President Obama Praises 'Fiscal Cliff' Deal

02 Jan 2013

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President Barack Obama, with Vice-President Joe Biden at his side, makes a statement regarding the passage of the fiscal cliff bill


Barack Obama has hailed a deal reached to stave off a "fiscal cliff" of drastic taxation and spending measures as "just one step in the broader effort to strengthen the economy".

The US president was speaking after the House of Representatives passed a Senate-backed bill by 257 votes to 167.

It raises taxes for the wealthy and delays spending cuts for two months, reports the BBC.

There had been intense pressure for the vote to be passed before financial markets reopened on Wednesday.

In Tuesday night's house vote, 172 Democrats and 85 Republicans voted in favour of the bill.

It had been passed in the Senate less than 24 hours earlier by 89 votes to eight after lengthy talks between Vice-President Joe Biden and Senate Republicans.

Speaking before returning to Hawaii for his interrupted Christmas holiday, Obama said he was open to compromise on budgetary issues, but would not have another debate with Congress about the so-called "debt ceiling".

The "fiscal cliff" measures - cutting spending and increasing taxes dramatically - came into effect automatically at midnight on Monday when George W Bush-era tax cuts expired.

The January 1 deadline triggered tax increases of about $536bn and spending cuts of $109bn from domestic and military programmes.

Economists had warned that if the full effects of the fiscal cliff were allowed to take hold, the resulting reduction in consumer spending could have sparked a new recession.

The compromise deal extends the tax cuts for Americans earning under $400,000 (£246,000) - up from the $250,000 level Democrats had originally sought.

In addition to the income tax rates and spending cuts, the package includes:

    Rises in inheritance taxes from 35% to 40% after the first $5m for an individual and $10m for a couple
    Rises in capital taxes - affecting some investment income - of up to 20%, but less than the 39.6% that would prevail without a deal
    One-year extension for unemployment benefits, affecting two million people
    Five-year extension for tax credits that help poorer and middle-class families

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