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America to jump off fiscal cliff, but not hit ground

National Constitution Center

Despite an apparent last-second fiscal cliff deal in the U.S. Senate, the House won’t vote on the budget package on New Year’s Eve. Also, President Obama’s comments on Monday upset some key GOP leaders.

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Vice President Joe Biden and Senate Minority Leader Mitch McConnell hammered out most of the details in an agreement on Monday afternoon, as Democrats and Republicans in the Senate compromised on taxes and some spending measures.

But the GOP-controlled House of Representatives won’t take up the measure until after the New Year.

A GOP House aide told The Hill that the failure of the House to vote on Monday wasn’t significant and the same vote could be taken on Tuesday, New Year’s Day.

So the contentious debate over taxes and spending spills into 2013, and while America may have fallen off the fiscal cliff, a Congressional bungee cord could always pull it back before painful tax hikes and spending cuts go into effect.

Both CNN and Politico reported on late Monday afternoon that House leaders told members that no votes will be taken until 2013.

It’s unclear how Congress would stop the automatic tax hikes and spending cuts that are part of the Budget Control Act of 2011 as part of negotiations in January.

Immediately, about 2 million people would lose unemployment benefits and payroll taxes will climb.

Congress can delay the imposition of the dreaded Alternative Minimum Tax, which would increase taxes on 30 million households and delay tax-return filings.

For now, the Senate negotiations are focused on the sequestration, the forced across-the-board federal spending cuts to defense and spending programs.

Republicans were insisting on spending cuts to compensate for programs reinstated from the sequestration, and there were reports both sides had proposed delays to the sequester to get the rest of the deal done.

The debt ceiling is reportedly not part of the Senate deal.

Biden and McConnell have reached an apparent compromise on tax hikes on people making more than $400,000 a year and households making more than $450,000 a year. There were reports that Senate leader Harry Reid had yet to approve the plan.

Other parts of the Senate plan include tax compromises on estates, an unemployment extension, and a permanent fix to the Alternative Minimum Tax.

The big question is what will happen when the Senate compromise deal on the fiscal cliff is finally approved and then sent to the House—and if that deal will include a delayed sequester.

The new Congress meets on Thursday, January 3, 2013. If the Senate acts quickly, the bill could be sent to the House as early as Tuesday.

But there have been constant reports that some House members will wait until the cliff happens, so they claim they voted for a tax cut in 2013, and not a tax hike.

And it’s very unclear if the House will approve a bill that hikes taxes on families making more than $450,000 a year.

House Speaker John Boehner couldn’t manage enough support to bring a bill to the floor in December that hiked taxes on people making more than $1 million annually.

The $100 billion in spending cuts that make up the sequestration start to go into effect on Wednesday. They could be retroactively halted if a deal is reached quickly.

Another factor could be that some key GOP leaders were offended by remarks made by President Barack Obama at a Monday public appearance.

“If Republicans think that I will finish the job of deficit reduction through spending cuts alone … that will hurt seniors, or hurt students, or hurt middle-class families without asking also equivalent sacrifice from millionaires or companies with a lot of lobbyists, et cetera, if they think that’s going to be the formula for how we solve this thing, then they’ve another thing coming,” Obama said. “That’s not how it’s going to work. We’ve got to do this in a balanced and responsible way. And if we’re serious about deficit reduction and debt reduction, then it’s going to have to be a matter of shared sacrifice.”

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Several Republican leaders immediately rebuked the president.

“He made a couple of jokes, laughed about how people are going to be here for New Year’s, sent a message of confrontation to the Republicans…. I guess I have to wonder—and I think the American people have to wonder—whether the president really wants this issue resolved, or is it to his short-term political benefit for us to go over the cliff?” said Senator John McCain.

“I know the president has fun heckling Congress. I think he lost, probably, numbers of votes with what he did–he didn’t lose mine; I’m not that way, I’m gonna look at the substance. But it’s unfortunate that he doesn’t spend as much time working on solving problems as he does with campaigns and pep rallies,” said Senator Bob Corker.

Also, there was talk that the Senate compromise on taxes could be viewed by conservatives as a victory for the Democrats.

That could lead the House to reject the bill, or amend it and return it to the Senate. The results would keep the fiscal cliff in limbo until the end of the week.

Scott Bomboy is the the editor-in-chief of the National Constitution Center.

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