Parties all over the world found reasons to celebrate the legislation that helped America avert the fiscal cliff.
The bill, passed by the Senate in the early morning hours of New Year’s Day and approved in the final hour of the day by the House of Representatives, eased fears around the world that the U.S. economy was headed for a recession because of mandatory spending cuts and tax hikes.
Financial markets emphatically embraced the legislation with stocks soaring in England, Germany, France and China, paving the way for a banner day on Wall Street.
The Dow Jones Industrial Average jumped 308.41 points, up 2.35 percent. The Nasdaq average was up 92.75 points (3.07 percent) and the Standard & Poor’s index climbed 36.23 points, up 2.44 percent.
Other Parties Pleased
Investors were not alone in applauding the solution to the crisis that has hung like an axe over the U.S. economy since the November elections.
Government employees had reason to relax after sequestration — 10-percent cuts across-the-board cuts in defense and domestic programs — was put off for at least another two months.
Middle-class families also were breathing easier after not having to deal with the Alternative Minimum Tax that could have pushed their tax bills up as much as $3,700.
The AMT, which previously had to be patched every year by Congress, now will be permanently indexed for inflation. That should keep it from affecting households with incomes under $75,000 and have only marginal effect on those earning between $75,000 and $250,000.
Medicare patients and their doctors were both winners. The doctors were going to see a 27 percent cut in reimbursement for their services and patients were in danger of having their doctors refuse to see them because of it, but that won’t happen now. The doctors have been assured they’ll get their money, though Congress didn’t specify where exactly it would come from.
One winner from the bill that isn’t getting much notice is the dairy industry. A nine-month extension to the farm bill was tacked on to the legislation, preventing a huge spike in the price of milk. If the extension had not been approved, a little-known law from 1949 would have kicked in and forced the cost of milk to double to as much as $7 a gallon.
Republicans Promise A Fight
Of course, not everyone was pleased with the outcome. Fiscal conservatives were seething over the lack of spending cuts in the bill and already are preparing to do battle with President Obama over the matter.
They intend to use the Feb. 28 deadline for raising the debt ceiling – the amount the United States Treasury can borrow to pay its bills – as a platform for negotiations.
Obama, speaking to reporters after the bill passed late Tuesday night, was ready for the challenge. “While I will negotiate over many things, I will not have another debate with this Congress about whether or not they should pay the bills they have already racked up,” Obama said.
Some Republicans are ready for the fight.
“Our opportunity here is on the debt ceiling,” Pennsylvania Senator Pat Toomey said on MSNBC. “We Republicans need to be willing to tolerate a temporary, partial government shutdown.”
The debt-ceiling was actually reached on Dec. 31, but Treasury Secretary Timothy Geithner said his department could use extraordinary measures to keep the money flowing until Feb. 28.
Obama will need cooperation from the same people who fought him tooth-and-nail over the fiscal cliff crisis, and this time, he may have a hard time getting it.
“This is going to be much uglier to me than the tax issue . . . this is going to be about entitlement reform,” Republican Senator Bob Corker of Tennessee said on CNBC. “This is the debate that’s going to be far more serious. Now that we have this other piece behind us – hopefully – we’ll deal in a real way with the kinds of things our nation needs to face.”
Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].
- Pylas, P. and Sampson, P. Markets rally after USF ‘fiscal cliff’ deal. Yahoo.com. Retrieved from: http://news.yahoo.com/markets-rally-us-fiscal-cliff-deal-111159565--finance.html
- Popper, N. (2013, Jan. 2) Markets Jump On Fiscal Deal. New York Times. Retrieved from: http://www.nytimes.com/2013/01/03/business/global/03iht-asiamarkets03.html
- Ferraro, T. and Whitesides, J. (2013, Jan. 2) Bigger fights loom after “fiscal cliff” deal. Reuters.com. Retrieved from: http://www.reuters.com/article/2013/01/02/us-usa-fiscal-idUSBRE8A80WV20130102