The Rotunda of the U.S. Capitol is seen. (J. Scott Applewhite, AP)
Hours past a self-imposed deadline for action, the Senate passed legislation early New Year's Day to neutralize a fiscal cliff combination of across-the-board tax increases and spending cuts that kicked in at midnight. The pre-dawn vote was 89-8.
Senate passage set the stage for a final showdown in the House, where a vote was expected later Tuesday or perhaps Wednesday.
Under the deal, taxes would remain steady for the middle class and rise at incomes over $400,000 for individuals and $450,000 for couples -- levels higher than President Obama had campaigned for in his successful drive for a second term in office.
Spending cuts totaling $24 billion over two months aimed at the Pentagon and domestic programs would be deferred. That would allow the White House and lawmakers time to regroup before plunging very quickly into a new round of budget brinkmanship certain to revolve around Republican calls to rein in the cost of Medicare and other government benefit programs.
Shortly after the Senate vote, President Obama said, "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 also said the bill takes a balanced approach to shrinking the U.S. deficit by "investing in (the) middle class" while "asking the wealthy to pay a little more."
One set of taxes is set to go up in 2013: The deal does not address the end of the payroll tax holiday on Tuesday. That tax will rise by 2%, back to its 2010 level.
The deal also stops scheduled pay increases for Congress set for spring 2013 and includes a nine-month extension of the farm bill, which had been delayed for months because of differences between the House and Senate versions of the legislation that sets U.S. agricultural policy every five years.
The agreement also does not address any increase in the nation's debt ceiling, which -- combined with the delay of automatic spending cuts -- sets up the distinct possibility of another cliff-like budget battle in February.
The omission of the debt ceiling dismayed some liberal Democrats, including Sens. Tom Harkin of Iowa and Sherrod Brown of Ohio. Their criticism prompted Biden's visit to Capitol Hill late Monday.
"He's here to hear members' concerns and respond to them," said Reid spokesman Adam Jentleson.
"The argument is that this is the best that can be done on a bipartisan basis," said Sen. Dianne Feinstein, D-Calif., when asked about the case the vice president had delivered behind closed doors.
Biden played a critical role, Feinstein said. "I think it was very important," she said, noting that McConnell and Biden "have a long prior experience" working together. "That's the reason this is bipartisan."
Sen. Charles Schumer, D-N.Y., said he would put pressure on the House to pass the measure.
House Democratic Leader Nancy Pelosi, D-Calif, did not exactly endorse the deal either, saying in a statement: "When a final agreement is reached and passed by the Senate, I will present it to the House Democratic Caucus."
The final details came together hours after President Obama said Congress was making progress on a short-term deal to avert the fiscal cliff.
As the day dragged on, negotiations narrowed to a Democratic offer to pay for the spending cuts for two months, estimated to cost $24 billion, a McConnell spokesman said. Republicans wanted additional cuts to make up for supplanting those cuts and sent Democrats a list outlining $130 billion of suggested cuts for Democrats to consider.
At his White House event earlier in the day, Obama told an audience of cheering supporters that a proposal would help reduce the nation's $16 trillion-plus debt through higher taxes on the wealthy. He also said it would also extend unemployment insurance and preserve tax credits for such middle class items as child care and education.
The campaign-style event chafed some congressional Republicans. Obama's 2008 presidential rival Sen. John McCain, R-Ariz., criticized it as "a cheer-leading, ridiculing-of-Republicans exercise."
Down the line, Obama said he will continue to insist that debt reduction be balanced with revenues as well as spending cuts, foreshadowing a second term defined by budgetary clashes with Republicans.
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SOURCE: USA Today
Susan Davis and David Jackson