




U.S. stocks vaulted higher on the first day of the new year, joining a global equity rally after Congress's last-minute agreement on the deficit. The Dow Jones Industrial Average shot up 235 points, or 1.9%, for a second consecutive day of triple-digit gains.



President Barack Obama appeared in the White House press briefing room minutes after the House passed the bill. With Vice President Joe Biden standing behind his right shoulder, he said: "Thanks to the votes of Democrats and Republicans in Congress I will sign a law that raises taxes on the wealthiest 2% of Americans while preventing a middle-class tax hike that could have sent the economy back into recession and obviously had a severe impact on families all across America." Mr. Obama said he would like to take additional steps to reduce the nation's deficit.


The far-reaching agreement will have lasting implications for the tax code, future budget battles and the balance of power in Washington. It raises income-tax rates for the first time in almost two decades and fulfills Mr. Obama's signature campaign promise to prevent rates from rising on the middle class. Not since 1991 has a Republican in Congress supported such a move—a challenge to its brand as the antitax party.


Speaker of the House John Boehner, right, walks with House Majority Leader Rep. Eric Cantor to a meeting with House Republicans on the fiscal cliff budget deal on Capitol Hill in Washington on Jan. 1. Reuters

House Speaker John Boehner emerges from a meeting with House Republicans at the U.S. Capitol on Tuesday. AFP/Getty Images

At the same time, the bill defers some of America's toughest spending problems—in particular the ballooning cost of health care—and it doesn't come close to the kind of $4 trillion deficit-reduction deal the country's leaders had hoped to negotiate. By some estimates, it would cut the deficit by $600 billion over 10 years.

"The bill before us is not the Grand Bargain," said Rep. David Dreier (R., Calif.) as the House opened debate. "But we are working hard to pull ourselves back from the cliff."





The protracted debate over the fiscal cliff was a classic example of what has inspired the public's ire. Both parties had for months said they didn't want New Year's 2013 to hit without action to block the across-the-board tax rate increases and $110 billion in defense and domestic-program spending cuts collectively known as the fiscal cliff.

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"This legislation is far from perfect, and the process that led us here was a disgrace," said Rep. Louise Slaughter (D., N.Y.).








"That's just madness,'' said Mr. Durbin. "We had a strong vote in the Senate. How much stronger can we make it?''

Mr. Boehner warned his colleagues that making changes risked killing the bill and exposing the GOP to blame for tax increases, spending cuts and possible turmoil in the economy. After canvassing members, Republican leaders decided there wasn't enough support to revise the bill and prolong the battle.

House Democrats supported the bill in significant numbers after a closed-door session with Mr. Biden, who came to the Capitol twice in 24 hours to sell the package. Mr. Biden's major mission was to calm liberals who groused that Mr. Obama gave too much ground.

Rep. Henry Waxman (D., Calif.) said earlier in the day that "the president gave up a lot—more than I would have liked—but I can understand that we're dealing with the product as it is, and I'll probably vote for it."


It was, said Rep. Gerry Connolly (D., Va.), a "hold-your-nose vote."

—Peter Nicholas contributed to this article.

Corrections & Amplifications
Republicans wanted automatic spending cuts of $24 billion, known as the sequester, to be replaced with cuts in other areas and not simply be canceled. An earlier version of this article incorrectly said $24 million.

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