A months-long battle over the U.S. "fiscal cliff" headed to a close on Tuesday as the House of Representatives moved toward final approval of a bipartisan deal meant to prevent Washington from pushing the world's biggest economy into recession.
The Republican-controlled House was expected to back a tax hike on the top U.S. earners shortly before midnight on Tuesday, ending weeks of high-stakes budget brinkmanship that threatened to spook consumers and throw financial markets into turmoil.
Approval of the bill would be a victory for President Barack Obama, who campaigned for re-election last November on a promise to raise taxes on the wealthiest but faced stiff opposition from congressional Republicans.
Republicans had earlier considered adding hundreds of billions of dollars in spending cuts after the bill had already passed the Senate with strong bipartisan support. That would have triggered further partisan warfare and pushed the crisis well past a self-imposed January 1 deadline.
But party leaders abandoned the effort after determining they lacked the votes.
"We've gone as far as we can go and I think people are ready to bring it to a conclusion," Republican Representative Jack Kingston of Georgia said. "We fought the fight."
Rules Committee Chairman David Dreier, a Republican, predicted the House would back the Senate bill, which also postpones for two months $109 billion in spending cuts on military and domestic programs set for 2013.
The bill easily cleared a procedural hurdle by a bipartisan vote of 408 to 10.
Lawmakers have struggled to find a way to head off across-the-board tax hikes and spending cuts that began to take effect at midnight, a legacy of earlier failed budget deals that is known as the fiscal cliff.
Strictly speaking, the United States went over the cliff in the first minutes of the New Year because Congress failed to produce legislation to halt $600 billion of tax hikes and spending cuts scheduled for this year.
TAX HIKES FOR WEALTHIEST
While many Republicans were uneasy with the tax hikes and wanted more spending cuts in the bill, they seemed to realize that the fiscal cliff would begin to damage the economy once financial markets and federal government offices returned to work on Wednesday. Opinion polls show the public would blame Republicans if a deal were to fall apart.
House Republicans had earlier considered adding $330 billion in spending cuts over 10 years to the Senate bill, which raises taxes on the wealthiest U.S. households by $620 billion over the same period.
But Senate Democrats refused to consider any changes to their bill, which passed 89 to 8 in a rare display of unity early Tuesday.
That measure, which passed the Senate at around 2 a.m., would raise income taxes on families earning more than $450,000 per year and limit the amount of deductions they can take to lower their tax bill.
Low temporary rates that have been in place for the past decade would be made permanent for less-affluent taxpayers, along with a range of targeted tax breaks put in place to fight the 2009 economic downturn.
However, workers would see up to $2,000 more taken out of their paychecks annually with the expiration of a temporary payroll tax cut.
The non-partisan Congressional Budget Office said the Senate bill would increase budget deficits by nearly $4 trillion over the coming 10 years, compared to the budget savings that would occur if the extreme measures of the cliff were to kick in.
But the bill would actually save $650 billion during that time period when measured against the tax and spending policies that were in effect on Monday, according to the Committee for a Responsible Federal Budget, an independent group that has pushed for more aggressive deficit savings.
Copyright @ Thomson Reuters 2012