The Senate spent the first few hours of the New Year ironing out the final details of a plan to roll back a package of automatic spending cuts and tax increases that technically went into effect at midnight.
The vote was 89-8 in favor of the compromise, which now goes to the House for a final vote as soon as Tuesday - and where passage is far from assured.
President Obama, speaking shortly after the Senate vote said that "while neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country." He urged the House, which is set to meet at noon, to "pass it without delay."
The Senate vote took place after midnight, meaning that the U.S. technically went over the much-dreaded "fiscal cliff." But the impact was expected to be minimal â€" assuming the House votes to pass the bill in the next few days.
The deal would leave both sides with less than they want â€" Republicans wanted taxes to remain steady for all Americans, Democrats wanted Bush-era tax cuts to expire for those making more than $250,000 a year. The two sides compromised at raising rates on taxpayers earning in excess of $400,000 (or $450,000 for couples).
As NPR's John Ydstie reports, "Ninety-nine percent of Americans will see little, or no change in income tax rates because of this deal. But the top 1 percent will see an increase of almost 5 percentage points on incomes above $400,000 for individuals and $450,000 for couples."
It would be the first major tax increase in two decades.
Ydstie says the agreement extends unemployment benefits for two million Americans but it doesn't extend the payroll tax holiday.
"That means virtually all U.S. workers will see their Social Security payroll tax rise 2 percentage points, back to the normal 6.2% on income up to $113,000," he says.
For the typical household with $50,000 in earnings, that amounts to about $20 per week. It could cost high income households as much as $4,500 dollars in annual take home pay.
The deal puts off for two months across-the-board cuts totaling $24 billion over two months that would have taken place under sequestration. The revenue gap will be filled temporarily by tax increases and cuts in other programs. The stop-gap is meant to give Congress and the president more time to work out a broader tax and spending agreement.
It's now the House's turn to seal the deal. The Senate overwhelmingly supported the compromise, and House Speaker John Boehner of Ohio and the chamber's Republican lawmakers are under enormous pressure to follow suit.
As The Associated Press points out:
House Speaker John Boehner pointedly refrained from endorsing the agreement, though he's promised a vote on it or a GOP alternative right away. But he was expected to encounter opposition from House conservatives.
"It's three strikes in my book and I'll be voting no on this bill," Rep. Tim Huelskamp told CNN Tuesday morning. Huelskamp says the legislation would impose a hardship on small businesses around the country and falls short of addressing the need for cuts in spending.
Speaking before the Senate's vote in the small hours of Jan. 1, Vice President Joe Biden â€" who worked with Senate GOP Leader Mitch McConnell of Kentucky to hammer out the measure â€" said his long experience on the Hill had taught him not to try to predict an outcome from either chamber.
"You shouldn't predict how the House is going to vote. But I feel very, very good," Biden told reporters.
