* Debt ceiling, spending cuts will spark more fights
* "Fiscal cliff" struggle a harbinger of things to come
* Republicans unhappy about deal to raise taxes on wealthy
* Republican Boehner and Democrat Reid exchanged insults
By Thomas Ferraro and John Whitesides
WASHINGTON, Jan 2 President Barack Obama and
congressional Republicans face even bigger budget battles in the
next two months after a hard-fought "fiscal cliff" deal narrowly
averted devastating tax increases and spending cuts.
The agreement, approved late on Tuesday by the
Republican-led House of Representatives and signed by Obama on
Wednesday, was a victory for the president, who had won
re-election in November on a promise to address budget woes,
partly by raising taxes on the wealthiest Americans.
But it set up potentially bruising showdowns over the next
two months on spending cuts and an increase in the nation's
limit on borrowing. Republicans, angry the fiscal cliff deal did
little to curb the federal deficit, promised to use the
debt-ceiling debate to win deep spending cuts next time.
Republicans believe they will have greater leverage over
Democrat Obama when they must consider raising the borrowing
limit in February because failure to close a deal could mean a
default on U.S. debt or another downgrade in the U.S. credit
rating. A similar showdown in 2011 led to a credit downgrade.
"Our opportunity here is on the debt ceiling," Republican
Senator Pat Toomey of Pennsylvania said on MSNBC. "We
Republicans need to be willing to tolerate a temporary, partial
government shutdown, which is what that could mean."
But Obama and congressional Democrats may be emboldened by
winning the first round of fiscal fights when dozens of House
Republicans buckled and voted for major tax hikes for the first
time in two decades.
"We believe that passing this legislation greatly
strengthens the president's hand in negotiations that come
next," House Minority Leader Nancy Pelosi told NBC in an
interview to air on Thursday.
Obama, who is vacationing in Hawaii, signed the legislation
late on Wednesday, the White House said.
"We received the bill late this afternoon, and it was
immediately processed. A copy was delivered to the president for
review. He then directed the bill be signed by autopen," a
senior administration official said. An autopen is an automatic
pen with the president's signature.
Deteriorating relations between leaders in the two parties
do not bode well for the more difficult fights ahead. Vice
President Joe Biden and Republican Senate leader Mitch McConnell
had to step in to work out the final deal as the relationship
between House Speaker John Boehner and Obama unraveled.
Senate Majority Leader Harry Reid also drew the ire of
Boehner, who told Reid in the White House to "Go fuck yourself"
after a tense meeting last week, aides said. His remark came
after the Democrat accused Boehner of running a "dictatorship"
in the House.
Bemoaning the intensity of the fiscal cliff fight, Obama
urged "a little less drama" when the Congress and White House
next address budget issues like the government's rapidly
mounting $16 trillion debt load. He vowed to avoid another
divisive debt-ceiling fight before the late-February deadline
for raising the limit.
"While I will negotiate over many things, I will not have
another debate with this Congress about whether or not they
should pay the bills they have already racked up," Obama said
before he headed to Hawaii to resume an interrupted vacation.
NOT TIME TO CELEBRATE
Analysts warned that might not be so easy. "While the
markets and most taxpayers may breathe a sigh of relief for a
few days, excuse us for not celebrating," said Greg Valliere,
chief political strategist at Potomac Research Group.
"We have consistently warned that the next brawl represents
a far greater threat to the markets - talk of default will grow
by February, accompanied by concerns over a credit rating
downgrade," he said.
Rating agencies Moody's Investors Service and Standard &
Poor's said the "fiscal cliff" measure did not put the budget on
a more sustainable path. The International Monetary Fund said
raising the debt ceiling would be a critical move.
"More remains to be done to put U.S. public finances back on
a sustainable path without harming the still fragile recovery,"
said Gerry Rice, a spokesman for the IMF.
Financial markets that had been worried about the fiscal
cliff showdown welcomed the deal, with U.S. stocks recording
their best day in more than a year. The S&P 500 achieved its
biggest one-day gain since Dec. 20, 2011, pushing the benchmark
index to its highest close since Sept. 14.
The debate over "entitlement" programs is also bound to be
difficult. Republicans will be pushing for significant cuts in
government healthcare programs like Medicare and Medicaid for
retirees and the poor, which are the biggest drivers of federal
debt. Democrats have opposed cuts in those popular programs.
"This is going to be much uglier to me than the tax issue
... this is going to be about entitlement reform," Republican
Senator Bob Corker of Tennessee said on CNBC.
"Now that we have this other piece behind us - hopefully -
we'll deal in a real way with the kinds of things our nation
needs to face," he said.
The fiscal cliff crisis ended when dozens of Republicans in
the House relented and backed a bill passed by the
Democratic-controlled Senate that hiked taxes on household
income above $450,000 a year. Spending cuts of $109 billion in
military and domestic programs were delayed for two months.
Economists had warned that the fiscal cliff of
across-the-board tax hikes and spending cuts would have punched
a $600 billion hole in the economy this year and threatened to
send the country back into recession.
Dozens of House Republicans reluctantly approved the Senate
bill, which passed by a bipartisan vote of 257-167 and sent it
to Obama to sign into law.
Peter Huntsman, chief executive of chemical producer
Huntsman Corp, said the vote did little to reduce the
U.S. budget deficit and would hinder growth.
"We haven't even begun to address the basic issues behind
this," Huntsman told Reuters. "We haven't fixed anything. All
we've done is addressed the short-term pain.
The vote underlined the precarious position of Boehner, who
will ask his Republicans to re-elect him as speaker on Thursday
when a new Congress is sworn in. Boehner backed the bill, but
most House Republicans, including his top lieutenants, voted
The Ohio congressman also drew criticism on Wednesday from
his fellow Republicans for failing to schedule a House vote on a
bill passed by the Senate that would provide federal aid to
Northeastern states hit by the storm Sandy.