Blow for John Boehner in bid to avoid fiscal cliff

http://www.theaustralian.com.au/

CONFRONTED with a revolt among the rank and file, House Republicans abruptly put off a vote on legislation allowing tax rates to rise for households earning $1 million and up, complicating attempts to avoid a year-end "fiscal cliff" that threatens to send the US economy into recession.

In a brief statement, House Speaker John Boehner said the bill “did not have sufficient support from our members to pass.” At the same time he challenged President Barack Obama and Senate Majority Leader Harry Reid, to work on legislation to avert the fiscal cliff. “The Senate must now act,” Mr Boehner said. Emerging from a hurriedly-called evening meeting of House Republicans, Steve LaTourette said Mr Boehner had told lawmakers he's “going to call the President and he's going to go down and talk to him and maybe they can hammer something out.” There was no immediate response from either the White House or Mr Reid's office. The legislation was crafted to prevent tax increases set to kick in on January 1, 2013, on tens of millions of Americans. But another provision that would have let rates rise for those at the upper income range - a violation of long-standing Republican orthodoxy - triggered the opposition of anti-tax lawmakers inside the party.The abrupt turn of events left precious little time for divided government to prevent across-the-board tax increases and deep spending cuts from taking effect with the new year. Economists say the combination threatened a return to recession for an economy that has been recovering slowly from the last one. The House will not meet again until after Christmas, if then, and the Senate is expected to meet briefly tomorrow, then not reconvene until next Friday (AEDT). The fiscal cliff issue has dominated the postelection session of Congress. More broadly, it marks the end of a tumultuous two-year period that began when tea party-backed Republicans roared into the House demanding lower taxes, only to be asked by their leadership to bless higher tax rates at upper incomes. Mr Boehner said the legislation - he'd dubbed it Plan B - marked a move to “protect as many American families and small businesses as possible from the tax hikes that are already scheduled to occur” with the new year. Referring to one of the core themes of Mr Obama's re-election campaign, he said the President has called for legislation to protect 98 per cent of the American people from a tax hike. “Well, today we're going to do better than that,” he said of the measure that raises total taxes by slightly more than $300 billion over a decade. “Our bill would protect 99.81 per cent of the American people from an increase in taxes.” Democrats said that by keeping tax rates unchanged below $1 million - Mr Obama wants the level to be $400,000 - Republicans had turned the bill into a tax break for the wealthy. They also accused Republicans of crafting their measure to impose a tax increase on 11 million middle class families. “This is a ploy, not a plan,” said Democrat Sander Levin. He accused Republicans of being “deeply cynical,” saying the legislation would scale back some education and child tax credits. A companion bill on the evening's House agenda, meant to build GOP support for the tax bill, called for elimination of an estimated $97 billion in cuts to the Pentagon and certain domestic programs over a decade. It cleared the House on a partisan vote of 215-209 and is an updated version of legislation that passed a little more than six months ago. Those cuts would be replaced with savings totaling $314 billion, achieved through increases in the amount federal employees contribute toward their pensions and through cuts in social programs such as food stamps and the health care law that Mr Obama signed earlier in his term.