What is exactly in 'fiscal cliff' plan?
US Senate votes 89-8 on a bill to stop the across-the-board tax increases and program budget cuts, now it goes to the House.PT1M31S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-2c4o3 620 349 January 2, 2013
MINUTES before the midnight deadline of the fiscal cliff, Democrats started celebrating a partial victory. It appeared the White House and Senate leaders had cut a deal - America would start to tackle its debt and deficit by taking an extra $600 billion in revenue rather than by cutting spending.
Just before 2am on Tuesday, the Senate passed the measure by an overwhelming 89 votes to 8. It still needs to pass the House of Representatives, which was due to reconvene at midday on Tuesday.
Americans earning more than $400,000 ($450,000 for couples) would foot much of the bill, with taxes on their wages and interest and investments increasing to levels not seen since Bill Clinton was president, 39.6 per cent. The tax hikes would be permanent.
Vice-President Joe Biden leaves the Democrat senators meeting. Photo: Getty Images/AFP
It is a victory for President Barack Obama, who campaigned to raise taxes on the wealthiest throughout his re-election bid. The White House's apparent victory did not win the full support of all Senate Democrats.
''I just think that's grossly unfair,'' said Democratic senator Tom Harkin, a liberal leader. ''If we're going to have some kind of a deal, the deal must be one that really favours the middle class, the real middle class.''
In Canberra, Treasurer Wayne Swan greeted news of the deal with only lukewarm praise, warning that a divided Washington needed to reach a more comprehensive agreement before the rest of the world would see the threat as having passed.
''As the IMF have said, anything short of a deep and wide-reaching resolution will not be good enough this time around,'' Mr Swan said.
''We will continue to closely monitor these developments because they have a significant impact on the entire global economy, including Australia.''
Australian Treasury officials reportedly believe that an even greater risk than the fiscal cliff is the danger that Washington will again strike an impasse over the nation's debt ceiling.
In mid-2011, the US government came within hours of a catastrophic default.
US Treasury officials said on Monday that the government was again brushing the debt ceiling, raising fears of a re-run of last year's impasse.
News of the deal, brokered by Vice-President Joe Biden and Republican Senate Minority Leader Mitch McConnell, started leaking about 9.30pm on Monday in Washington, and although Congress has had 18 months to tackle the fiscal cliff, the last-minute plan prompted celebration among some Democrats.
As negotiations continued through the day, members on both sides of the aisle lamented and fretted.
In the end though it appeared senators believed a failure to act at all would be worse than a failure to compromise. ''No deal is the worse deal,'' said Senator Joseph Lieberman, the independent from Connecticut.
''It's a controversial package. But we knew that it was going to be a difficult challenge,'' said Senate Majority Whip Richard Durbin. ''We have to pass it for the good of the country.''
About 11.30pm, Mr Biden emerged from talks with the Democratic leadership saying he felt ''really very very good'' about how a vote in the Senate would go. Then he reminded everyone that Senate votes were unpredictable, and House votes were even worse.
Hours earlier Mr Obama said during a briefing: ''Just last month Republicans in Congress said they would never agree to raise tax rates on the wealthiest Americans … obviously, the agreement that's currently being discussed would raise those rates and raise them permanently.''
Although a Senate deal was reached early on Tuesday, the US had already passed over the fiscal cliff and there was no guarantee the House of Representatives would pass the measures during the public holiday on January 1, to ensure no impacts were felt.
Under the last-minute deal - which covers only a few key elements of automatic tax increases and spending cuts - the Senate agreed to ensure 2 million Americans on federal unemployment benefits would have them extended.
Savage cuts to the defence budget, opposed by members of both parties, would be delayed for two months.
with DAVID WROE