The White House and top Republicans have struck a dramatic deal to avert huge New Year tax increases and postpone automatic spending cuts that had threatened to send the US economy into recession.
After months of agony over the crisis, weeks of debate about a possible solution and days of intense closed-door negotiations, members of the US Senate voted 89-8 early on Tuesday to pass a controversial bill that averts the ‘fiscal cliff’.
It now goes to the House of Representatives, which could hold a vote on the measure later on New Year’s Day.
If agreed by Congress, it would hand President Barack Obama a victory by increasing tax rates on households earning over $US450,000 ($A436,000) a year but exempt everyone else from a planned tax increase.
‘While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country and the House should pass it without delay,’ Obama said in a statement after the vote.
The deal puts off $US109 billion in budget cuts across the government for two months, but in the process sets the stage for a new showdown between Obama’s Democrats and Republicans in dysfunctional Washington at the end of February.
‘There’s more work to do to reduce our deficits, and I’m willing to do it,’ Obama said.
Vice-President Joe Biden, who negotiated the deal with top Senate Republican Mitch McConnell, trooped to Capitol Hill to sell it to Democratic senators, some of whom wanted tax increases to kick in at a lower threshold.
Had no deal been struck, experts warned that the fragile US economy could have been sent spinning back into recession by the $US500 billion combined whack from spending cuts and tax rises.
In the end, the deal was clinched a few hours before a midnight deadline. The Senate vote came just after 2.00am while the House was not due back into session until Tuesday.
Now it remains for Republican House Speaker John Boehner to rally his restive conservative coalition around the pact, which will likely need some Democratic votes in the House to pass.
