Fiscal cliff crises averted, but more fights loom

STORY HIGHLIGHTS

• Rise in rates is first for any Americans since '93, according to Tax Foundation


• The vote prevents tax increases for more than 98% of Americans


• It also wards off $110 billion in automatic cuts to domestic and military spending


• Reid accused Boehner of "dictatorship" Friday; Boehner responded with profanity

(CNN) -- After exhaustive negotiations that strained the country's patience, the House approved a bill to avert the dreaded fiscal cliff, staving off widespread tax increases and deep spending cuts.

In the 257-167 vote late Tuesday, 172 Democrats and 85 Republicans favored the bill; 16 Democrats and 151 Republicans opposed it.

The approved plan maintains tax cuts for individuals earning less than $400,000 per year and couples earning less than $450,000. It will raise tax rates for those who make more -- marking the first time since 1993 that federal income tax rates have gone up for any Americans, according to the Tax Foundation.

The bill also extends unemployment insurance and delays for two months the threat of sequestration, a series of automatic cuts in federal spending.

World markets rose after the news. U.S. stocks jumped, too, with the Dow rising 210 points after opening. And federal workers breathed a sigh of relief as the deal provides a reprieve from across-the-board cuts of 8% to 10% of their budgets. The Defense Department said it has stayed furlough notices for its civilian work force of 800,000, but Pentagon officials say they're worried that unpaid leave may be harder to implement later in the fiscal year.

"We hope Congress can find a way to end sequester once and for all," Pentagon spokesman George Little said.

Just hours before the bill passed, House Speaker John Boehner pitched to fellow Republicans the idea of amending the Senate-approved bill to add a package of spending cuts. He cautioned about the risk in such a strategy, saying there was no guarantee the Senate would act on it.

Rum, electric vehicles and motor sports: Nuggets in the fiscal cliff bill

By the end of the night, he was among the Republicans who voted for the bill as written.

President Barack Obama said he would sign the bill into law, but he did not say when. After the vote, he flew to Hawaii to rejoin his wife and daughters on their winter vacation.

Congress is planning to send the bill to the White House by early afternoon, a Republican leadership aide told CNN.

In practical terms, there's no urgency on the president's signature. It's up to the Obama administration to implement the budget and tax changes, and since the president has said he will sign the measure, the administration can begin planning for the changes immediately.

Had the House not acted, and the Bush-era tax cuts expired fully, broad tax increases would have kicked in. In addition, $110 billion in automatic cuts to domestic and military spending would have taken place.

The combined effect could have dampened economic growth by 0.5%, possibly tipping the U.S. economy back into a recession and driving unemployment from its current 7.7% back over 9%, according to economists' estimates.

While the package provides some short-term certainty, it leaves a range of big issues unaddressed.

It doesn't mention the $16.4 trillion debt ceiling that the United States reached Monday.

iReport: What's your message for Washington?

Come late February, Congress will have to tackle both the debt ceiling and the postponed sequester -- a legacy of the last battle over the debt ceiling, in 2011.

Obama warned Congress that he will not tolerate another act of prolonged brinksmanship.

"While I will negotiate over many things, I will not have another debate with this Congress over whether or not they should pay the bills that they've already racked up through the laws that they've passed," he said after the Tuesday night vote.

"We can't not pay bills that we've already incurred. If Congress refuses to give the United States government the ability to pay these bills in time, the consequences for the entire global economy would be catastrophic -- far worse than the impact of the fiscal cliff."

How they voted: House | Senate

A partial victory

While the deal gives Obama bragging rights for raising taxes on the wealthiest Americans, it also leaves him breaking a promise.

Obama had vowed to raise tax rates for the top-earning 2% of Americans, including those with household income above $250,000 and individuals earning more than $200,000.

Raising the threshold for higher tax rates shrinks the number of Americans affected. While nearly 2% of filers have adjusted gross incomes over $250,000, only 0.6% have incomes above $500,000, according to the Tax Policy Center. By comparison, Census Bureau figures put the median U.S. household income at just over $50,000.

Some House Republicans weren't exactly overjoyed in voting for the plan.

Opinion: Look beyond the fiscal cliff

"I'm a very reluctant yes," said Rep. Nan Hayworth, an outgoing Republican representative from New York.

"This is the best we can do, given the Senate and the White House sentiment at this point in time, and it is at least a partial victory for the American people," she said. "I'll take that at this point."

Conservative lobbyist Grover Norquist, whose Americans for Tax Reform pushes candidates to sign a pledge never to raise taxes, said the plan preserves most of the Bush tax cuts and won't violate his group's beliefs.

"The Bush tax cuts lapsed at midnight last night," Norquist tweeted Tuesday. "Every (Republican) voting for Senate bill is cutting taxes and keeping his/her pledge."

The timing of the vote was crucial, as a new Congress is set to be sworn in Thursday. And without a breakthrough, the entire process would have had to start over.

Cliff deal spurs global market rally

Specifics of the plan

The legislation will raise roughly $600 billion in new revenues over 10 years, according to various estimates.

According to the deal:

-- The tax rate for individuals making more than $400,000 and couples making more than $450,000 will rise from the current 35% to the Clinton-era rate of 39.6%.

-- Itemized deductions will be capped for individuals making $250,000 and for married couples making $300,000.

-- Taxes on inherited estates will go up to 40% from 35%.

-- Unemployment insurance will be extended for a year for 2 million people.

-- The alternative minimum tax, a perennial issue, will be permanently adjusted for inflation.

-- Child care, tuition and research and development tax credits will be renewed.

-- The "Doc Fix" -- reimbursements for doctors who take Medicare patients -- will continue, but it won't be paid for out of the Obama administration's signature health care law.

The Democratic-led Senate overwhelmingly approved the bill early Tuesday before passing it to the House.

As news about the fiscal cliff's deflection spread across the world, several markets reacted positively Wednesday.

Australia's ASX All Ordinaries index added 1.2%. South Korea's KOSPI gained 1.5%, and the Hang Seng in Hong Kong advanced 1.9%. Tokyo's Nikkei and the Shanghai Composite remain closed for holiday celebrations but will reopen later in the week.

More fiscal cliffs loom

Payroll taxes still set to go up

Despite the last-minute fiscal cliff agreements, Americans are still likely to see their paychecks shrink somewhat because of a separate battle over payroll taxes.

The government temporarily lowered the payroll tax rate in 2011 from 6.2% to 4.2% to put more money in the pockets of Americans. That adjustment, which has cost about $120 billion each year, expired Monday.

Now, Americans earning $30,000 a year will take home $50 less per month. Those earning $113,700 will lose $189.50 a month.

Opinion: Cliff deal hollow victory for American people

With the latest battle round over, lawmakers will next set their sights on the other items on their docket of congressional squabbles over money: the debt ceiling and resolving the sequester.

Obama said he hopes leaders in Washington this year will focus on "seeing if we can put a package like this together with a little bit less drama, a little less brinksmanship (and) not scare the heck out of folks quite as much."

He thanked bipartisan House and Senate leaders for finally reaching a resolution Tuesday, but said Congress' work this year is just beginning.

"I hope that everybody now gets at least a day off I guess, or a few days off, so that people can refresh themselves, because we're going to have a lot of work to do in 2013."

Read more: 5 things to know about the fiscal cliff

Angry rhetoric flew

In the tense days leading up to the deal, heated words flew between some Democrats and Republicans.

On Friday, after Democratic Senate Majority Leader Harry Reid accused Boehner of holding a "dictatorship" in his chamber, the House speaker responded with a profanity.

"Go f— yourself," Boehner said to Reid, according to a source with knowledge of the exchange in a White House lobby.

Big issues still pending

CNN's Dana Bash, Rich Barbieri, Charles Riley, Dana Ford, Matt Smith, Jessica Yellin, Deirdre Walsh and Ted Barrett contributed to this report.

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Sandy Hook survivors welcomed at new school

A man waves to a child on a bus on the first day of classes after the holiday break, in Newtown, Conn.,Wednesday, Jan. 2, 2013. / AP Photo/Jessica Hill

Updated 1:21 p.m. ET

MONROE, Conn. The children who escaped last month's shooting at Sandy Hook Elementary School in Newtown were welcomed Wednesday to a school in a neighboring town that was overhauled specially for them.

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Orientation day for Sandy Hook students

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Heroism of Sandy Hook teachers

The open house at the former Chalk Hill School in Monroe marks the students' first time in a formal classroom setting since the massacre on Dec. 14, when a gunman killed 20 of their fellow classmates and six educators. Classes are starting for the Sandy Hook students on Thursday.

The road leading to the school in a rural, largely residential neighborhood was lined with signs greeting the students, saying "Welcome Sandy Hook Elementary School" and "Welcome. You are in our prayers." Several police cars were parked outside the school.

Teams of workers, many of them volunteers, prepared the former Chalk Hill middle school with fresh paint and new furniture and even raised bathroom floors so the smaller elementary school students can reach the toilets. The students' desks, backpacks and other belongings that were left behind following the shooting were taken to the new school to make them feel at home. Superintendent Janet Robinson said the rooms may not look exactly the same, but the school has been renamed Sandy Hook Elemntary.

Monroe police officers said at a press conference Wednesday it was "the safest school" in the country.

Counselors say it's important for children to get back to a normal routine and for teachers and parents to offer sensitive reassurances.

When classes start on Thursday, Robinson said teachers will try to make it as normal a school day as possible for the children.

"We want to get back to teaching and learning," she said. "We will obviously take time out from the academics for any conversations that need to take place, and there will be a lot of support there. All in all, we want the kids to reconnect with their friends and classroom teachers, and I think that's going to be the healthiest thing."

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Lawmakers Furious at Boehner Over Sandy 'Betrayal'

Republican lawmakers from New York and New Jersey whose storm-ravaged residents are desperate for federal aid are fuming at their party's leaders for refusing to hold a vote on a $60 billion disaster relief package despite promises that help was on the way.

"This was a betrayal," Rep. Michael Grimm, R-N.Y., told ABC News.com. "It's just reprehensible. It's an indefensible error in judgment not have given relief to these people that are so devastated."

New Jersey Gov. Chris Christie, a Republican, called it a "dereliction of duty" in a joint statement with New York Gov. Andrew Cuomo, a Democrat.

"This failure to come to the aid of Americans following a severe and devastating natural disaster is unprecedented," the governors said.

Lawmakers were told by Speaker John Boehner, R-Ohio, that the relief bill would get a vote on Tuesday night following an eleventh hour vote on the fiscal cliff bill. But in an unexpected switch, Boehner refused to put the relief bill to a vote, leading to lawmakers from parties yelling on the floor of the House.

Congress historically has responded to natural disasters by promptly funding relief efforts. The Senate already passed its version of the bill that would replenish an emergency fund set to run out of cash next week and which will help repair subways and tunnels in New York City and rebuild parts of the New Jersey shore devastated by superstorm Sandy.

Time is particularly pressing, given that a new Congress will be sworn in Thursday. The Senate will therefore have to vote on the bill again before it comes to the House, which could be as late as February or March.

Boos as House Adjourns Without Hurricane Sandy Relief Watch Video

'Fiscal Cliff' Deal Passes House Despite GOP Holdouts Watch Video

Rep. Peter King, R- N.Y., took the floor of the House and to the airwaves and aimed his outrage squarely at Boehner, accusing him plunging "a cruel knife in the back" of storm-ravaged residents "who don't have shelter, don't have food," he said during a House session this morning.

"This is not the United States. This should not be the Republican Party. This shouldn't not be the Republican leadership," King said on the floor of the House.

He made no attempt to hide his anger, suggesting that residents in New York and New Jersey should stop sending money to Republicans and even questioning aloud whether he could remain a member of the party.

"Anyone who donates one cent to the Republican Congressional Campaign Committee should have their head examined," King, a staunch conservative and Republican congressman for 10 years, told CNN.

"They have written off New York and New Jersey. They've written me off…. Party loyalty, I'm over that. When your people are literally freezing in the winter… Then why should I help the Republican Party?" he added.

He said that Boehner refused to talk to Republican members from New York and New Jersey when they tried to ask him about the vote Tuesday night.

"He just decided to sneak off in the dark of night," King said.

Democrats were also outraged.

"It is truly heartless that the House will not even allow the Sandy bill to come to the floor for a vote, and Speaker Boehner should reconsider his ill advised decision," Sen. Chuck Schumer, D- N.Y., said in a statement.

October's storm was the worst natural disaster ever to hit the region, causing billions in damage and leaving 120 people dead.

More than 130,000 people are expected to make claims to the federal government, but without a funding increase only about 12,000 people can be covered with existing funds.

"It doesn't make sense they wouldn't vote on this. There are truly people in need," said Steve Greenberg, whose home was flooded and damaged by fire in the hard-hit Breezy Point section of Queens. "Not of these people are fit to serve," he said.

Grimm said Boehner's decision fuels a perception that the Republican Party does not care about people.

"It buys into the ideology that Republicans don't care and are callous," he said. Grimm said there were enough votes to get the bill passed and that it makes fiscal sense, because the money would go to help spur small businesses.

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Humble coin toss thrust to heart of multiverse debate

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60 dead in New Year's stampede in Ivory Coast

ABIDJAN: At least 60 people died and dozens more were injured in Abidjan as crowds that had gathered for celebratory New Year's fireworks stampeded overnight, Ivory Coast rescue workers said on Tuesday.

An AFP journalist saw many injured children, while images broadcast by RTI television showed bodies stretched lifeless on the ground outside the city's main stadium.

Piles of abandoned shoes and clothing could also be seen at the stadium, where soldiers and police were deployed, along with UN peacekeepers.

"This is a real tragedy on this New Year's Day," President Alassane Ouattara said at the scene.

"We are all in shock," he added, saying a period of national mourning would be held.

The government said 60 people had died, with an average age of 18. Earlier, the head of military rescue workers, Lieutenant Colonel Issa Sako, told journalists that 61 had died.

"Forty-nine wounded were evacuated" by rescue workers, Sako said, adding that other injured victims had gone to hospital on their own. Another rescue official said at least 200 people had been wounded in all.

Sako said the flow of people at the stadium had caused a "very large crush" and that "in the crush, people were walked over and suffocated by the crowd".

Officials said around 50,000 people had gathered for the fireworks.

Witnesses said the stampede had broken out after the fireworks ended, though the cause remains unclear. It erupted near the stadium's main entrance, where security had set up tree trunks as crowd control barriers.

According to a police source, the crush occurred when two streams of spectators going in opposite directions crossed paths.

A security source added that rescue services "took some time to arrive".

Interior Minister Hamed Bakayoko said the "exact circumstances" of the tragedy are "under investigation by the security services".

Visibly shaken children were among the roughly 40 wounded taken to a hospital in the wealthy neighbourhood of Cocody, in the north of the economic capital.

A mother named Zeinab who had taken two of her children to the stadium found one of them in the hospital, a small boy who lay on a bed in a groggy state.

Zeinab said she "hurt all over" and showed a journalist the scratches on her body.

"I don't know what happened but I found myself lying on the ground with people stepping on me, pulling my hair or tearing my clothes," she said.

She said she had been knocked unconscious and that a young man had pulled her from the crowd.

The New Year's fireworks, the city's second in two years, had been touted as a symbol of national renewal under Ouattara after a violent post-election crisis that tore the country apart from December 2010 to April 2011, killing some 3,000 people.

The unrest began after Ouattara's long-time rival and former iron-fisted ruler Laurent Gbagbo refused to step down.

He was later arrested by forces loyal to Ouattara, with UN and French military backing, and transferred to the International Criminal Court in The Hague, where he is accused of crimes against humanity.

Though the troubled west African nation -- the world's top cocoa producer -- is still recovering from the political and military crisis, Ouattara had struck a note of optimism in a New Year's message on Monday evening.

He said the former French colony had "possibilities like seldom before" ahead of it, promising it would soon reap the rewards of economic growth and development.

- AFP/jc

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It's all up to the House

STORY HIGHLIGHTS

• If it's not done by noon Thursday, a new Congress will have to start from scratch


• A statement from House leadership made no promises, members meet to review proposal


• Under the Senate package, taxes would stay the same for all but a sliver of the U.S. population


• It leaves a range of big issues unaddressed

With the fiscal cliff deal in limbo, what's your New Year's message to Washington? Go to CNN iReport to share your video.

(CNN) -- If a Senate deal to avert the fiscal cliff becomes law, all but a sliver of the U.S. population will avoid higher tax rates, some key issues will be put off for two months, and all sides in the battle will emerge with a mixed record: winning key points, while ceding ground on others.

The deal, which passed the Democratic-controlled Senate in an overwhelming 89-8 vote in the early hours of Tuesday, would maintain tax cuts for individuals earning less than $400,000 and couples earning less than $450,000. Technically, it would reinstate cuts that expired at midnight.

It would raise tax rates for those over those levels -- marking the first time in two decades the rates jump for the wealthiest Americans.

Blog: Latest updates

The bill faces an uncertain future in the Republican-controlled House where GOP members gathered Tuesday afternoon.

"The purpose of this meeting is to review what the Senate has passed, discuss potential options, and seek member feedback. No decision on the path forward is expected before another member meeting that will be held later today," one GOP leadership aide said.

Vice President Joe Biden, meanwhile, met with House Democrats. A longtime senator, he helped broker the Senate deal.

The House faces a deadline. On Thursday at noon, a new Congress will be sworn in. A bill passed by the previous Senate would no longer apply, so both chambers would have to start from scratch.

Some Republican lawmakers, including Reps. Phil Gingrey of Georgia and Tim Huelskamp of Kansas, told CNN they would not support the bill as written.

"It's taxing, and still taxing, small businessmen and women, and I don't like that at all," Gingrey said, referring to some small business owners who would be among those whose tax rates rise.

It's the opposite argument of some Democrats who oppose the bill. Sen. Tom Harkin, D-Iowa, complained that the deal "makes tax benefits for high-income earners permanent, while tax benefits designed to help those of modest means and the middle class are only extended for five years."

The bill temporarily extends certain tax breaks, such as the one for college tuition, while making new tax rates permanent.

Read more: 5 things to know about the fiscal cliff

While the deal gives President Barack Obama bragging rights for raising taxes on the wealthiest Americans, it also leaves him breaking a promise.

Obama had vowed to raise tax rates for the top-earning 2% of Americans, including those with household income above $250,000, and individuals earning more than $200,000.

"What I'm not going to do is to extend Bush tax cuts for the wealthiest 2% that we can't afford and, according to economists, will have the least positive impact on our economy," the president said at a news conference in November, after being asked by CNN why Americans should believe he would not "cave again this time" by allowing those Bush-era tax cuts to be extended.

When asked whether closing loopholes instead of raising rates would be satisfactory, the president responded, "when it comes to the top 2%, what I'm not going to do is to extend further a tax cut for folks who don't need it, which would cost close to a trillion dollars. And it's very difficult to see how you make up that trillion dollars, if we're serious about deficit reduction, just by closing loopholes in deductions. You know, the math tends not to work."

The deal passed by the Senate would cap itemized deductions for individuals making $250,000 and for married couples making $300,000.

Raising the threshold for higher tax rates to $400,000 shrinks the number of Americans affected. While nearly 2% of filers have adjusted gross incomes over $250,000, only 0.6% have incomes above $500,000, according to the Tax Policy Center.

Going over the fiscal cliff: Messages to Washington

Still, in a written statement early Tuesday, the president held on to the 98% figure he has so often touted.

The deal "protects 98% of Americans and 97% of small business owners from a middle class tax hike," he 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."

The president also acknowledged, "There's more work to do to reduce our deficits, and I'm willing to do it. 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."

However, many Americans are still likely to see their paychecks shrink somewhat, due to a separate battle over payroll taxes.

Senate vote 'sends a strong message'

"Glad it's over," said Senate Majority Leader Harry Reid, D-Nevada, after the vote on the fiscal cliff deal, just a couple of hours after the East Coast rang in the new year. "We'll see if the Republicans in the House can become functional instead of dysfunctional."

A statement from House leadership made no promises.

"Decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members -- and the American people -- have been able to review the legislation," the statement said.

Sen. John Hoeven, R-North Dakota, was hopeful the House will follow suit.

"The vote was 89 to 8. Bipartisan vote. 89 votes," he said. "I think it sends a strong message and I think it will be approved by the House."

What the package proposes

Read the bill (pdf)

Under the Senate package:

-- Taxes would stay the same for most Americans. But they will increase for individuals making more than $400,000 and couples making more than $450,000. For them, it will go from the current 35% to the Clinton-era rate of 39.6%.

-- Itemized deductions would be capped for those making $250,000 and for married couples making $300,000.

-- Taxes on inherited estates will go up to 40% from 35%.

-- Unemployment insurance would be extended for a year for 2 million people.

-- The alternative minimum tax -- a perennial issue -- would be permanently adjusted for inflation.

-- Child care, tuition and research and development tax credits would be renewed.

-- The "Doc Fix" -- reimbursements for doctors who take Medicare patients -- will continue, but it won't be paid for out of the Obama administration's signature health care law.

-- A spike in milk prices will be avoided. Agriculture Secretary Tom Vilsack said milk prices would have doubled to $7 a gallon because a separate agriculture bill had expired.

What's not addressed

While the package provides some short-term certainty, it leaves a range of big issues unaddressed.

It doesn't mention the debt ceiling, and temporarily puts off for two months the so-called sequester -- a series of automatic cuts in federal spending that would have taken effect Wednesday. It would have reduced the budgets of most agencies and programs by 8% to 10%.

This means that, come late February, Congress will have to tackle both those thorny issues.

"We're going to have to deal with the sequester, that's true," said Sen. Max Baucus, D-Montana, "but look, this is better than nothing."

Read more: 3 more fiscal cliffs loom

Reid said the agreement was a win for average Americans.

"I've said all along that our most important priority was to protect the middle class families," he said. "This legislation does that."

And maybe a bit more.

According to the U.S. Census Bureau, median household income in 2011 was $50,054, which is well below the tax cut threshold approved by the Senate.

Senate Minority Leader Mitch McConnell, R-Kentucky, praised the effort, but said it shouldn't have taken so long to get an agreement.

"We don't think taxes should be going up on anyone but we all knew that if we did nothing they would be going up on everyone today," he said. "We weren't going to let that happen."

If the bill doesn't pass

There's a lot at stake.

If the House doesn't act and the Bush administration's 2001 and 2003 tax cuts expire, broad tax increases will kick in, as will $110 billion in automatic cuts to domestic and military spending.

The nonpartisan Congressional Budget Office has predicted the combined effect could dampen economic growth by 0.5%, possibly tipping the U.S. economy back into a recession and driving unemployment from its current 7.7% back over 9%.

But if tax-averse House Republicans approve the bill Tuesday -- when taxes have technically gone up -- they can argue they've voted for a tax cut to bring rates back down, even after just a few hours. That could bring some more Republicans on board, one GOP source said.

But Gingrey, speaking Tuesday to CNN, said he does not believe his constituents will see it that way.

He's concerned they will see it as "just more smoke and mirrors, and Congress pulls these stunts all the time," Gingrey said. "Putting off the sequester for two months, kicking that can down the road yet again... this bill, as I see it so far, looks like it's all about raising revenue, but very little, if anything, about cutting spending."

Concerns persist

Read more: What if there's no deal on fiscal cliff

The White House budget office noted in September that sequestration was designed during the 2011 standoff over raising the federal debt ceiling as "a mechanism to force Congress to act on further deficit reduction" -- a kind of doomsday device that was never meant to be triggered. But Congress failed to substitute other cuts by the end of 2012, forcing the government to wield what the budget office called "a blunt and indiscriminate instrument."

In its place, the Senate plan would use $12 billion in new tax revenue to replace half the expected deficit reduction from the sequester and leave another $12 billion in spending cuts, split half-and-half between defense and domestic programs.

Read more: Medicare patients may suffer if country goes over fiscal cliff

Conservative lobbyist Grover Norquist, whose Americans for Tax Reform group pushes candidates to sign a pledge never to raise taxes, said the plan "right now, as explained" would preserve most of the Bush tax cuts and wouldn't violate his group's pledge.

"Take the 84% of your winnings off the table," Norquist told CNN. "We spent 12 years getting the Democrats to cede those tax cuts to the American people. Take them off the table. Then we go back and argue about making the tax cuts permanent for everyone."

But Robert Reich, who served as labor secretary in the Clinton administration, said the $450,000 threshold "means the lion's share of the burden of deficit reduction falls on the middle class, either in terms of higher taxes down the road or fewer government services." In addition, he said, the plan does nothing to raise the federal debt ceiling just as the federal government bumps up against its borrowing limit.

And that, Arizona GOP Sen. John McCain told CNN, is likely to be "a whole new field of battle."

"We just added 2.1 trillion in the last increase in the debt ceiling, and spending continues to go up," McCain said. "I think there's going to be a pretty big showdown the next time around when we go to the debt limit."

Read more: Fiscal cliff's new definition of rich

CNN's Matt Smith, Mike Pearson, Jessica Yellin, Dana Bash, Deirdre Walsh, Lisa Desjardins, Ted Barrett and Ashley Killough contributed to this report.

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The art of the "fiscal cliff" deal

Nobody said it would be easy.

Senators voted in the pre-dawn hours of New Year's Day to pass the long-sought agreement on the "fiscal cliff" and the House readies for its turn as soon as today, which, if the House passes it, would officially avert the tax hikes and spending cuts that technically took effect at midnight (the deal, when signed by the president, will make the new tax rates and spending retroactive to midnight).

Play Video

Biden advises not to predict outcome of "cliff" deal

How did the politicians involved get to their final agreement? Here's the rundown, according to officials familiar with the talks and with the White House's thinking:

Friday through Sunday: Senate Minority Leader Mitch McConnell's opening offer Friday night to Senate Majority Leader Harry Reid was a $750,000 income tax threshold and no jobless benefits and no extension of the earned-income tax credit and other low-income tax breaks, means-testing Medicare, and the Bush era estate tax rates. Offers bounced back and forth Saturday and on Sunday, Reid opted out and handed talks over to Vice President Joe Biden (at McConnell's suggestion). President Obama, Reid and House Minority Leader Nancy Pelosi were in tandem through the talks. Delaying the federal spending cuts, or sequester, fell out of the talks on Sunday but McConnell came down to $550,000 in income tax threshold and some estate tax concessions reflected in the final deal.

Sunday, 8 p.m. ET: Mr. Obama and senior staff met in the Oval Office to discuss their final counter-offer to McConnell. The president set the $400K and $450K income threshold with one-year of jobless benefits and some delay of the sequester. Biden and McConnell talked through the night. Their last call was at 12:45 a.m.

After that, Mr. Obama and Biden met in the Oval until 2 a.m. to go over final details. Mr. Obama sent his legislative liaison Rob Nabors to Capitol Hill at 2 a.m. to begin drafting a bill with Senate Democrats. Biden and McConnell spoke again at 6:45 a.m. The rest of Monday was devoted to resolving the sequester impasse.

Monday, 9 p.m. ET: Biden and McConnell sealed the deal by telephone (Biden spoke to McConnell after clearing final details with Mr. Obama). The president then called Reid and Pelosi for one final OK and the deal was announced/leaked/confirmed.

The officials also pointed out that to get to the final deal, moving Republicans from a position of no tax increases in debt ceiling debate to tax increases through tax reform after Mr. Obama's re-election to nothing more than $1 million in higher rates and now to $400,000 and $450,000 thresholds is a significant policy and political victory (worth $620 billion over 10 years).

When the big deal talks failed before Christmas, Mr. Obama's biggest goal was to get GOP buy-in on higher tax rates for the wealthy. It is regarded as one of the most significant policy victories in two decades, the officials said.

Compromising on the two-month sequester was difficult, the officials added. The White House wanted a full year of waiving the sequester but there was no time to negotiate the difficult policy details (the sequester talks took literally all of Monday).

As for the deal's effect on the deficit, it does not cut the deficit relative to what would have occurred if all the fiscal cliff tax cuts had been erased (meaning all Bush tax cuts expired) and the sequester kicked in full force. But, relative to a baseline that assumes all existing tax policy would have continued, the deal raises $620 billion in revenue. The Alternative Minimum Tax (AMT) fix is not counted by the WH, for example, because its extension was assumed in the existing policy baseline (that doesn't mean it won't cost anything; just that the White House doesn't count the cost).

The jobless benefit extension for one year cost $30 billion and that is not paid for. The Medicare "doc fix" is paid for by savings that will be taken from other provider payouts in Medicare. It costs $31 billion, meaning those provider cuts will pay for protecting doctors from a 27 percent automatic cut in premiums.

And $12 billion in new revenue comes from allowing 401Ks and other retirement instruments into Roth IRAs. This is the revenue that forms half of the offset of the two-month sequester delay. The other $12 billion will come from a 50-50 split of non-defense and defense cuts.

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New School for Sandy Hook Duplicated to the Crayons

The students and staff of Sandy Hook Elementary School will return to school on Thursday for the first time since the shooting rampage that left 20 young students and six adults dead. The students will be in a new building where their old classrooms have been completely recreated.

Instead of returning to the halls of Sandy Hook Elementary School in Newtown, Conn., they will be going to the building that used to be the Chalk Hill Middle School in Monroe, about six miles away.

Sandy Hook school was shut since Adam Lanza carried out his massacre shortly before Christmas.

Since principal Dawn Hochsprung was one of the victims of the shooting, the school will be led by interim principal Donna Page. Page was the school's prior principal who retired in 2010.

"Please know the inspiration you and your children have been to my staff and me as we connect with you at Chalk Hill," Page wrote in a letter posted on the school's website. "Be assured that the towns of Monroe and Newtown are working night and day to ensure the facility is safe, secure, and fully operational for our return," Page wrote.

The school will host a walk-through for families on Wednesday and "Opening Day" will be Thursday.

"I want to reassure you that we understand many parents may need to be near their children on their first day(s) of school and you will be welcome," Page wrote.

Don Emmert/AFP/Getty Images

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The school is encouraging students to take the bus in order to help them return to familiar routines and said parents may come to the school's classrooms or auditorium throughout the day after the 9:07 a.m. opening. They are asking that no more than one adult family member accompany each child in order "to ensure a safe and secure environment."

In addition to a parental presence at the school, comfort dogs will be returning to brighten the day. Small armies of golden retrievers spread out all over Newtown in the days following the shooting to comfort mourners young and old.

Chicago's Lutheran Church Charities' K-9 Parish Comfort Dogs were in Newtown after the shooting and are traveling back to Connecticut today. Nine dogs and their handlers gathered at their building at 1 a.m. this morning to board a caravan of one RV and two vans heading to Connecticut.

"The community of Newtown will be going through the healing process for a very long time," the group wrote on their website. "The LCC K-9 Comfort dogs will be returning to Newtown...They will be there to greet children as they return to school."

The rest of the Newtown school district resumes classes on Wednesday.

Furniture and supplies from Sandy Hook were moved to Chalk Hill in order to recreate the classrooms just as they were.

Teachers photographed their classrooms at Sandy Hook in order to replicate everything about them, from the pictures on the walls to the crayons left on the students' desks. This is all part of an effort to make the students feel as comfortable as possible.

Workers completely retrofitted the former middle school to fit the needs of its young students, including tearing out bathrooms that were made for teenagers and rebuilding them for elementary-aged kids.

New security systems are being installed at Chalk Hill school, and Newtown Councilman Steve Vavrek told ABC News that the school will be "the safest school in America."

For a school that has gone through so much, moving forward does not mean forgetting.

"I want parents and families enduring the loss of their precious children to know their loved ones are foremost in our hearts and minds as we move forward," Page wrote. "Your strength and compassion has been, and will continue to be an inspiration to me and countless others as we work to honor the memory of your precious children and our beloved staff."

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In-depth 2012: The best long reads of the year

Read more: "2013 Smart Guide: 10 ideas that will shape the year"

Dig deeper, look closer and think harder – these are the goals of New Scientist's in-depth articles. Each one is perfect for saving in your favourite read-it-later app and curling up in front of a glowing tablet for a good long read.

These are our editors' picks of our best features of the year, and all are prime examples of the amazing breadth of big ideas that were ripe for the tackling in 2012. When you have finished digesting these readable meals, visit our in-depth articles archive if you're hungry for more.

Richard Webb: "You might not have heard of the algorithm that runs the world." I certainly hadn't, or that its mathematical foundations are starting to look a little wobbly. An eye-opening examination of how seemingly abstruse mathematics is in fact deeply embedded in modern life: "The algorithm that runs the world"

Sally Adee: Gastric bypass surgery is the best surgery you're not getting, said Dr Oz on his popular medical advice show in the US. Because of enthusiasm from people like him, this operation has become massively popular – but by whimsically hacking at our stomach, might we might be messing with a system far more complicated than anyone really understands? Samantha Murphy had the surgery and began to realise that losing 45 kilograms could come with some profound neurological trade-offs: "Change your stomach, change your brain"

Michael Le Page: Nowadays most people either haven't heard of the 1970 book The Limits to Growth, or believe – wrongly – that the research it was based on has been discredited. But the main message of Limits is perhaps more relevant than ever – that a delayed response to mounting environmental problems leads to catastrophe further down the line: "Boom and doom: Revisiting prophecies of collapse"

Richard Fisher: This is a simple story about a scientific mystery. Strange rumbles, whistles and blasts have been reported all over the world for centuries. In New York state, they are called "Seneca guns"; in the Italian Apennines they are described as brontidi, which means thunder-like; in Japan they are yan; and along the coast of Belgium they are called mistpouffers – or fog belches. Yet the cause is often unexplained – what on Earth could be behind them? "Mystery booms: The source of a worldwide sonic enigma"

Valerie Jamieson: It's been a sensational year for particle physics, but the Higgs boson isn't the only fascinating particle in town. Meet 11 more particles that change our understanding of the subatomic world: "11 particles for 11 physics puzzles"

David Robson: What is the secret of the legendary "flow state" that seems to mark out genius in everyone from piano virtuosos to tennis champions? With the latest brain stimulation techniques, it may soon be within everyone's reach, and Sally Adee writes with panache as she describes her own use of the technology during a terrifying marksmanship training session. This has everything I want to read in a story – drama, a revolutionary idea and some practical advice for anyone to try at home: "Zap your brain into the zone: Fast track to pure focus"

Graham Lawton: The writer of this article, Christopher Kemp, is a self-confessed lover of marginalia – nooks and crannies of science that are often overlooked. But as this beautifully written story reveals, those nooks and crannies often contain rich and fascinating material. Material, in fact, like ambergris: "Heaven scent: The grey gold from a sperm whale's gut"

Ben Crystall: Many people may remember the wonder material Starlite from an episode of BBC TV's Tomorrow's World – it seemed to have a miraculous ability to withstand fire and heat. So what happened to it? In this feature Richard Fisher uncovers the strange tale of Starlite and its eccentric inventor Maurice Ward, and on the way reveals fascinating details about Ward and his creation. And though Ward is dead, the story may not be over – it now looks like Starlite could get a second chance… "The power of cool: Whatever became of Starlite?"

Clare Wilson: I enjoyed working on this feature the most this year because to me it truly represents the future of medicine. New Scientist often predicts that some new medicine or technology will be available in five years' time. When it comes to using gene therapies or stem cell therapies on babies in the womb – the subject of this feature – the timeline is probably more uncertain, yet I don't see how anyone can doubt that some day it will happen: "Fetal healing: Curing congenital diseases in the womb"

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President Obama says deal in sight to avert fiscal cliff

WASHINGTON: President Barack Obama said on Monday a deal to avert the fiscal cliff budget crisis was in sight, as dramatic New Year's Eve negotiations went down to the wire ahead of a midnight deadline.

"It appears that an agreement to prevent this New Year's tax hike is within sight. It's not done. There are still issues left to resolve, but we're hopeful that Congress can get it done," Obama said at the White House.

The framework of a possible deal to head off automatic tax increases due to kick in with the turn of a year appeared to be in place after through the night negotiations between Democrats and Republicans on Capitol Hill.

But Obama hinted that the proposed pact would not deal with complementary and punishing cuts to government spending also due to take place in the New Year, which he said would have to be dealt with down the line.

The president said the deal would extend tax credits for clean energy firms and also unemployment insurance for two million people which are due to expire later Monday.

"For now, our most immediate priority is to stop taxes going up for middle class families, starting tomorrow. I think that is a modest goal that we can accomplish. Democrats and Republicans in congress have to get this done."

Even if the Democratic-controlled Senate does sign off on a deal Monday, avoiding the cliff could go down to the wire.

The bill must then go to the Republican-held House of Representatives.

The chamber is in session on Monday, but House Speaker John Boehner has struggled to control his party's restive conservatives, many of whom may balk at signing on to any Obama-approved deal that raises taxes.

The key areas of friction are the income threshold at which taxes should rise, Obama's insistence on extending unemployment benefits and Republican demands for increased federal spending cuts.

Reports said that the deal would see taxes rise for families earning more than $450,000 a year. Obama had originally campaigned for the threshold to kick in for those making $250,000 and above.

"There are a number of issues on which the two sides are still apart," Democratic Senate Majority Harry Reid conceded. "Negotiations are continuing as I speak, but we really are running out of time."

Days of last-gasp talks have produced no deal between US political leaders struggling for a compromise to head off a fiscal crisis that could roil global markets and plunge the United States back into a punishing recession.

Republicans have dropped their demand for a new way of calculating inflation that would have cut the level of benefits for Social Security recipients.

But they were reportedly maintaining their insistence that estate inheritance tax rates stay at current levels.

The two sides remained bitterly at odds over the $109 billion in automatic spending cuts set to hit the Pentagon as well as other federal agencies beginning in early January.

Democrats said they were pushing for a delay of the cuts, known as the "sequester," for about two years, while some Republicans, including Senator Roy Blunt, said it was inconceivable to allow a delay without imposing more targeted offsets to pay for such a postponement.

Don Stewart, McConnell's spokesman, said in a statement on Monday that the Republican leader and Biden had talked long into the night to try to hammer out a deal.

Democratic congressman Chris Van Hollen said there was better than a 50-50 chance of a pre-midnight agreement, but his Republican rivals were a question mark.

"One big question of course is whether an agreement put together by the senators on a bipartisan basis, whether that can pass the House of Representatives," he told CNN.

Republicans largely oppose raising taxes on anyone.

There may be a push by conservatives to let the economy slide off the cliff so that taxes rise on all Americans, only for lawmakers to quickly turn around and vote for a tax cut on the middle class.

- AFP/de

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