Spending Cuts, Fiscal Cliff | featured news

The fiscal pact Congress reached hours into the new year will delay $109 billion in automatic across-the-board spending cuts for two months. But it will make a down payment on those reductions that will affect federal operations this year and next.

Legislation to block the "fiscal cliff" is headed to the White House for President Barack Obama's signature. The bill will avoid, for now, the major tax increases and government spending cuts that had been scheduled to take effect with the new year.

House members were meeting to decide whether they would go along with the Senate's approval of a last-minute deal to pull the U.S. back from the so-called fiscal cliff.

A last-ditch tax deal in the Senate might let the U.S. economy will escape the worst of the so-called fiscal cliff and avoid going back into recession. But even if the House goes along, the tax increases likely coming in 2013 will dent economic growth anyway. In the early hours of the new year, the Senate voted to end a long stalemate and raise taxes on upper-income households, extend long-term unemployment benefits and postpone decisions over government spending cuts, officials said. But any deal needs approval from the House.

Just before a self-imposed deadline at which Senate leaders were set to brief their respective caucuses about a prospective deal, negotiations toward a scaled-back agreement to avoid the onset of automatic tax hikes and spending cuts on Jan. 1 appeared on the verge of breakdown.

Financial markets would be affected adversely if U.S. lawmakers fail to agree on a "fiscal cliff" deal before Tuesday, President Barack Obama said in an interview broadcast on Sunday, while urging Congress to act quickly to extend tax cuts for middle-class Americans.

U.S. consumer confidence tumbled in December, driven lower by fears of sharp tax increases and government spending cuts set to take effect next week.

Lawmakers are engaged in a playground game of 'who goes first,' daring each political party to let the year end without resolving a Jan. 1 confluence of higher taxes and deep spending cuts that could rattle a recovering, but-still-fragile economy.

The U.S. Treasury Department will begin taking steps this week to delay hitting the government's $16.4 trillion borrowing limit. The government is facing a crunch on the debt ceiling because the issue has become ensnarled in talks to avoid some $600 billion in tax hikes and spending cuts due to begin in early January. Failing to raise the debt ceiling could cause the government to default on its debt.

Lawmakers say Congress probably could resolve the so-called "fiscal cliff" if Republican leaders let Democrats provide most of the votes....