After a long legislative push on New Year's Day, Congress has cleared a measure to avert most of the tax hikes and temporarily hold off the mandatory spending cuts of the "fiscal cliff." President Obama signed the bill into law on Jan. 2.
The package is largely a collection of extensions of tax provisions, and some tax hikes, affecting individuals and businesses, from large corporations to small, family-owned firms, including many in construction. It also will give design and construction firms that pursue federal contracts a short reprieve from the mandatory “sequestration” budget cuts that were to take effect on Jan. 2.
Final congressional approval of the bill came with House passage by a 257-167 vote. The Senate had approved the measure early that morning, on an 89-8 vote.
The House vote marked the end of weeks of intense partisan struggle and steers the country away from a deep plunge over the fiscal cliff. But the new legislation is far from the comprehensive deficit-reduction deal some had sought. The Obama administration says the measure will reduce the deficit by $737 billion over 10 years, compared with what the deficit would have been if the pre-Dec. 31 tax and spending amounts had continued in place.
The Congressional Budget Office, using a different yardstick, estimated the bill would increase the deficit by nearly $4 trillion over 10 years. CBO compared the bill's impact with what the deficit would have been if all of the tax cuts had expired on Dec. 31, as previously scheduled
But with the deficit problem far from solved, the rugged fiscal fight that has embroiled Democrats and Republicans since 2011 is sure to continue. In fact, lawmakers and the Obama administration have little time to go to their corners for a breather. Several deadlines lie just ahead. Most importantly, the U.S. is expected to reach its $16.4-trillion debt limit around March 1, Treasury Secretary Timothy Geithner has indicated.
The nearing of the debt limit in summer 2011 precipitated a major legislative standoff resolved just before the government was to default on its financial obligations. But that resolution proved only a short-term one and set the stage for the current trip to the edge of the “cliff.”
In addition, action must be taken by March 1 on the delayed 2013 budget sequester. Moreover, on March 27, funding must be approved to carry federal agencies, including their construction programs, through the last half of the fiscal year.
Brian Turmail, spokesman for the Associated General Contractors of America, said in a Jan. 1 statement that AGC was evaluating the package's impact and added, "However, the initial details appear to inflict less damage on the economy than the initial tax increases and proposed spending cuts."