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Democrats win landslide vote as US Senate steps back from fiscal cliff

The US Senate has passed legislation to block the impact of across-the-board tax increases and spending cuts that make up the fiscal cliff.

The vote in the Democrat-dominated chamber was an overwhelming 89-8 and came well after midnight local time on New Year's Day.

A vote in the Republican-led House of Representatives is expected before tomorrow.

The White House-backed legislation would prevent middle-class taxes from rising, and raise rates on incomes over 400,000 US dollars (£245,800) for individuals and 450,000 US dollars (£276,000) for couples.

It also blocks spending cuts for two months, extends unemployment benefits for the long-term jobless, prevents a 27% cut in fees for doctors who treat Medicare patients and prevents a spike in milk prices.

A last-minute addition would also prevent a 900 US dollars (£553) pay rise for members of Congress - those serving in both the Senate and House - from taking effect in March.

Shortly after the Senate vote, President Barack Obama said: "While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country and the House should pass it without delay."

Mr Obama said the Bill takes a balanced approach to shrinking the US deficit by "investing in (the) middle class" while "asking the wealthy to pay a little more".

Without legislation, economists had warned of a possible new recession and spike in unemployment if the fragile US economy were allowed to fall over the so-called fiscal cliff of tax increases and spending cuts.

Activity at both ends of Pennsylvania Avenue was remarkable as the Obama administration and politicians spent the final hours of 2012 haggling over long-festering differences.

"It shouldn't have taken this long to come to an agreement, and this shouldn't be the model for how we do things around here," said Senate Republican leader Mitch McConnell, who negotiated the agreement with Vice-President Joe Biden.

Under the deal, spending cuts totalling 24 billion US dollars (£14.7 billion) over two months aimed at the Defence Department and domestic programmes would be deferred.

That would allow the White House and politicians time to regroup before plunging very quickly into a new round of budget brinkmanship certain to revolve around Republican calls to rein in the cost of the Medicare healthcare programme for the elderly and other government benefit schemes.

As darkness fell on the last day of the year, Mr Obama, Mr Biden and their aides were at work in the White House, and lights burned in the House and Senate.

Democrats complained that Mr Obama had given away too much in agreeing to limit tax increases to incomes over 450,000 US dollars, far above the 250,000 US dollars level he campaigned on. Yet some Republicans recoiled at the prospect of raising taxes at all.

Democratic senators ended up overwhelmingly supporting the measure after being briefed at a closed-door session at the Capitol with Mr Biden.

"The argument is that this is the best that can be done on a bipartisan basis," said Democratic Senator Dianne Feinstein, when asked about the case the vice-president had made.

Passage sends the measure to the House of Representatives, where Speaker John Boehner refrained from endorsing a package as yet unseen by his famously rebellious rank-and-file. He said the House would not vote on any Senate-passed measure "until House members - and the American people - have been able to review" it.

House Democratic leader Nancy Pelosi issued a statement saying that once the legislation cleared the Senate, "I will present it to the House Democratic caucus".

And while the nominal deadline for action passed at midnight, Mr Obama's signature on legislation by the time a new Congress takes office at noon on January 3 - the likely timetable - would eliminate or minimise any inconvenience for taxpayers.

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