final approval Tuesday night in the House of Representatives even as outside groups warned that the bill would simply delay difficult decisions for a few months.
After a day of wild political gyrations — even by Washington’s standards — the House voted 257 to 167 to pass a plan negotiated by Vice President Joe Biden and Senate GOP leader Mitch McConnell that raise income tax rates on households earning more than $450,000 and postpones $110 billion in spending cuts through the end of February.
For Maryland, home to nearly 300,000 federal employees and a large government contracting community, the stakes were especially high. Economists say the frequent budget showdowns in Congress have already harmed the region’s economy and that a prolonged period of uncertainty could do more damage.
“I want to send a message to the American people that we can get it done — that we can get things done,” said Rep. Elijah E. Cummings, a Baltimore Democrat who voted for the plan. “People have become thoroughly and rightfully frustrated, and hopefully this will be a step in the right direction.”
Behind-the-scenes machinations played out Tuesday on Capitol Hill, hours after the nation plunged over the “fiscal cliff,” triggering nearly $600 billion in automatic tax increases and spending cuts. House Republican leaders initially demanded more budget cuts before agreeing to the deal — jeopardizing the underlying legislation — but then suddenly backed off and scheduled a series of late votes.
Members of both parties pointed to provisions they don’t like, but lawmakers also hoped to end the standoff before markets open Wednesday and a new Congress is sworn in Thursday.
“I’d be happy if we had what the president campaigned on,” said Rep. Andy Harris, a Cockeysville Republican who voted against the agreement. “Our estimates … [show] there are $40 in tax increases for every dollar in cuts.”
Republicans might have secured more cuts had House Speaker John A. Boehner not walked away from negotiations with President Barack Obama last month over a more comprehensive budget deal. Ultimately, it was McConnell who managed to keep the lower, Bush-era income tax rates in place for families earning up to $450,000.
Obama had tried to draw the line at $250,000.
“This law is just one step in the broader effort to strengthen our economy and broaden opportunity for everybody,” the president said after the House vote, adding that he would sign the bill. “The fact is the deficit is still too high.”
The nonpartisan Congressional Budget Office said Tuesday that the measure would add $3.9 trillion to budget deficits over the next decade — most of which would come from extending tax breaks. Still, 85 of 236 Republicans voting joined all but 16 Democrats in support of the legislation. The Senate passed the agreement early Tuesday on an 89-8 vote.
Rep. C.A. Dutch Ruppersberger praised the “courage” of the Republicans who helped to pass the bill.
“I really think that tonight starts the beginning of, hopefully, a new 113th Congress where we have to come together, Republicans and Democrats, as Americans, to make sure we continue to move forward in the fiscal issues that we have to deal with,” the Baltimore County Democrat said. “This is just the first step.”
Several groups with ties to Maryland expressed concern about the deal.
The legislation delays for two months across-the-board spending cuts known sequestration, forcing Congress to rehash the same budget battles in February. That will coincide with separate talks over raising the nation’s $16.4 trillion debt ceiling.
None of that is reassuring for Maryland’s government contractors.
“The two things that our member companies are looking for is consistency and predictability,” said Alan L. Chvotkin, executive vice president of the Professional Services Council, which represents more than 300 contractors in Maryland and elsewhere.
“This two-month delay may provide a short-term political solution, but it does nothing to add to that consistency and predictability,” he said.
Private government contractors in Maryland were awarded about $27 billion in work last year — among the highest per capita in the nation.
Contractor trade groups and federal employee unions said they are concerned that the legislation calls for $12 billion in additional spending cuts without specifying where those reductions will come from. American Federation of Government Employees President J. David Cox Sr. argued that the federal workforce should be off limits.
“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,” he said.
The union represents thousands of employees in Maryland, including many who work for the Woodlawn-based Social Security Administration.
William R. Dougan, president of the National Federation of Federal Employees, was even more direct.
“The proposed fiscal cliff solution is a bad deal for federal employees,” he said. “The most important federal workforce issue of our generation — sequestration — continues to hang over the head of federal employees throughout government.”
Recent uncertainty over federal budgets has already had an impact on the region, said Stephen S. Fuller, director of the Center for Regional Analysis at George Mason University. Economic growth in the Washington metro area, he said, has slipped considerably when compared with other large urban regions.
“The federal machine has ground to a halt,” he said.
Because the deal does not extend a Social Security tax break that was first approved in 2010, virtually all workers will see a 2 percent reduction in take-home pay.
“Paychecks are going to be smaller on top of the fact that people are going to be worried about their jobs,” Fuller said.
Still, Fuller sees reasons to be optimistic. If lawmakers can reach a broad budget fix in the coming weeks, it would create certainty in the second half of the year. Such an agreement would likely minimize spending cuts in the short term, giving the economy more room to recover, he said.
“And as soon as everybody knows what the rules are, they can get back to work,” Fuller said.
Rep. Chris Van Hollen, the top Democrat on the House Budget Committee, said the “vast majority” of the package “represents important progress.” He noted the extension of middle-class tax cuts, the child tax credit and jobless benefits for the long-term unemployed as well as a permanent fix to the Alternative Minimum Tax, which had threatened to saddle many middle-class families with significantly higher taxes
The agreement also maintains the current rates government pays doctors who see Medicare patients.
The Montgomery County lawmaker served on the super committee, the panel of Democratic and Republican lawmakers whose failure to agree on deficit reduction in 2011 led to the sequester.
“The difference between a divided government and dysfunctional government is the willingness to compromise,” he said.