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Fate of US 'fiscal cliff' deal hangs in the balance

Michael Mathes
House Speaker John Boehner emerges from a meeting with House Republicans at the US Capitol on January 1, 2013 in Washington. The fate of a deal to avert a US "fiscal cliff" budget calamity looked in increasing peril on Tuesday as Republicans in the House of Representatives balked at endorsing it in a swift vote.

The fate of a deal to avert a US "fiscal cliff" budget calamity looked in increasing peril on Tuesday as Republicans in the House of Representatives balked at endorsing it in a swift vote.

The deal to cut newly-raised taxes on most Americans and to make the rich pay the highest tax rates since Bill Clinton's 1990s presidency passed the Senate in a dramatic moment of political theater two hours into 2013.

But hopes of a timely vote in the House on Tuesday were dashed amid signs that Republicans are angry that the pact raises taxes on the rich and yet does nothing to cut spending on social programs that swell the deficit.

"We have to in some way address spending," Republican congressman Spencer Bachus said, confessing he would be "shocked" if the bill was not amended in the House to add spending cuts before being being sent back to the Senate.

Such a move would likely unleash turmoil when global markets open on Wednesday for the first time in the New Year, with investors already irked at US government dysfunction certain to be dismayed at signs of a new logjam.

It could also splinter bipartisan support for the deal in the Democratic-led Senate in a scenario that could hold the economy hostage to Washington wrangling for several more days.

One House Republican, Tim Huelskamp, said that the powerful number two Republican in the chamber Eric Cantor told a high stakes meeting of the party caucus that he was opposed to the bill.

"The principal reason is there are no spending cuts," said Huelskamp.

A colleague, Robert Woodall, also complained that the bill did not address government spending, calling the compromise thrashed out by Senate Republicans and the White House "unbelievable."

"I would not vote for it as it comes to the floor right now."

A second meeting of House Republicans caucus was expected later Tuesday.

Republican anger placed House Speaker John Boehner in a tough political position, likely to incur the wrath of American voters if the bill does not pass, but facing an erosion of his stature in his own caucus if it does.

Boehner's spokesman Brendan Buck acknowledged there was "universal concern" among Republicans in the House at the lack of spending cuts in the deal.

As the year turned, every Americans became liable to a tax hike with the expiry of rate cuts first passed under former president George W. Bush.

Huge spending cuts also were also kicking in across the US government in a combined $500 billion whack that experts fear could send the fragile economy tipping back into a job-killing recession.

The deal to avert the fiscal cliff agreed on Monday raised taxes only on households earning $450,000 a year and exempted anyone else.

It put off $109 billion in automatic spending cuts -- known as the sequester -- for two months, setting up another bitter political cliffhanger at the end of February.

Vice President Joe Biden, who helped broker the deal, was on Capitol Hill for the second time within hours on Tuesday, trying to convince House Democrats to back it.

Boehner could cobble together a majority with Republicans and Democratic lawmakers -- but would risk further fracturing his authority before asking his party to re-elect him as speaker of the newly elected House that convenes Thursday.

If the legislation does pass the House unamended, it will represent a win for President Barack Obama as it raises taxes on the richest Americans -- albeit above an income threshold higher than he and other Democrats had wanted.

Obama issued a statement shortly after the 2:00 am (0700 GMT) Senate vote, urging House lawmakers to pass the bill "without delay."

The White House also issued a statement, calling the tax agreement "a victory for middle-class families and the economy," and laying out the raft of measures contained in the legislation.

"For the first time in 20 years, Congress will have acted on a bipartisan basis to vote for significant new revenue," it said.

The deal also includes an end to a temporary two percent cut to payroll taxes for Social Security retirement savings -- meaning all Americans will pay a little more -- and changes to inheritance and investment taxes.