WASHINGTON -- Three hours shy of the midnight deadline, the White House and congressional leaders reached a deal to avert the so-called fiscal cliff, several sources confirmed to The Huffington Post.
Under the deal brokered by Vice President Joe Biden and Senate Minority Leader Mitch McConnell (R-Ky.), Congress would permanently extend the Bush income tax cuts at $400,000 and below, keep the estate tax threshold at $5 million and extend unemployment benefits for one year.
It would also temporarily delay the sequester -- i.e., billions of dollars in across-the-board spending cuts -- for another two months. The cost of continuing current spending levels will be paid for through an even mix of tax revenue increases and later spending cuts. Half of those cuts will come from defense spending; half will come from nondefense spending.
The deal includes other tax provisions as well: It extends the child tax credit and the college tuition credit for five years, individual and business tax extenders for two years, and the Medicare "doc fix" for one year. The Alternative Minimum Tax will be permanently fixed. The agreement also extends the farm bill for one year.
Notably, the fiscal package does nothing to address the debt ceiling, which the government just hit Monday. Treasury Secretary Timothy Geithner sent a letter to congressional leaders earlier in the day outlining emergency measures he can take to prevent the government from defaulting on the debt, but those measures will only delay default for a matter of weeks, until right around the time when lawmakers will have to address the sequester again. That sets up another major fiscal fight between the White House and Congress.
The deal still requires buy-in from members of both parties, and Biden was set to meet with Senate Democrats Monday night to try to sell them on the package. That could prove challenging given that key progressive groups, including the AFL-CIO, made it clear earlier Monday that they would oppose any deal that raised the income limit for extending the Bush tax cuts above $250,000.
Still, both Senate Majority Leader Harry Reid (D-Nev.) and House Minority Leader Nancy Pelosi (D-Calif.) gave the deal their blessing Monday night in a phone call with President Barack Obama, sources confirmed.
A Pelosi aide suggested that while the House Democratic leader backs the proposal on the table, she isn't completely wedded to it.
"She's been supportive all along," said the aide. "Though if House Dems have serious problems, that could move her."
Reid spokesman Adam Jentleson said Senate Democrats would have preferred to push off the sequester for longer than two months, but Republicans wouldn't agree to that. The deal on the table is "what we could get," he said.
Jentleson lamented that the sequester and the debt ceiling will now need to be addressed at the same time, in a matter of months. "It's a lot to deal with," he said.
UPDATE: Tuesday, 12:39 a.m. -- Vice President Biden's principal argument to Democrats on Monday night appeared to be that this deal was the best that could be negotiated on a bipartisan basis and that while it might not be popular, it was better than going over the cliff.
Coming out of the meeting with the vice president late Monday night, many Senate Democrats conceded they were displeased with aspects of the deal but agreed with the vice president's larger point.
"The disagreement on this provision and that provision and other provisions are large and wide, but the number of people who believe that we should go over the cliff rather than vote for this is very small," said Sen. Chuck Schumer (D-N.Y.). "It's not that this proposal is regarded as great or is loved in any way, but it's regarded as better than going over the cliff."
Schumer added that Biden essentially argued that going over the cliff "would be devastating," and he "was very persuasive, but he did not have to do much convincing."
Sen. Dianne Feinstein (D-Calif.) sang a similar tune with respect to Biden's message.
"The argument is that this is the best that we could put together at this time on a bipartisan basis," Feinstein told reporters. "We need a bipartisan basis to get this done so that means compromises on both sides."
Some lawmakers sounded more positive notes. Sen. Barbara Boxer (D-Calif.) said the deal was good for both her state and the country.
"My main concern here is keeping this economic recovery going, and I think this package does that," she said.
The House GOP leadership also broke its silence on the deal, although Speaker John Boehner (R-Ohio) stopped short of making any pledges to bring the bill to the House floor if it were to pass in the Senate.
"The House will honor its commitment to consider the Senate agreement if it is passed," read a joint statement issued by Boehner, House Majority Leader Eric Cantor (R-Va.), Majority Whip Kevin McCarthy (R-Calif.) and Republican Conference Chair Cathy McMorris Rodgers (R-Wash.). "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."
UPDATE: Tuesday, 2:24 a.m. -- The Senate overwhelmingly passed the fiscal cliff legislation, 89-8.
Mike McAuliff contributed reporting.