US reaches 'fiscal cliff' deal

Last updated 17:06 02/01/2013

Washington's last-minute scramble to step back from a recession-inducing "fiscal cliff" shifted to the Republican-controlled House of Representatives on Tuesday after the Senate approved a bipartisan deal to avoid steep tax hikes and spending cuts.

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The US House of Representatives has passed a bill which avoids the prospect of the nation's economy going over the fiscal cliff.

After the Senate and the White House thrashed out a deal, which was supported by the Senate in a vote on Monday evening New Zealand time, all eyes turned to the House of Representatives to see if it would become law.

At a vote about 10.57pm Washington DC time on Tuesday (4.57pm NZT on Wednesday), the measure reached the 217 votes needed to pass into law.

Earlier, Republicans abandoned their effort to attach spending cuts that would have been rejected by the Senate.

The Senate deal was worked out by Vice President Joe Biden and Senate Minority Leader Mitch McConnell, a Kentucky Republican.

The bill would make permanent the income tax cuts for most workers that ended at midnight, continue expanded unemployment benefits, and delay automatic spending cuts for two months.

It would let a 2 per cent payroll tax cut expire.

The measure isn't the grand bargain on deficit reduction lawmakers wanted when they created the tax-and-spending deadlines over the past three years.

Instead, it would avert most of the immediate pain and postpone Congress' fiscal feud for two months - until a February fight over raising the US$16.4 trillion ($19.6 trillion) debt limit.

House Speaker John Boehner had earlier offered fellow Republicans two options. He told members they could either amend the Senate bill if there were enough members to pass it, or vote on the unchanged Senate measure, said Republican Steven LaTourette of Ohio.

Eric Cantor, the House Majority Leader, declared as he left a meeting in the basement of the Capitol building that he did not support the bill.

Oklahoma Representative Tom Cole, a Republican, said he expected the House to pass the Senate's plan unchanged with a "substantial" bipartisan vote.

"Let's accept the wins that we have and live to fight another day," Cole said in an interview on Bloomberg Television.

- Agencies with Sydney Morning Herald

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