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Within hours of the House approving the American Taxpayer Relief Act of 2012 , the president and Congress turned their attention to the country’s mounting federal debt.

With Cliff Averted, Attention Turns to Deficit

  • 1/9/2013

With Cliff Averted, Attention Turns to Deficit

Within hours of the House approving the American Taxpayer Relief Act of 2012 (HR 8), President Obama and congressional leaders turned their attention to the country’s mounting federal debt. While the measure postpones automatic spending cuts for two months, lawmakers now have to determine how to replace those cuts while also raising the debt ceiling and funding the federal government.

HR 8 permanently extends middle-class tax cuts and unemployment insurance benefits, and expands the child care tax credit, the Earned Income Tax Credit, and college tuition tax credit. The agreement also raises $620 billion in revenue with the restoration of the 39.6 percent income tax rate for individuals with incomes above $400,000 per year and married couples with combined incomes above $450,000 per year. The tax rate for estates worth over $5 million per person would increase from 35 percent to 40 percent. HR 8 also provides a permanent fix for the alternative minimum tax.

"I think we all recognize this law is just one step in the broader effort to strengthen our economy and broaden opportunity for everybody," said the president in a statement immediately following the House vote. He added, "The fact is the deficit is still too high, and we're still investing too little in the things that we need for the economy to grow as fast as it should."

At the same time, the president warned that large spending cuts would not help grow the economy. Instead, they must go hand-in-hand with further reforms to the tax code, he said. He then issued a sterner warning that he would not compromise on raising the debt ceiling, which the Treasury announced has already reached its limit.

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