The US Senate has passed a law to neutralize the effect of a “fiscal cliff” combination of tax increases and spending cuts that came into effect at midnight on 31st December, 2012. The passage of the bill clears the way for a final vote in the House, where a vote is expected in a day or two.
Under the deal, taxes would remain the same for the middle class but would rise at incomes over $ 400,000 for individuals and $ 450,000 for couples — levels higher than Prez Obama had campaigned for in his presidential fight.
Spending cuts of $ 24 billion over two months aimed at the Pentagon and domestic programs would be postponed. It would allow the lawmakers time to regroup before starting a new fight over controlling the costs of medicare and other government programs. It was also decided at the last minute to use the measure to prevent a $ 900 pay hike for lawmakers due to take effect this April.
Economists both in and out of government have warned of a recession if the economy were allowed to fall over a fiscal cliff of tax increases and spending cuts.