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'Plan B' to avert fiscal cliff in the US fails

Obama said he’ll try to prevent across-the-board tax increases after a vote calling for higher rates on million-dollar earners failed.

House Speaker Rep. John Boehner speaks about the fiscal cliff in Washington yesterday.
House Speaker Rep. John Boehner speaks about the fiscal cliff in Washington yesterday.
Image: (AP Photo/Jacquelyn Martin)

A REPUBLICAN PLAN to let tax breaks expire on US millionaires collapsed late yesterday when it failed to earn enough party support, leaving talks on averting the ‘fiscal cliff’ up in the air.

House Speaker John Boehner had boasted sufficient support for his “Plan B” to put pressure on President Barack Obama to break the stalemate over how to avoid the tax hikes and mandatory spending cuts set to kick in on 1 January.

But Democrats balked at the initiative, and conservatives opposed to raising taxes on anyone, even the wealthy, revolted. Boehner, who sought to use the vote as leverage in his talks with Obama, was forced to pull back.

Raising taxes

“The House did not take up the tax measure today because it did not have sufficient support from our members to pass,” Boehner said in a statement late yesterday after calling a brief meeting with his Republican caucus.

“Now it is up to the president to work with Senator (Harry) Reid on legislation to avert the fiscal cliff,” he added.

House Majority Leader Eric Cantor said the House of Representatives now stood adjourned until after Christmas.

Boehner must now work with Obama and the Democrats, who control the Senate and could potentially shepherd a bill approved by moderate Republicans through the House, if he hopes to avoid the year-end fiscal cliff.

“Plan B… is a multi-day exercise in futility at a time when we do not have the luxury of exercises in futility,” White House spokesman Jay Carney said hours before the vote in the House.

“It cannot pass the Senate. The president would veto it.”


But shortly after Plan B crashed to defeat, Carney put out a more conciliatory statement, saying a “bipartisan solution” was still possible.

“The president’s main priority is to ensure that taxes don’t go up on 98 percent of Americans and 97 percent of small businesses in just a few short days,” Carney said.

Obama “will work with Congress to get this done and we are hopeful that we will be able to find a bipartisan solution quickly that protects the middle class and our economy.”

Boehner’s plan would have extended George W. Bush-era tax breaks for everyone apart from those earning more than $1 million a year and also redirect automatic spending cuts away from defense to other programs.

Republican leaders sweetened the deal by offering a companion spending cut bill, in a bid to win over deficit hawks who see government spending as the main driver behind the country’s $16 billion debt.

But the White House charged that the bill would offer big tax breaks to wealthy Americans earning less than $1 million who do not need them.

Obama had originally insisted on letting tax cuts expire on households earning more than $250,000, but has since upped the threshold to $400,000 in a bid to reach a compromise.

Boehner’s tactics have mystified many in Washington, with some wondering whether he can sell any deal with Obama to his restive caucus.

The speaker has faced intensifying opposition from conservatives who oppose raising any tax rates, arguing that doing so would slow economic growth.

Democrats saw the failed vote as proof that only a bipartisan deal has any hope of averting the automatic tax hikes and spending cuts.

The White House insists the two sides are not that far apart, and Obama has compromised on Social Security retirement benefits and tax rates in ways that have angered liberal supporters.

- © AFP, 2012

Read: What’s a fiscal cliff? Let Monty explain… >

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