THE US Congress has finally backed a deal to avert a "fiscal cliff" of tax hikes and massive spending cuts that had threatened to unleash economic calamity.
The deal increases taxes on the rich and puts off $US109 billion ($A105 billion) budget cuts for two months, lifting the clouds of immediate crisis.
The deal's fate had hung in the balance for hours as House conservatives sought to add spending reductions to a version passed by the Senate in the early hours of 2013.
In the end, the House voted 257 votes to 167 to pass the original bill after a fiercely contested and unusual session on New Year's Day.
President Barack Obama, who campaigned for re-election on a platform of building a more equitable economic system, declared the deal was a promise kept, despite falling short of earlier hopes for a grand deficit bargain.
"I will sign a law that raises taxes on the wealthiest two per cent of Americans while preventing a middle class tax hike that could have sent the economy back into recession," Obama told reporters after the vote."The deficit needs to be reduced in a way that's balanced. Everyone pays their fair share. Everyone does their part," Obama said, before heading to Air Force One to resume his interrupted annual holiday in his native Hawaii.
Had the deal splintered, all Americans would have been hit by tax increases and the spending cuts would have kicked in across the government, in a combined $US500 billion shock that could have rocked the fragile recovery.
The House vote took place after a conservative rebellion fizzled when it became clear there were not sufficient votes in the restive Republican caucus to send an amended version of the bill cuts back to the Senate.
Republican party leaders ultimately feared they would carry the can if the deal collapsed, leaving Americans enraged by higher taxes and the prospect that an economy slowly recovering from crisis could be plunged back into recession.
The political feuding which spanned the Christmas and New Year holidays reflected the near impossibility in forging compromise in Washington, where power is divided between a Democratic president and the Republican House.
It was also a signal that Obama, despite a thumping re-election win in November, may find it tough to achieve second-term legislative goals that include immigration reform, clean energy legislation and gun control.
The truce in dysfunctional Washington is likely to be brief, given the fight that will ensue over the spending cuts that now loom at the end of February.
This fights will be paralleled by one over Obama's request for Congress to lift the country's $US16 trillion borrowing limit. Republicans are already demanding concessions on expenditures in return for allowing it to rise.
Stock markets, which had been likely to plunge if the deal had foundered, reacted positively to the news with indices in Asia rising sharply.
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