America's long-running fiscal cliff crisis was finally resolved on Tuesday night when Congress voted in favour of a White House compromise that will impose tax rises on the wealthiest and spare the working-class and middle-class.
Barack Obama, in a statement to reporters at the White House, hailed it as a fulfilment of his election campaign promise.
"The central premise of my campaign for president was to change the tax code that was too skewed towards the wealthy at the expense of working, middle-class Americans. Tonight we have done that," he said.
Obama, who broke off his holiday with his family in Hawaii to return to Washington to see the crisis resolved, left minutes later to fly back to Honolulu.
Before leaving, he issued a warning that he was tired of these repeated showdowns with Congress and would be looking for alternative ways of doing business in Washington.
Already the Republicans are gearing up for fresh confrontations as early as next month over spending cuts and the debt ceiling.
Obama called instead for a more bipartisan approach on issues such as spending cuts. "The one thing I think hopefully in the new year we will focus on is seeing if whether we can put a package like this together with a little bit less drama, a little less brinkmanship, not scare the heck out of folks quite as much," the president said.
The end of the fiscal cliff drama came when a large bloc of House Republicans, who had stubbornly opposed the bill, caved in and reluctantly joined Democrats to pass it comfortably by 257 to 167.
It exposed the extent of the Republican ideological divide, with 85 voting for and 151 unable to swallow the deal. The Democrats were more cohesive, with only 16 Democrats voting against.
The House vote came after the Senate passed the bill in the early hours of Tuesday morning.
The bill is a short-term, messy compromise. Without the bill, every taxpayer in America would have faced rises from 1 January. Instead, the increases are confined to the wealthiest 2% of the population.
The bill also blocked automatic cuts in federal programmes from defence to welfare due to kick in on 1 January. A decision on cuts has been postponed for two months.
Obama, in his White House statement after the House vote, said: "Thanks to the votes of Democrats and Republicans in Congress I will sign a law that raises the tax on the wealthiest 2% of Americans while preventing a middle-class tax hike that could have sent the economy back into recession."
The Congressional vote amounts to only a partial victory for Obama. He had promised the new taxes would kick in at $250,000 but, to the dismay of leftwing Democrats, agreed to compromise, in the face of Republican opposition, on $450,000. The Republicans had wanted the threshold set at $1m.
America went over the 'fiscal cliff' at midnight on 31 December, with every taxpayer facing an automatic rise. The rises proved temporary. The new legislation reverses this, removing the increases from all but the wealthiest.
The White House had warned that failure to reach a deal could unsettle the markets as well as slow economic recovery. It is hoping the deal will calm the markets when Wall Street reopens on Wednesday.
Obama, feeling empowered by his election victory in November, had been hoping that he might at last be able to tame the Republican House members, many of them backed by the Tea Party.
Although he won a small victory over the fiscal cliff, it is far from the crushing one he had been hoping for. House Republicans are already planning a series of fresh showdowns, beginning next month over spending cuts and the debt ceiling.
Obama originally proposed a 'grand bargain' to deal with all of the remaining issues in the hope that he would avoid these regular and debilitating stand-offs with Congress.
Mitch McConnell, the Republican leader in the Senate, within minutes of Tuesday's vote, flagged up the coming battles ahead over spending and the debt ceiling.
So too did the Republican House Speaker John Boehner, who said: "Now the focus turns to spending. The American people re-elected a Republican majority in the House, and we will use it in 2013 to hold the president accountable."
But Obama insisted he had enough of such confrontation. If Congress decides to make an issue of raising the debt ceiling, it would be responsible for the "catastrophic" consequences.
The fiscal cliff crisis has been runnning since Obama won the election in early November. Attempts by Obama and the Republican House Speaker John Boehner to do a deal before Christmas collapsed. So too did negotations between the Democratic Senate leader Harry Reid and his Republican counterpart McConnell.
In the end, the deal was brokered over the weekend by McConnell and the vice-president, Joe Biden.
The bill was passed by the Senate, with 89 senators in favour and eight against, at 2am on Tuesday, too late to prevent the country breaching the midnight fiscal cliff deadline.
The bill restricts tax rises to individuals earning $400,000 or more a year and households earning $450,000 or more. Estate tax also rises, to 40% from 35%, but inheritances below $5m are exempted from the increase. Benefits for the unemployed are extended for another year.
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