US heads over fiscal cliff despite reported deal

Leaders of the Democratic controlled Senate and the White House struck a last-minute deal to avert the feared fiscal cliff that can plunge the US economy back into a recession, but the Republican House of Representatives went home long before midnight.

Vice President Joe Biden, who became the Democratic point man in the talks, headed to the Capitol Hill Monday night to pitch the plan to fellow Democrats so that the House may pass it Tuesday with retrospective effect before the tax increases and spending cuts actually start to kick in.

CNN citing a source familiar with the deal said the Senate proposal would put off the cuts for two months and keep the expiring Bush-era tax cuts for individuals earning less than $400,000 or couples earning less than $450,000. Taxes on inherited estates over $5 million will go up, and that exemption will be indexed for inflation.

Biden had been in negotiations with Republican Senate Minority Leader Mitch McConnell since Sunday afternoon. Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi, both Democrats, agreed to the plan in calls with President Barack Obama, CNN reported citing a Democratic source.

Obama had chided lawmakers earlier Monday and warned that battles over spending still loomed.

"They are close, but they're not there yet," Obama said. "And one thing we can count on with respect to this Congress is that if there is even one second left before you have to do what you're supposed to do, they will use that last second."

In the House, there's little practical difference in settling the issue Monday night versus Tuesday, CNN cited Republican sources as saying.

But if House Republicans approve the bill Tuesday-when taxes have technically gone up-they can argue they've voted for a tax cut to bring rates back down, even after just a few hours, Republican sources said. That could bring some more Republicans on board, CNN said.

(Arun Kumar can be contacted at arun.kumar@ians.in)