White House and Congress Reach Deal to Postpone Fiscal Cliff

According to the agreement, the sequestration will be delayed by two months and will be funded half by cuts in the defense budget and half by cuts in non-defense budgets.

The White House reached agreement with congressional Republicans late Monday on a deal to prevent across-the-board tax increases and spending cuts to government programs set to take effect at midnight, according to administration and Senate Democratic officials.

These officials said a New Year's Eve vote in the Senate to ratify the deal to avert the so-called "fiscal cliff" was possible later in the evening, barring opposition from majority Democrats.

The measure would extend George W. Bush-era tax cuts for family incomes below $450,000 and briefly avert across-the-board spending cuts set to strike the Pentagon and domestic agencies this week.

There was no immediate confirmation from aides to the top Republicans in Congress, Senate Minority Leader Mitch McConnell and House Speaker John Boehner.

Vice President Joseph Biden, who stepped in to negotiate the deal with McConnell, arrived at the Capitol to brief the Democratic rank and file.

The officials who described the developments did so on condition of anonymity, saying they were not authorized to discuss the details.

Hours earlier, President Barack Obama said, "It appears that an agreement to prevent this New Year's tax hike is within sight. ... But it's not done," he added of legislation that redeems his campaign pledge to raise taxes on the wealthy while sparing the middle class.

Even by the dysfunctional standards of government-by-gridlock, the activity at both ends of historic Pennsylvania Avenue was remarkable as the White House and Congress struggled over legislation to prevent a "fiscal cliff" of more than $500 million in tax increases and about $110 million in spending cuts.

Economists feared that such a double blow to the fragile U.S. economy could lead to a big jump in unemployment and lead to a new recession.

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.