Voting on New Year’s Day for the first time in 62 years, the United States House of Representatives has passed the American Taxpayer Relief Act of 2012 (the so-called fiscal cliff bill) by 257 votes to 167, accepting the version which the Senate had earlier approved by 89 votes to eight. In the House, 172 Democrats voted for the bill and 16 against, with 85 Republicans for and 151 against. The legislation now goes to President Barack Obama, for signing into law. The Act will end the temporary tax breaks granted by President George W. Bush in 2001, but the hikes, from 35 per cent to 39.6 per cent, will affect only those on over $400,000 a year; the President conceded his initial $250,000 threshold. The middle classes, however, will pay more in payroll taxes, the U.S. equivalent of national insurance, which had been frozen earlier in a tax holiday, and the White House had to accept reduced increases in estate taxes, which affect only rich Americans. Other administration concessions, totalling $205 billion, lie in tax breaks for corporate research and development, and continuing corporate tax exemption on foreign subsidiaries’ profits. The President, for his part, can claim some gains, such as extension periods for unemployment benefits, and tax credits on earned income, childcare, and college tuition fees — all of which help poorer and middle earners. In addition, the spending cuts due to start on January 1 have been deferred for two months.
The new Act, nevertheless, is only a stage in a bitter political war between the President, those Congressional Democrats who support him, and the House Republicans in particular. It means the scheduled end of the Bush tax cuts did not coincide with spending cuts, with the attendant risk of a recession — the fiscal cliff — but battles await over the deferred cuts and the debt ceiling, the amount the federal government is allowed to borrow. Yet the House Republicans’ concern is clearly not with the budget deficit, which shrank from 10.1 per cent of GDP in 2009 to 7 per cent in 2012, but with taxation itself and even the idea of government, defence apart. Especially since January 2011, when the Republicans won the House with a large number of Tea Party-style extremists, the GOP has, solely on ideological grounds, persistently obstructed all of Mr. Obama’s efforts. The President, too, has often appeared disdainful of Congressional liaison and even of the complex legislative process, but there is no sign that the GOP will respond to a different approach. This apparently endless and bitter confrontation shows U.S. politics at its ugliest and most dysfunctional, as well as the constitution’s vulnerability to the very factionalism it was meant to prevent.