House Passes Senate Fiscal Cliff Bill
JOHN BERMAN, CNN ANCHOR: Our STARTING POINT, a late-night deal to avert the fiscal cliff. The House passes a bill with their backs up against the wall. Many lawmakers say they saw no choice.</s>UNIDENTIFIED MAEL: If we don't pass this tonight, we are looking at $4 trillion tax increase and you're looking at financial chaos.</s>BERMAN: The middle class spared from major tax hikes and spending cuts, but there's still the issue of the debt ceiling, and the president has a stern warning for Congress.</s>BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I had not have another debate with this Congress over whether or not they should pay the bills that they've already racked up.</s>BERMAN: This morning, the political fallout. What this all means for you and what's next. We have a packed two hours ahead. We're joined by New York Congressman Steve Israel, Tennessee Congresswoman Marsha Blackburn, Jen Psaki, who was President Obama's traveling press secretary for his reelection campaign, economist Diane Swonk as well. Also Connecticut attorney Irving Pinsky. Morning, everyone. I'm John Berman.</s>BROOKE BALDWIN, CNN ANCHOR: Good morning, I'm Brooke Baldwin. Soledad is off today. Happy new year to you. Happy new year to you, Berman.</s>BERMAN: Happy new year.</s>BALDWIN: Good to see you. It is Wednesday, January 2, and STARTING POINT begins right now.</s>BERMAN: Our STARTING POINT this morning: what on earth just happened? Yes, we are off the fiscal cliff, and financial markets, they are weigh up this morning, but it took one last night of fighting, frustrations, and a fractured late-night vote to make it all happen. We're talking complete mayhem here. So let's recap. Late last night the House of Representatives passed the Senate's fiscal cliff bill. The final tally, 257-167, and while 151 Republicans voted no, it is worth noting its speaker, John Boehner, voted yes. So did Paul Ryan, by the way. Here is the deal that took over 500 days to seal. No tax hikes for couples earning less than $450,000 a year. Itemized deductions kept for couples make more than $300,000 a year. Unemployment benefits extended a year for 2 million Americans, and the alternative minimum tax permanently adjusted for inflation.</s>BALDWIN: Here is the thing, though, because what the deal doesn't actually address is federal spending. Drastic domestic and defense cuts have been put off for more than two months. Looking ahead that could get messy if this is an indication, think about that. Also there is the debt ceiling. This is the end of February. It is now at $16.4 trillion, and by the way, we just blew past that this week. The president drawing a line in the sand for that upcoming battle.</s>BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I will not have another debate with this Congress over whether or not they should pay the bills that they have already racked up. If Congress refuses to give the United States government the ability to pay these bills on time the consequences for the entire global economy would be catastrophic, far worse than the impact of the fiscal cliff.</s>BALDWIN: So that was the president. Let's talk to Brianna Keilar. She covers the White House for us live this morning from Washington. Brianna, we ran through the biggies there in the bill. I want you to run through what's not included in this bill.</s>BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: What you just mentioned, the spending cuts that are only in police for two months and then have to be dealt with, and also the fact that the debt ceiling is going to be hit. I mean, right now, the treasury is taking extraordinary measures so that it isn't. But ultimately, Congress will have to act in late February or early March. Those are the things that Congress has absolutely no choice. There is a deadline. They have to deal with it. But Democrats and Republicans in the White House have also said they want to tackle long-term deficit reduction. That was the whole point of the fiscal cliff. That was supposed to be the incentive for tackling long-term deficit reduction. How are they going to do that? Entitlement reform, which obviously Republicans are bigger fans of, and then tax reform. So these are the things that Congress wants to tackle, kind of needs to tackle, but there is that hard and fast deadline. And it will be attached to spending cuts and debt ceiling sort of to give everything a deadline. This is big stuff. This gets to the fundamental disagreements between Democrats and Republicans, so hold on to your hats and glasses, folks. This will be a wild two months.</s>BALDWIN: Holding on, holding on. You mentioned between Democrats and Republicans, key splits in the ayes and nays. Run through the winners and losers, if you will, in this fiscal cliff fight.</s>KEILAR: There are obvious ones. Obviously if you a couple and you make $450,000 or more than $400,000 as an individual, you will see your taxes go up. If you itemize deductions and you are making more than $300,000 as a couple, $250,000 as an individual, you will see a cap phased in and you will see your taxes go up. So those are the obviously losers. There are less obvious winners that maybe you didn't know about. Milk, sugar, and peanut producers, they have a tax cut. It has been preserved in this. The long-term unemployed will see benefits extended. That's obviously very important. And doctors who might have seen payments from Medicare reduced, they won't now. And also the alternative minimum tax, Brooke. Having covered Washington, we're always talking about the AMT fix, they have to fix it, because it's not indexed for inflation. It now is permanently so it doesn't hit the middle class. That's important.</s>BALDWIN: Brianna Keilar, thank you very much.</s>BERMAN: It's amazing to think this fight might have been the easy one, and we have three more in the next two months. Let's talk about this fight. It was a doozy overnight. We want to know what's going on behind closed doors. So we'll bring in Chris Frates, a reporter from "The National Journal" following the action behind the scenes in our Washington bureau this morning. Chris, this was not a smooth ride. What did it take to get the deal done?</s>CHRIS FRATES, REPORTER, "NATIONAL JOURNAL": That's the understatement so far of the new year. What it took to get the deal done was a late tag-team effort between Senate Republican leader Mitch McConnell and Vice President Joe Biden. A story coming out online a little later this morning that will take readers behind all these scenes. Let me give you one example. The Senate Republican leader felt like Harry Reid's democratic counterpart wasn't negotiating in good faith, trying to Republicans to the edge of the cliff. So he called Vice President Joe Biden as an end around. Mitch McConnell walked to the Senate cloak room sat down and said essentially, look, Joe, a lot of these guys are very smart people, but I don't see the trip wires like you do in this negotiation. I want to work with you. And Biden said "I'll call you back with an offer." And that's how this started where 30 hours later we had a deal that was done and just passed by the House last night.</s>BERMAN: Sitting in the phone booth in the cloak room. That's amazing. For all of the talk on the vice president and Senate side, so much drama overnight on the House side. You had Speaker Boehner voting for the bill, House Majority Leader Eric Cantor voting against the bill. The House whip voting against the bill and Paul Ryan voting for the bill. This is a real split.</s>FRATES: It is. It shows the schism and it's a real good demonstration of why it was so difficult for Speaker Boehner to negotiate a bigger, grander deal with the president. He was unable to get his own deal through the House a few weeks ago, and even his negotiation deal that passed with overwhelming bipartisan support, 89 votes in the Senate, didn't get the majority of the Republicans in the House to sign on. So what you are seeing is the difficulty played out for everyone to see of how difficult it is for Speaker Boehner to get these kinds of bills passed through the House.</s>BALDWIN: Chris, Quickly, given the schism that you outlined, this is the last day of the 112th Congress, and tomorrow is the big day for John Boehner. He is up for the speakership. How is it looking for them?</s>FRATES: I think it looks fine for him. A lot of grumbling among folks, but he allowed everyone to vote their conscious. No one got forced into voting for something they didn't want to. We avoided the fiscal cliff. And there is no challenger to Boehner at this point, and it doesn't seem like there will be a late comer.</s>BERMAN: Between Speaker Boehner, Mitch McConnell, and Joe Biden, there were a lot of political levers being pulled over the last six days. Chris Frates, "National Journal," thank you so much for joining this morning. Good stuff. That's the politics. But what about the economics and the money? What does it mean for everyone?</s>BALDWIN: Money, money, money.</s>CHRISTINE ROMANS, CNN ANCHOR: Your tax rates are not going up unless you are rich. Your tax rates are not going up for 98 percent of Americans, but you paychecks will be smaller starting with your next paycheck. That's because the two-year-old payroll tax holiday is over. It expired. It's done. The rate you pay out of your paycheck to fund Social Security goes from 4.2 percent back up to 6.2 percent. Here is how it affects your bottom line. If you're making $30,000, you will pay about $50 more a month in taxes -- excuse me. If you are earning $50,000, you will give $83 more a month to the taxes that fun Social Security. If you make $113,000 a year, you will pay an extra $189 a month in taxes. This was a measure meant to get the economy going, a stimulative measure. The treasury department picked up your tab and it cost us $120 billion a year. That was a perk to every working American that went away. So your taxes did not go up, but your paycheck will likely be smaller.</s>BERMAN: It was a two-year thing. You got to enjoy it for two years, but now it's over for everyone. And even though the president is saying middle class taxes will not be raised, we are seeing taxes goes up.</s>ROMANS: They are. And, look, one thing so interesting about this. We shouldn't be messing with Social Security mechanisms that bothered people in both parties quite frankly. Now this is going away and you are back up to 6.2 percent. Plan accordingly, because you will have less money in your paycheck.</s>BALDWIN: ASAP. Christine Romans, thank you. U.S. stock markets don't open for two hours, but stock futures are up sharply now that the House has passed this doozy, to quote you, the fiscal cliff legislation. What about reaction around the world when it comes to the markets? Let's go to Richard Quest, he is live in London. How are global investors reacting to this?</s>RICHARD QUEST, CNN INTERNATIONAL CORRESPONDENT: Let's take your theme of money and money makes the world go round. And on this side of the Atlantic, what you did on your side overnight has given a rollicking strong move to the markets. Looking at the major markets, the London FTSE is up two percent this morning. And in Frankfurt, the DAX is up 2.2 percent. All the major horses in Europe are up strongly and although -- I mean, it's hard. The critics and politicians and they all may say they didn't like what was done in the United States, but it has been the certainty that is now created the impetus -- the phrase you will hear excuse me. The phrase you will hear people use is "risk on." And that's what we're seeing in the markets today.</s>BALDWIN: We know the markets like certainty. You look ahead and looking down at the calendar of upcoming crises, the debt ceiling, sequestration, a couple issues coming up in the next couple of weeks here, do you anticipate a little bit of change and uncertainty globally?</s>QUEST: I have no doubt that as the twin peaks of debt ceiling and budget talks continue in the United States this spring, the enthusiasm will evaporate. Are you basically left on both sides of the Atlantic deep uncertainty, a Eurozone crisis that seemingly has no end, and U.S. budget deficit crisis that seemingly has no end. So on this new year, ladies and gentlemen, in New York, just celebrate the fact that you are up two percent on the European markets.</s>BALDWIN: OK, Richard Quest.</s>BERMAN: I'm celebrating the fact that nothing else this fiscal cliff, two of the best financial minds, Richard Quest and Christine Romans singing.</s>ROMANS: Dow futures up 200 points.</s>BERMAN: You will be singing more later. Moving on to other news right now, we're going to talk about Secretary of State Clinton and her health, that close call. Doctors say the blood clot could have been fatal, caused a stroke or led to seizures or epilepsy. She's still in the hospital being treated with blood thinners. She should make a full recovery. Former President Bill Clinton and Daughter Chelsea seen visiting her at New York Presbyterian hospital yesterday.</s>BALDWIN: Also students from Connecticut Sandy Hook Elementary School return to class tomorrow this is for the very first time since the horrendous massacre three weeks ago. But the children won't be back at Sandy Hook in that building itself. They will attend an empty elementary school a couple of miles away in Newtown. And how about this? Connecticut attorney Irving Pinsky who sought to sue the state of Connecticut for this $100 million over the shooting, has withdrawn the suit for now. Part of the reason he says was the outcry was too strong. Pinsky represents the parents of a six-year- old survivor. We'll have Mr. Pinsky here on the show in the next hour on</s>STARTING POINT. BERMAN: Yes, really controversial. A lot of people have a lot of questions for the attorney. In Los Angeles, a photographer killed last night trying to get a shot of Justin Bieber. Police say the man snapped pictures of a sports car that he thought the pop-star was in. The photographer was struck and killed while crossing a freeway to return to his own car. In a statement, Justin Bieber said he was not in the sports car, but his thoughts and prayers with the family of the victim.</s>BALDWIN: There was a huge high-speed chase earlier in the year, and this city councilman was on the freeway, and he said, look, if this happens again this could really have a tragic ending, and sadly a photographer passed away. Still ahead here on STARTING POINT, the fiscal cliff deal passes, but the bruising battle to get there, leaving some political scars, certainly. Also anger this morning from northeast lawmakers over Congress' refusal to help victims of hurricane Sandy. Coming up next we'll talk to New York Congressman Steve Israel about this.</s>BERMAN: Plus, guns and guards, a controversial plan started in one school system today. We'll talk about that. You're watching STARTING POINT.