WASHINGTON — Racing the clock, the White House reached a New Year's Eve accord with Senate Republicans late Monday to neutralize across-the-board tax increases and spending cuts in government programs due to take effect at midnight, according to administration and Senate Democratic officials.
Under the deal, taxes would remain steady for the middle class and rise at incomes over $400,000 for individuals and $450,000 for couples — levels higher than President Barack Obama had campaigned for in his successful drive for a second term in office.
Spending cuts totaling $24 billion over two months aimed at the Pentagon and domestic programs would be deferred. That would allow the White House and lawmakers 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 Medicare and other government benefit programs.
Officials also decided at the last minute to use the measure to prevent a $900 pay raise for lawmakers due to take effect this spring.
Democratic senators said they expected a vote on the measure later in the evening. They spoke after a closed-door session with Vice President Joseph Biden, who brokered the deal with Senate Republican leader Mitch McConnell.
"The argument is that this is the best that can be done on a bipartisan basis," said Sen. Dianne Feinstein, D-Calif., when asked about the case the vice president had delivered behind closed doors.
Passage would send the measure to the House, where Speaker John Boehner, R-Ohio, 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.
Numerous GOP officials said McConnell and his aides had kept the speaker's office informed about the progress of the talks.
The House Democratic leader, Rep. Nancy Pelosi of California, issued a statement saying that when legislation clears the Senate, "I will present it to the House Democratic caucus."
Without legislation, economists in and out of government warned of a possible recession if the economy were allowed to fall over a fiscal cliff of tax increases and spending cuts.
And while the deadline to act was technically midnight, Obama's signature on legislation by the time a new Congress takes office at noon on Jan. 3, 2013 — the likely timetable — would eliminate or minimize any inconvenience for taxpayers.
Even by the dysfunctional standards of government-by-gridlock, the activity at both ends of historic Pennsylvania Avenue was remarkable as the administration and lawmakers spent the final hours of 2012 haggling over long-festering differences.
"One thing we can count on with respect to this Congress is that if there's even one second left before you have to do what you're supposed to do, they will use that last second," the president said in a mid-afternoon status update on the talks.
As darkness fell on the last day of the year, Obama, Biden and their aides were at work in the White House, and lights burned in the House and Senate. Democrats complained that Obama had given away too much in agreeing to limit tax increases to incomes over $450,000, far above the $250,000 level he campaigned on. Yet some Republicans recoiled at the prospect of raising taxes at all.
A late dispute over the estate tax produced allegations of bad faith from all sides.
After hours of haggling, Biden headed for the Capitol to brief the Democratic rank and file.
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