The Senate approved a scaled-down package early Tuesday morning aimed at halting historic tax hikes for most Americans and postponing across-the-board spending cuts, just hours after Congress missed a midnight deadline for action.
The Senate voted 89-8 in favor of the package, which was hastily pulled together after a late-night deal between White House and Senate Republican negotiators.
For the near-term, it appears a tax hike will technically go into effect on Jan. 1, as the midnight deadline was missed. In total, $600 billion in tax hikes and spending cuts are scheduled to hit in the new year unless and until the legislation is finalized.
But the goal in Washington is to produce a bill that could patch up the problem in the coming days, sparing most Americans from any major or lasting blow to their paychecks.
The bill now goes to the House side, where its chances are unclear. The House is expected to come back into session at noon on Tuesday.
Senate leaders, though, hailed the deal as an "imperfect" but vital solution to the fiscal crisis.
"The president wanted tax increases, but thanks to this imperfect agreement, 99 percent of my constituents won't be hit by those hikes," Senate Republican Leader Mitch McConnell said.
President Obama praised Senate lawmakers for passing the bill early Tuesday, imploring the House to do the same.
There's more work to do to reduce our deficits, and I'm willing to do it," Obama said in a statement. "But tonight's agreement ensures that, going forward, we will continue to reduce the deficit through a combination of new spending cuts and new revenues from the wealthiest Americans."
Senate leaders assembled the vote after a marathon weekend of talks during which Vice President Biden and McConnell did much of the hard bargaining. After the White House and Senate Republicans agreed to the framework, Biden was brought in once more to sell the deal to reluctant Senate Democrats Monday night.
Under the proposal, current tax rates would be extended for everyone except families making above $450,000 -- up from President Obama's earlier threshold of $250,000. The bill would also extend long-term jobless benefits for a year and address other expiring provisions like the estate tax.
The late-night deal ironed out the last major sticking point between the two sides -- what to do about the $110 billion in automatic spending cuts set to kick in starting in January.
Officials said the two sides agreed to postpone the cuts by two months, in exchange for a 50-50 mix of revenue increases and spending cuts. Of those cuts, half would come from defense and half would come from other budgets.
Fox News has also learned the deal contains a repeal of an ObamaCare program called the CLASS Act. The provision, which would set up a government-run long-term care program, was never actually implemented amid concerns that it couldn't generate enough revenue to sustain itself.
The big question is whether the Senate plan can pass the House -- and if so, when. The longer the stalemate drags on, the greater the risk for the economy and taxpayers.
House conservatives were already voicing frustration about the lopsided ratio of tax increases in the plan, as compared with net spending cuts. One estimate showed the bill includes $620 billion in tax hikes and $15 billion is spending cuts. As one House Republican told Fox News, "I cant imagine a ratio such as that warming our fiscal hearts."
House Republican leaders made clear they were reserving judgment on the package. The House GOP leadership team said any decision on whether to accept or amend any Senate-passed bill would not be made until the House and the American people "have been able to review the legislation."
On the other side, Democrats had complained about the move to raise taxes only on those making over $450,000, though it wasn't enough to hold up the Senate vote.
"Looks like a very bad deal the way this is shaping up," Sen. Tom Harkin, D-Iowa, said earlier in the day. Harkin voted against the bill, as did Sens. Tom Carper, D-Del.; Mike Lee, R-Utah; Rand Paul, R-Ky.; Richard Shelby, R-Ala.; Michael Bennet, D-Colo.; Chuck Grassley, R-Iowa; and Marco Rubio, R-Fla.
But all sides were stressing the urgency of the situation.
Of the looming tax hike, Obama said: "Middle class families can't afford it, businesses can't afford it, our economy can't afford it."
The tax hikes, combined with the spending cuts, could trigger another recession if they are not dealt with soon, economists warn. The fiscal deal, though, still pushes off a permanent decision on the spending cuts until two months down the road, when lawmakers could find themselves in a similar position -- only this time, with the debt ceiling playing a far more prominent role.