WASHINGTON - The White House and top Republicans struck a dramatic deal to avert huge New Year tax hikes and spending cuts known as the "fiscal cliff" that had threatened to send the US economy into recession.
The pact, if agreed by Congress, would hand President Barack Obama a victory by hiking tax rates on the wealthy - households earning over US$450,000 (S$550,000) a year - but exempt everyone else from a planned tax increase on Tuesday.
It would also put off US$109 billion in budget cuts across the government for two months, but in the process set the stage for a new showdown between Obama's Democrats and Republicans in dysfunctional Washington at the end of February.
Vice President Joe Biden, who negotiated the deal with the top Republican in the Senate Mitch McConnell, was on Capitol Hill to sell it to Democratic senators, some of whom wanted tax hikes to kick in at a lower threshold.
Had no deal been struck, budget experts warned that the fragile US economy could have been sent spinning back into recession by the US$500 billion combined whack from spending cuts and tax hikes.
In the end, the deal was clinched just a few hours before a midnight deadline. A Senate vote was planned within hours, while the House of Representatives was not due back into session until Tuesday.
"I feel very good about how this vote could go," Biden said before senators weighed in on the bill, though adding that he would not predict exactly how the two chambers would vote.
"I feel very, very good. I think we'll get a very good vote tonight."
Now it remains for Republican House Speaker John Boehner to rally his restive conservative coalition around the agreement, which will likely need some Democratic votes in the House to pass.