Jonathan Ernst/Reuters
Senate Majority Leader Harry Reid, center, departed after the vote.
WASHINGTON – The Senate, in a pre-dawn vote two hours after the deadline passed to avert automatic tax increases, overwhelmingly approved legislation Tuesday that would allow tax rates to rise only on affluent Americans while temporarily suspending sweeping, across-the-board spending cuts.
The deal, worked out in furious negotiations between Vice President Joseph R. Biden Jr. and the Republican Senate leader, Mitch McConnell, passed 89-8, with just three Democrats and five Republicans voting no. Although it lost the support of some of the Senate’s most conservative members, the broad coalition that pushed the accord across the finish line could portend swift House passage as early as New Year’s Day.
Quick passage before the markets reopen Wednesday would likely negate any economic damage from Tuesday’s breach of the so-called “fiscal cliff” and largely spare the nation’s economy from the one-two punch of large tax increases and across-the-board military and domestic spending cuts in the New Year.
“This shouldn’t be the model for how to do things around here,” Senator McConnell said just after 1:30 a.m. “But I think we can say we’ve done some good for the country.”
“You surely shouldn’t predict how the House is going to vote,” Mr. Biden said late New Year’s Eve after meeting with leery Senate Democrats to sell the accord. “But I feel very, very good.”
The eight senators who voted no included Marco Rubio, Republican of Florida and a potential presidential candidate in 2016, two of the Senate’s most ardent small-government Republicans, Rand Paul of Kentucky and Mike Lee of Utah, and Senator Charles E. Grassley, who as a former Finance Committee chairman helped secure passage of the Bush-era tax cuts, then opposed making almost all of them permanent on Tuesday. Two moderate Democrats, Tom Carper of Delaware and Michael Bennet of Colorado, also voted no, as did the liberal Democrat Tom Harkin, who said the White House had given away too much in the compromise. Senator Richard Shelby, Republican of Alabama, also voted no.
The House Speaker, John A. Boehner, and the Republican House leadership said the House would “honor its commitment to consider the Senate agreement.” But, they added, “decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members – and the American people – have been able to review the legislation.”
Even with that cautious assessment, Republican House aides said a vote Tuesday is possible.
Under the agreement, tax rates would jump to 39.6 percent from 35 percent for individual incomes over $400,000 and couples over $450,000, while tax deductions and credits would start phasing out on incomes as low as $250,000, a clear victory for President Obama, who ran for re-election vowing to impose taxes on the wealthy.
Just after the vote, Mr. Obama called for quick House passage of the legislation.
“While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country and the House should pass it without delay,” he said.
Democrats also secured a full year’s extension of unemployment insurance without strings attached and without offsetting spending cuts, a $30 billion cost. But the two-percentage point cut to the payroll tax that the president secured in late 2010 lapsed at midnight and will not be renewed.
In one final piece of the puzzle, negotiators agreed to put off $110 billion in across-the-board cuts to military and domestic programs for two months while broader deficit reduction talks continue. Those cuts begin to go into force on Wednesday, and that deadline, too, might be missed before Congress approves the legislation.
To secure votes, Senator Harry Reid, the Senate Democratic leader, also told Democrats the legislation would cancel a pending congressional pay raise — putting opponents in the politically difficult position of supporting a raise — - and extend an expiring dairy policy that would have seen the price of milk double in some parts of the country.
The nature of the deal ensured that the running war between the White House and Congressional Republicans on spending and taxes would continue at least until the spring. Treasury Secretary Timothy F. Geithner formally notified Congress that the government reached its statutory borrowing limit on New Year’s Eve. Through some creative accounting tricks, the Treasury Department can put off action for perhaps two months, but Congress must act to keep the government from defaulting just when the “pause” on pending cuts is up. Then in late March, a law financing the government expires.
