US over the fiscal cliff, but averts a fall with Senate deal

The US economy, which at least technically went over the ''fiscal cliff'' for a day, escaped a fall with a Senate tax deal early in the morning that would delay deep automatic spending cuts for another two months and give way to a fresh round of congressional fights in the New Year.

The Senate agreed to raise some taxes on the wealthy while keeping tax rates low for the middle class under a bipartisan deal during a special New Year's session at around 2 a m EST (0700 GMT), with 89 in favour and 8 against.

The stop-gap agreement, however, did not in any way help to rein in huge annual budget deficits that has pushed US debt to the $16.4 trillion ''fiscal cliff".

The deal that ended a year-end drama could still face stiff challenges in the House of Representatives.

The new legislation would help avert across-the-board tax increases and sweeping spending cuts to the Pentagon and other government agencies.

It would also help the administration extend unemployment benefits for the long-term jobless, prevent a 27 per cent cut in fees for doctors under the Medicare scheme and help milk prices under check.