(CNN) - Congress entered the final hours of negotiations Monday before the year-end deadline to reach a fiscal cliff agreement and avoid a combination of major tax increases and automatic spending cuts.
After Congressional leaders struck a deal with the White House late Monday night, the Senate approved a version of the bill in the early hours of Tuesday morning. The House reconvenes Tuesday at noon and will review the bill.
Check back here for the latest developments on Capitol Hill as lawmakers hustle to avert a situation that experts say could throw the economy into crisis.
2:30 a.m. ET - President Obama releases a statement on the Senate vote.
"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
"This agreement will also grow the economy and shrink our deficits in a balanced way – by investing in our middle class, and by asking the wealthy to pay a little more.
"What's more, today's agreement builds on previous efforts to reduce our deficits. Last year, I worked with Democrats and Republicans to cut spending by more than $1 trillion. Tonight’s agreement does even more by asking millionaires and billionaires to begin to pay their fair share for the first time in twenty years. As promised, that increase will be immediate, and it will be permanent."
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2:06 a.m. ET - Senate passes the fiscal cliff deal 89-8. Reid says there will be no more votes on Senate floor at the time.
2 a.m. ET - Republican Sens. Marco Rubio of Florida, Mike Bennet of Colorado and Chuck Grassley of Iowa also vote "no," brining the total "nays" to eight.
1:50 a.m. ET - Senators voting "no" so far include: Democratic Sens. Tom Carper of Maryland and Tom Harkin of Iowa, as well as Republican Sens. Mike Lee of Utah, Rand Paul of Kentucky and Richard Shelby of Alabama.
1:48 a.m. ET - CNN's Lisa Desjardins obtains a copy of the bill, titled "American Taxpayer Relief Act."
1:41 a.m. ET - Senators voting now. 60 votes are needed to pass.
1:38 a.m. ET –– Reid: "The vote will start immediately."
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1:35 a.m. ET - McConnell takes the floor.
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12 a.m. ET - With the passing of midnight, the U.S. has technically gone over the fiscal cliff, meaning tax hikes are set to kick in. The Senate is expected to vote on a deal tonight to revert taxes to 2012 levels for individuals making $400,000 and households making $450,000. Those above the threshold will pay the Clinton-era tax rate of 39.6%.
House leaders say they will consider the bill Tuesday if it’s passed by the Senate. The chamber is scheduled to reconvene at noon.
11:58 p.m. ET - CNNMoney's Jeanne Sahadi reports that the IRA just issued new withholding tables for 2013, and those tables assume the 2001 and 2003 tax cuts expire. If Congress enacts legislation to the contrary, the agency said it “will issue new, corresponding tables at that time.”
11:17 p.m. ET - House leadership released a statement saying the House will review the Senate version of the bill, if it's passed, before making any decisions.
"The House will honor its commitment to consider the Senate agreement if it is passed. 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."
Statement is from House Speaker John Boehner (R-OH), Majority Leader Eric Cantor (R-VA), Majority Whip Kevin McCarthy (R-CA), and Republican Conference Chair Cathy McMorris Rodgers (R-WA).
11:14 p.m. ET - From CNN's Dana Bash and Deirdre Walsh: Biden just left Democratic caucus saying he knows better than to predict votes in the Senate and House - but hopes it will go well.
"I feel very very good," he said. "I think we will have a good vote tonight."
11:12 p.m. ET - From CNN's Dan Merica: When asked what the selling point on the fiscal cliff was, Biden exclaimed, "me!"
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11:03 p.m. ET - Sen. Joe Lieberman, an independent who caucuses with Democrats, says the Senate will vote tonight, CNN's Dan Merica reports.
Meanwhile, Democratic Sen. Chuck Schumer of New York says there will be a "very strong vote from our caucus."
"The number of people who believe that we should go over the cliff rather than vote for this is very small," he added.
10:55 p.m. ET - CNN's Dan Merica reports that Sen. Sherrod Brown, another liberal Democrat, is voting "yes."
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10:50 p.m. ET - Democratic Sen. Tom Harkin of Iowa told CNN Senior Congressional Correspondent Dana Bash that he plans to vote "no" on the deal as he emerged from the Democratic caucus. CNN reported earlier that Harkin and other Democrats were unhappy with the raise of the income threshold for tax rates to $450,000.
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10:11 p.m. ET - From CNN's Dan Merica: A Senior Democratic aide said if the Democratic caucus meeting goes well, you could have a vote "pretty shortly after."
"If everybody cooperates, it could go very quickly. Once the caucus breaks up, it could happen in an hour," the source said.
The source said concerns from some liberal Democrats "can be appeased in a number of different ways...(Reid) met with a lot of his caucus members today and heard concerns, support, the full range of feelings."
10:10 p.m. ET - From CNN's Dana Bash and Deirdre Walsh: Democratic Leader Nancy Pelosi released the following statement:
“I understand at the present time, Senate Democrats are meeting with the Vice President. When a final agreement is reached and passed by the Senate, I will present it to the House Democratic Caucus.”
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9:18 p.m. ET - More on the deal from CNN Chief White House Correspondent Jessica Yellin: The deal includes a two-month buy down on the sequester. The delay will be paid for with a mix of revenues and spending cuts at a cost of approximately $24 billion.
Half of it paid will be paid for in revenue and half in spending cuts. Of the spending cuts, it's half defense and half non-defense.
The estate tax limit will remain $5 million in terms of exemption for an invididual but that cap is indexed to inflation so it will increase every year.
"Doc Fix" (payments to doctors with Medicare patients) will not be paid for with Affordable Care Act.
9:10 p.m. ET - A Democratic source said Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi just signed off on a fiscal cliff deal in calls with President Obama, CNN Chief White House Correspondent Jessica Yellin reports.
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9:05 p.m. ET - From CNN Senior Congressional Producer Ted Barrett: Asked if Biden had a deal with Republicans, the vice president said: "Oh, I'll tell you in a minute."
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9:01 p.m. ET - Vice President Joe Biden is pulling up to the Capitol. His motorcade just entered the campus on the Senate side, CNN's Dan Merica reports.
8:53 p.m. ET - A Democratic source said the principals in the fiscal cliff talks have struck a deal, CNN Chief White House Correspondent Jessica Yellin reports.
8:52 p.m. ET - Heritage Action for America, a conservative group, sent an email urging House and Senate members to vote "no" on the deal, calling it a "kick-the-can" approach" and taking issue with a provision that could raise tax rates for those making more than $400,000 per year.
"This kick-the-can approach, necessitated by a president who refuses to stop campaigning and start seriously addressing our nation’s fiscal problems, is not an adequate solution to America’s coming fiscal crisis, which is a result of overspending, not under-taxing. Allowing a tax increase to hit a certain segment of Americans and small businesses is not a solution; when combined with the coming Obamacare tax increases, it all but ensures a weaker economy," the group stated in the email.
8:45 p.m. ET - A Democratic source confirmed that Vice President Joe Biden is headed to Capitol Hill, CNN Senior Congressional Producer Ted Barrett reports. CNN reported earlier that Biden would come to the Capitol when a deal has been reached.
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7:45 p.m. ET - After House leaders decided to adjourn until Tuesday without a fiscal cliff deal, House Majority Whip Kevin McCarthy advised members to stay near the Capitol in case a vote comes up.
It's unusual that members of Congress are in Washington on New Year's Eve; the last time it happened was in 1995. Members generally spend the holiday far away from the halls of the Capitol.
So what are some House lawmakers doing in Washington on the last night of 2012? (And how close are they really staying to the office?)
CNN's Dan Merica caught up with a few members to find out. Read more
7:14 p.m. ET - Richard Trumka, president of the AFL-CIO, tweeted his opposition to the emerging fiscal cliff deal:
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6:34 p.m. ET - The House of Representatives adjourned until Tuesday without voting on any plan to avert the so-called fiscal cliff, but Senate negotiators say they still hope to vote on some proposal Monday night.
6:26 p.m. ET - The "goal is tonight" for a vote in the Senate, a senior Senate Democratic source told CNN Senior Congressional Correspondent Dana Bash.
6:21 p.m. ET - CNNMoney reports: It's official: U.S. debt will reach its legal borrowing limit on Monday, giving Congress about two months before it must raise the debt ceiling or risk causing the government to default on its bills and financial obligations.
6:20 p.m. ET - While a deal hasn't yet been announced, Sens. Jon Kyl and John Cornyn said they “hope” to vote tonight if they work out the remaining issues and score the agreement, CNN Senior Congressional Producer Ted Barrett reports.
“There is an agreement. Basically there’s an agreement. They’re just ironing out some details," McCain said.
“Until Leader Reid and McConnell and the president all circle back and say, yeah, we have signed off on this, it’s not necessarily formalized,” Kyl added.
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6:09 p.m. ET - From CNN's Dan Merica: Sen. Kay Bailey Hutchison said Republican leadership hopes the Senate will vote on a deal Monday night.
"They would like to vote before midnight. That is our hope, our hope," she said on Capitol Hill.
Asked how confident she was that the Senate version of the bill would pass in the House, the senator from Texas said "this is the very best for the most people in America that we can get with a divided Congress and a president that wants to raise taxes."
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5:59 p.m. ET - Chief Justice John Roberts is warning leaders in the other two branches of the federal government that the pending "fiscal cliff" would "inevitably result in the delay or denial of justice for the people the courts serve," CNN Supreme Court Producer Bill Mears reports.
In his annual year-end report on the federal judiciary, Roberts on Monday said the federal courts have already made significant cuts in their funding, representing only about two-tenths of 1% of the entire federal budget. He said a prolonged reduction would be extremely hard to overcome. Read more
5:30 p.m. ET - "I think there's a very good chance there will be a vote tonight. I think they have come to an agreement," Republican Sen. Rand Paul of Kentucky said on CNN's "The Situation Room with Wolf Blitzer."
He said that he's a "likely no" on the vote, saying he's against the idea of raising taxes on anyone and added that the deal will not include enough spending cuts.
"The only thing that I'm hearing that confuses me still is if it's good to protect 99% of people from a policy akin to drowning, then why is it good then to go ahead and throw the 1% overboard," he said. "I don't think you can necessarily punish one segment of the economy and it not have repercussions on the middle class."
4:16 p.m. ET - Stocks rallied Monday, ending a volatile year on a high note, as investors welcomed signs a fiscal cliff deal is taking shape in Washington, CNNMoney's Ben Rooney reports.
On the final day of 2012, the Dow Jones Industrial average rose 1.3%, or more than 167 points. The S&P 500 added 1.7%. The Nasdaq rose 2%, with shares of Apple gaining 4.6%. Read more.
4:14 p.m. ET - Asked by CNN's Wolf Blitzer when the Senate may vote on a potential deal, Sen. John McCain said: "I think that there's hopes that we vote tonight or tomorrow."
McCain also predicted gridlock on another upcoming vote.
"I think there’s going to be a whole new field of battle when the debt ceiling rolls around," he said, referring to the February deadline for the debt ceiling.
4:12 p.m. ET - "I think it shows the dysfunction of the political system," Sen. Lindsey Graham said on CNN's "The Situation Room with Wolf Blitzer," referring to the House's decision to dismiss later this evening before a possible vote on the fiscal cliff.
4:01 p.m. ET - U.S. TO GO OVER THE CLIFF: The House of Representatives will not vote Monday on any potential fiscal cliff deal, meaning the U.S. is technically headed over the fiscal cliff. The House will wrap up Monday around 6:30 p.m. ET. After a House GOP Conference meeting at 5 p.m. ET they will have one vote series and then head out for the evening. .
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3:39 p.m. ET - Sen. Joe Lieberman of Connecticut on the Senate floor: "I suppose it is often true that no deal IS better than a bad deal, but in the case of the fiscal cliff no deal is the worst deal because the government will go over the fiscal cliff and will take almost every American with us. Almost every family that pays taxes now will pay higher taxes. People’s jobs will immediately be put in jeopardy. Unemployment compensation will end for more than two million people. Our defenses will be decimated by cuts that will put us in a position of accepting really unacceptable risks to our security."
3:36 p.m. ET: CNN Pentagon Correspondent Chris Lawrence reports the Defense Department is prepared to inform 800,000 civilian employees that they could face limited furlough in 2013, if there’s no deal to resolve the fiscal cliff, according to a Pentagon official. The official says although the notice would likely be sent to all civilian employees, only a limited number would actually be subject to unpaid leave.
2:51 p.m. ET: Federal workers are bracing for furloughs that could start to take place in the next few months if Congress doesn't replace massive budget cuts scheduled to begin Wednesday. Read more at CNN Money.
2:49 p.m. ET: Senate Minority Leader Mitch McConnell, speaking on the Senate floor, says negotiators are "very, very close" to reaching a deal to avoid the fiscal cliff.
"I can report that we've reached an agreement on all of the tax issues," McConnell said, adding that he agreed with the president's statement Monday in which he called for legislation to protect middle class Americans from a tax hike.
"Let's pass the tax relief portion now. Let's take what's been agreed to and get moving," McConnell said on the Senate floor. "Let me be clear, we'll continue to work on finding smarter ways to cut spending, but let's not let that hold up protecting Americans from the tax hike that will take place in about 10 hours...We can do this. We must do this."
2:21 p.m. ET: Sen. John McCain, R-Arizona, also took to the Senate floor to slam Obama for his remarks Monday afternoon. McCain said the president "made a couple of jokes, laughed about how people are going to be here for New Year's, [and] sent a message of confrontation to the Republicans."
"I guess I have to wonder, and I think the American people have to wonder, whether the president really wants this issue resolved or is it to his short-term political benefit for us to go over the cliff?" McCain asked.
2:18 p.m. ET: MORE on timing of a potential House vote, from CNN's Dana Bash and Deirdre Walsh: House GOP sources told CNN the House is increasingly unlikely to vote on any fiscal cliff package until New Year's Day, after the midnight deadline and after tax rates have technically already gone up.
The reason is partly about process, but the benefit is political.
House GOP sources said the main reason the House is not likely to vote before the deadline is because the deal is not yet done, and it still has to go through the Senate–which takes time.
2:01 p.m. ET - Republican Sen. Bob Corker of Tennessee lambasted the president's remarks, saying on the Senate floor that they were "unbecoming."
"I just listened to the president and my heart is still pounding. I'm very disappointed to hear what the president had to say in front of a pep rally–something very unbecoming of where we are at this moment."
Corker mostly took issue with proposals to use new revenues to pay for the sequester, saying such action was "absolutely unacceptable."
"I know the president has fun heckling Congress," he continued. "I think he lost probably numbers of votes with what he did. He didn't lose mine. I'm not that way. I'm going to look at the substance, but it's unfortunate that he doesn't spend as much time working on solving problems as he did with campaigns and pep rallies. I am very disappointed in what the president had to say."
2:04 p.m. ET - Rep. Darrell Issa, R-California, says on CNN that he's glad that a deal appears close, but that he's disappointed the president "took a swipe at Congress once again" during his afternoon statement.
1:58 p.m. ET: CNN's Dana Bash and Deirdre Walsh report that House sources say it's "unlikely" the House will vote on any fiscal cliff deal Monday. They say it's more likely the lower chamber will vote on any potential deal Tuesday.
1:53 p.m. ET: "At this point, it looks like I'll be spending New Year's here, in D.C.," Obama tells a crowd as Congressional negotiations continue over avoiding the fiscal cliff.
1:52 p.m. ET: Obama says if Republicans think a deficit reduction plan would include cuts to programs that benefit middle income Americans, "they've got another thing coming."
1:50 p.m. ET: Obama says he's "willing to do more" in reducing federal deficit, but that any program would have to be balanced.
1:48 p.m. ET: Obama says he would have preferred a "grand bargain" to cut the federal deficit, but that it was too much to hope for with the current Congress.
1:47 p.m. ET: While some issues remain, Obama says he's "hopeful" a deal will be reached that will not raise taxes on middle income Americans.
1:46 p.m. ET: Obama says it appears an agreement to avoid the fiscal cliff is "within sight"
1:42 p.m. ET: Two minutes to the president's remarks.
1:38 p.m. ET - WATCH LIVE: Obama's remarks will begin any minute. Watch live on CNN/TV or a livestream of the president's remarks here.
1:33 p.m. ET - CNN Senior Congressional Correspondent Dana Bash reports that a Republican source suggests the deal be described as "very close," not "tentative."
What's holding them up? Those close to the negotiations are battling over which cuts to implement in order to replace two months of the sequester. The Republican source says it has come down to finding $24 billion in spending cuts.
"It's like looking under the cushions at this point. If we can't find that at this point we should pack this place up," the source said.
1:30 p.m. ET: CNN's Brianna Keilar reports that President Obama will likely tout Democratic successes in fiscal cliff negotiations during his afternoon statement Monday, according to a person familiar with his message.
1:18 p.m. ET CNN White House Correspondent Brianna Keilar reports that the emerging deal would expire the Bush-era tax cuts for households making $450,000 or more per year or individuals earning at least $400,000 annually. They would start paying the Clinton-era tax rate of 39.6%.
The deal would also cap itemized deductions. The level where this will begin to be phased in is at $300,000 for households and $250,000 for individuals.
The estate tax would increase to 40% from the current rate of 35%, with the threshold remaining at $5 million. It was set to increase to 55% with a threshold of $1 million.
These permanent changes would raise approximately $600 billion in revenue.
Also, there would be some temporary extensions of the following tax credit, (though the duration of the extension is still unclear):
–earned income tax credit
–American opportunity tax credit
–child tax credit
–production tax credit
–research and development tax credit
1:04 p.m. ET - A Senate Republican aide confirmed that Republicans have agreed to a Democratic proposal to raise the income threshold for increased tax rates to $450,000 for households and $400,000 for individuals, CNN Senior Congressional Correspondent Dana Bash reports.
1:01 p.m ET - Sources say no deal has been reached yet and talks are still ongoing, CNN Chief White House Correspondent Jessica Yellin reports.
12:39 p.m. ET - The White House announced that President Barack Obama will deliver remarks about the fiscal cliff at 1:30 p.m. ET in the South Court Auditorium.
12:06 p.m. ET - Some 2.1 million jobless Americans are receiving their last federal unemployment checks this week if Congress doesn't extend the deadline in the fiscal cliff talks to file for extended benefits, CNNMoney's Tami Luhby reports.
And another 1 million who exhaust their state benefits in the first quarter of 2013 will never see a federal unemployment payment, according to the National Employment Law Project, an advocacy group. Read more
12:01 p.m. ET - The fiscal cliff hasn't been reached yet, but it has already affected the nation's economy, according to CNNMoney's Chris Isidore.
Economists say some key aspects of the economy - particularly those affecting consumer and business spending - have been weakened by worries about the fiscal cliff negotiations. But they say the damage is relatively small so far, well short of the new recession that so many feared. Improvements in home and auto sales, as well as job creation, have tempered the decline up to now. Read more
11:30 a.m. ET - Republican negotiators attempting to broker a deal to avoid the year-end fiscal cliff are asking for a three-month delay to the across-the-board spending cuts known as the "sequester," according to a Democratic source.
The source said Democrats are pushing for at least a year delay to the cuts.
Said a second Democratic source: "The emerging deal that creates another cliff in three months can't pass."
11:13 a.m. ET - Sen. Tom Harkin, a veteran Democrat and a leading liberal voice, told CNN Monday that he and other Democrats may try to block the fiscal cliff deal that's being furiously negotiated ahead of the year-end deadline, CNN Senior Congressional Correspondent Dana Bash reports.
"They think Republicans may object? We may object," Harkin told CNN.
The Iowa Democrat said he and other progressives are furious about any suggestion of raising the household income threshold to $450,000 for tax cut extensions. President Barack Obama campaigned on a promise to raise rates on households making more than $250,000 a year.
10:30 a.m. ET - Hours before the fiscal cliff deadline, Sen. Isakson (R-GA) believes a bipartisan agreement on revenue has been reached.
10:25 a.m. ET - Congressional Democrats trying to negotiate a deal to avoid the fiscal cliff have increased the income threshold for tax increases to $450,000, a Democratic source told CNN Senior Congressional Correspondent Dana Bash.
Sen. Dick Durbin, D-Illinois, explained further on Monday that Republicans offered a $450,000 income threshold for individuals and $550,000 for couples – and that Democrats countered with a $360,000 threshold for individuals and $450,000 for couples.
10:14 a.m. ET - Fiscal cliff negotiations between Vice President Joe Biden and Senate Minority Leader Mitch McConnell made significant progress overnight, CNN Chief White House Correspondent Jessica Yellin reports.
The two sides are now closer to a deal than they were Sunday, according to sources close to the process.
The potential agreement includes allowing top tax rates to return to Clinton-era levels, an extension of unemployment insurance and an agreement to increase the estate tax, though there would likely be a compromise to keep it from jumping to pre-bush policy levels, said a source familiar with the negotiations.
The emerging deal would set the top tax bracket at $450,000 for households and $400,000 for individuals.
According to another source, Senate Majority Leader Harry Reid initially proposed a $450,000 income tax threshold to McConnell, a level from which Biden has not moved.
White House staff worked very late Sunday night and early Monday morning on the deal points between the parties, sources told CNN.
McConnell told reporters Monday he last spoke with Biden at 6:30 a.m. He also spoke with the vice president at 12:45 a.m. Monday morning.
8:28 a.m. ET - CNN Radio Congressional Correspondent Lisa Desjardins reports on the main sticking points in fiscal cliff talks, including income tax rates, the estate tax, capital gains tax rates, the Alternative Minimum Tax, unemployment benefits, Medicare doctors, and the sequester.