WALL STREET JOURNAL, CNN, BLOOMBERG (USA), REUTERS
WASHINGTON – The House of Representatives has approved a Senate bill to avoid the American and global economy facing the dreaded consequences of the so-called "fiscal cliff" of automatic tax hikes and spending cuts across the United States.
Hailed as a victory for President Barack Obama, the vote on the compromise measure came just after 11 PM Tuesday, avoiding income tax increases for more than 99% of households, reports Bloomberg. Stock markets around the world Wednesday surged on the news of the deal in Washington.
The 257-167 vote largely fell along partisan lines, reports CNN, but enough Republicans fell in line behind House Speaker John Bohener to push the bill forward. Of the favorable votes, 172 were Democrats and 85 were Republicans. Sixteeen Democrats voted against the bill, with 151 Republicans "No" votes, including Majority Leader Eric Cantor.
After the Senate bill passed after midnight on Jan. 1, Bohener ordered a vote on the bill, which President Obama said he’d sign into law.
"Thanks to the votes of Democrats and Republicans in Congress I will sign a law that raises taxes on the wealthiest 2% of Americans while preventing a middle-class tax hike that could have sent the economy back into recession and obviously had a severe impact on families all across America," Obama said.
According to the deal, the tax rate for individuals making more than $400,000 and couples making more than $450,000 will rise from the current 35% to the Clinton-era rate of 39.6%, reports CNN. Itemized deductions would be capped for individuals making $250,000 and for married couples making $300,000.
New battles in the Senate are expected to occur this year. In two months, the delayed $110 billion in spending cuts will again kick in. At the same time, the U.S. will face the need to increase its borrowing limit, a change that can only be made by Congress. While the Republicans want to use the debt ceiling to extract spending cuts, President Obama has warned he would not negotiate, explains The Wall Street Journal.
After news of the deal spread, Asian stocks climbed and the yen fell. The MSCI Asia Pacific excluding Japan Index climbed 1.7 percent at 12:22 p.m. in Hong Kong. The yen tumbled 1.1 percent to 115.73 per euro and the Dollar Index, which tracks six peers, fell 0.4 percent, reports Bloomberg.
London's FTSE, Frankfurt's DAX and Paris' CAC 40 opened between 1.4-1.9 percent higher, reports Reuters.
This deal comes after weeks of bitter negotiations between Democrats and Republicans over budget management and tax increases.