US Senate approves bill to avert 'fiscal cliff'

Agreement likely to face stiff challenges in Republican-controlled House; holiday allows Congress time to draw up legislation.

By REUTERS
US Congress 390 (photo credit: REUTERS)
US Congress 390
(photo credit: REUTERS)
WASHINGTON - The US Senate on Tuesday, two hours after a December 31 deadline had lapsed, approved legislation aimed at averting the "fiscal cliff" by stopping most tax hikes and across-the-board spending cuts that were due to begin with the new year.
The House of Representatives still must approve the measure, possibly on Tuesday.
The agreement still came too late for Congress to meet its own deadline of New Year's Eve to pass laws halting $600 billion in tax hikes and spending cuts due to come into force on January 1.
But with Tuesday a holiday, Congress still had time to draw up legislation, approve it and backdate it to avoid the harsh fiscal measures coming into force.
That will need the backing of the House where many of the Republicans who control the chamber complain that US President Barack Obama has shown little interest in cutting government spending to try to reduce the US budget deficit.
House Republicans are also likely to balk at planned tax hikes on household incomes over $450,000 a year that was part of the agreement struck between Vice President Joe Biden and Senate Republican Minority Leader Mitch McConnell.
Nevertheless, Speaker John Boehner on Monday night said the House would consider legislation to avert the fiscal cliff if the Senate passes such a measure.
"The House will honor its commitment to consider the Senate agreement if it is passed. Decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members...have been able to review the legislation," Boehner and other House Republican leaders said in a statement.
The House has convened a session for Tuesday at noon.
The deal would make permanent the alternative minimum tax "patch" that was set to expire, protecting middle-income Americans from being taxed as if they were rich.
Indiscriminate spending cuts for defense and non-defense spending were simply postponed for two months.
As New Year's Day approached, members were thankful that financial markets were closed, giving them a second chance to return on Tuesday to try to blunt the worst effects of the fiscal mess.
There is no major difference whether a law is passed on Monday night, Tuesday or Wednesday. Legislation can be backdated to Jan. 1.