US lawmakers hope to resolve any uncertainty over the so-called "fiscal cliff" before financial markets reopen on January 2, with the House of Representatives considering urgent legislation approved by the Senate in a middle-of-the-night new year's drama unlike any other in the history of Congress.
The largely tax-focused legislation was only part of the grand deal President Barack Obama had hoped to make with lawmakers on addressing the country's chronic deficit spending, meaning that his administration and a bitterly partisan Congress face more showdowns on fiscal issues in the months ahead.
Economists, who had warned that the "fiscal cliff" combination of higher taxes on almost all Americans and deep spending cuts taking effect at the start of the year would spin the country back into recession, were warning that even a limited agreement to avoid it could still dent economic growth.
Rejection of the legislation by the Republican-controlled House, which days ago expressed its disapproval of tax increases, would mean that any fiscal deal would have to start again when a new Congress, with dozens of new members, is seated on Thursday.
The deal under consideration on Tuesday tackled one of the most sensitive issues: higher taxes. The measure would be the first significant bipartisan tax increase since 1990. It would prevent taxes from going up on the poor and middle class but would raise rates on households making more than 450,000 US dollars a year.
It also would also put off for two months more than 100 billion dollars in automatic spending cuts that were set to hit the Pentagon and domestic programmes starting this week, and it would extend unemployment benefits for the long-term unemployed.
The measure cleared the Senate on an 89-8 vote not long after midnight Tuesday, hours after Vice President Joe Biden and Senate Republican Leader Mitch McConnell, veteran negotiators, sealed a deal.
The top Republican in Congress, House Speaker John Boehner, was briefing his party members on Tuesday, while Mr Biden met with House Democrats. A Mr Boehner aide said Republican leaders would not decide their course until a second meeting later in the day.
Mr Boehner, pointedly refrained from endorsing the agreement, though he promised a vote on it or a Republican alternative right away. He was expected to encounter opposition from House conservatives, who oppose any tax increase at all.
The spending cuts will have to be addressed in the coming weeks and months, along with an increase in the government's borrowing limit as it seeks to pay its bills. The midnight deadline on Monday had been set back in 2011 as motivation for the Obama administration and Congress to get serious about taking sweeping action to address deficit spending that has averaged about one trillion dollars a year.