Susan Davis and David Jackson, USA TODAY
A divided Republican House passed the Senate's "fiscal cliff" agreement Tuesday night, following a tense day of GOP protests that the plan does not do enough to rein in federal spending.
President Obama lauded the vote, saying it averts a series of tax hikes and spending cuts "that could have sent the economy back into recession."
Obama also said the deal is "just a step" in a comprehensive effort to reduce the nation's debt, and that he had wanted a larger agreement but encountered too much political opposition.
"That failure comes with a cost," Obama said, adding that he hopes future budget talks do "not scare the heck out of people."
House Democrats provide the winning margin for the plan that stopped the fiscal cliff which technically took effect Tuesday with the new year. The finally tally was 257-167.
Obama, who pledged to reduce the national debt in part by raising taxes on the wealthy, said he would continue efforts to reduce the federal debt while investing in the nation's economic development.
Appearing with Obama: Vice President Biden, a key negotiator in last-minute fiscal cliff talks.
Immediately after his comments, the White House announced that Obama would fly overnight to Hawaii to re-join his family on their end-of-year vacation. Obama had returned to Washington from Hawaii on Thursday for fiscal cliff talks.
Opponents said the plan's two-month delay of major spending cuts only sets up more budget battles in the weeks to come, as the nation bumps up against its $16.39 trillion debt ceiling.
For his part, Obama said the debt ceiling should not threaten future budget deals, saying the limit must be raised because "we can't not pay bills that we've already incurred."
Earlier in the evening, House Republicans could not muster enough support to add spending cuts to the bill that the Senate passed in the early morning hours of Tuesday. So GOP leaders put the Senate bill on the House floor as is.
House Democratic leader Nancy Pelosi, D-Calif. said that while the plan doesn't do everything many people want, "it is a good way for us to have a happy start to a new year."
House Speaker John Boehner, R-Ohio, and other Republican leaders - who at one time vowed to block any increase in taxes - did not speak during the debate.
The fiscal cliff legislation raises tax rates on incomes over $400,000 for individuals and $450,000 for couples, while retaining the George W. Bush-era tax cuts for Americans with lower incomes. It also features an extension of unemployment insurance..
One set of taxes is going up in 2013, however: The deal does not address the temporary payroll tax holiday that expired Tuesday. That tax is rising by 2 percentage points, back to its 2010 level.
Republican criticism of the Senate plan surfaced during a closed-door meeting hosted by Boehner and House Majority Leader Eric Cantor, R-Va.
"The lack of spending cuts in the Senate bill was a universal concern amongst members in today's meeting," said Boehner spokesman Brendan Buck.
Cantor actually told colleagues he opposed the Senate bill, His statement was an early warning sign the Senate-passed bill faced problems in the House. House GOP leaders met throughout the day Tuesday in to come up with a plan on how to proceed.
After an early evening meeting of the Republican caucus, Rep. Scott Garrett, R-N.J., said there were two options for Republicans: continue with the Senate bill or amend it. "To the credit of leadership they are trying to get a sense of where we as a conference are on this," he said.
Amending the agreement would have thrown the whole deal into question as the Senate has already overwhelmingly approved the bill. The House also faced a noon Thursday deadline before the next Congress is sworn in - erasing all prior action and leaving Congress to start anew with roughly 100 new lawmakers entering the House and Senate.
Had the House not acted, President Obama and other Democrats have made clear they would blame the Republicans for the string of tax increases and defense and social cuts that come with it.
Rep. John Fleming, R-La., said members were concerned about rattling financial markets or being blamed for going over the cliff. Republicans were also coalescing around the idea to battle over spending cuts in upcoming budget fights, including a brewing February battle to raise the debt ceiling.
"Now the topic will be spending cuts," he said.
Earlier in the day, Vice President Biden returned to Capitol Hill to huddle with House Democrats, seeking to build support for the Senate proposal.
Biden attended a meeting of the House Democratic Caucus that stretched for three hours on Tuesday, outlining the details and addressing concerns from skeptical Democrats. Later, Biden expressed confidence about the fate of the Senate bill as he left the White House for a meatball-and-provolone sandwich at Potbelly's. "I think we're going to be OK," Biden said to a CNN camera crew nearby.
House Minority Leader Pelosi, D-Calif., said given the "uncharacteristically, very strong bipartisan" vote in the Senate, Republicans should move to schedule an up-or-down vote on the measure.
"Right now, our members, after very thoughtful deliberations and review, are continuing to review the legislation, weighing pros and cons, weighing the equities of not going over the cliff," she said, adding that Democrats were awaiting guidance from GOP leaders on how they will proceed. "I think we have made gigantic progress."
Democratic support for the plan was significant considering the White House's endorsement. However, Minority Whip Steny Hoyer, D-Md., told reporters some members were unhappy with raising the tax thresholds for incomes above $400,000, instead of the $250,000 that President Obama had pledged in his re-election campaign.
During the debate, Hoyer said: "Compromise is not the art of perfection."
In contrast to Republicans, the Democratic rank-and-file were optimistic as they left the Biden meeting.
"There are a lot of good things in here for Democrats to vote for," said Rep. Elijah Cummings, D-Md., including higher tax rates on the wealthy and extended unemployment benefits for out-of-work Americans.
The flurry of House activity came just hours after the Senate approved, 89-8, an agreement in the wee hours of New Year's Day, the deadline for the cliff.
The plan worked out between the White House and Senate leaders would raise taxes on the wealthy, eliminate some - but not all - tax hikes for the middle class, and defer a series of budget cuts for two months.
Critics said the plan does little to reduce the nation's debt and only delays a looming battle over the debt ceiling. They also pointed to a Tuesday report by the Congressional Budget Office, saying the Senate bill would add nearly $4 trillion to federal budget deficits over the next decade, largely because it extends the lower income tax rates for nearly every American.
House Budget Chairman Paul Ryan, R-Wis., the 2012 Republican vice presidential nominee, declined to talk to reporters on his way into the closed-door GOP meeting. "Happy New Year's, guys," he said.
Ryan is a prospective candidate in the 2016 presidential election; two additional potential GOP candidates, Sens. Marco Rubio and Rand Paul, voted against the bill early Tuesday.
Under the Senate-House deal, taxes would remain steady for the middle class and rise for incomes over $400,000 for individuals and $450,000 for couples.
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.
Shortly after the Senate vote, Obama said, "While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country and the House should pass it without delay."
Obama also said the bill takes a balanced approach to shrinking the U.S. deficit by "investing in (the) middle class" while "asking the wealthy to pay a little more."
The deal also stops scheduled pay increases for Congress set for spring 2013 and includes a nine-month extension of the farm bill, which had been delayed for months because of differences between the House and Senate versions of the legislation that sets U.S. agricultural policy every five years.
Biden played a critical role in working out the agreement with Senate Minority Leader Mitch McConnell. "I think it was very important," Sen. Dianne Feinstein, D-Calif. said Monday, noting that McConnell and Biden "have a long prior experience" working together. "That's the reason this is bipartisan."
The agreement does not address any increase in the nation's debt ceiling, which - combined with the delay of automatic spending cuts - sets up the distinct possibility of another cliff-like budget battle in February.
Budget conflicts have been a recurring theme in the 112th Congress, which has distinguished itself as one of the least productive legislative sessions since World War II. The body also hit historically low approval ratings in the past two years.
The Democratic president and divided Congress first clashed in spring 2011 over a near-government shutdown. Tensions continued that summer during the fight over raising the national debt limit.
Such tensions are likely to happen again in 2013. Congress must approve in mid-February an increase in the $16.4 trillion debt ceiling, the nation's borrowing authority, and in late March when the current federal funding runs out and another government shutdown threat looms if the partisan gridlock continues.
"When the president said (Monday) that round two is the debt ceiling, he is right," said Sen. Lindsey Graham, R-S.C. Republicans will fight for spending cuts, particularly in entitlement programs like Medicare, in exchange for the required congressional approval to raise the debt ceiling. "If that's too much to ask, so be it," he said.
Contributing: Jackie Kucinich