The so-called "fiscal cliff" came tonight -- but now there is a specific deal on the table to try to soften it after the fact, according to congressional sources.
Senate Majority Leader Harry Reid, D-Nev., said the deal -- brokered by Vice President Joe Biden and Senate Minority Leader Mitch McConnell -- would get a vote in the Senate sometime after midnight. The House would not vote before Tuesday afternoon at the earliest, sources said.
"I feel really very, very good about this vote," Biden told reporters leaving the meeting with Senate Democrats, "but having been in the Senate for as long as I have there's two things you shouldn't do: You shouldn't predict how the Senate is going to vote before they vote....[and] you surely shouldn't predict about how the House is going to vote."
The proposal would extend Bush-era tax cuts permanently for people making less than $400,000 per year and households making less than $450,000, the sources said.
The steep "sequester" budget cuts scheduled to go into effect with the New Year would be postponed two months, said sources. They said half the money would come from cuts elsewhere, and the other half from new revenue.
The deal also would affect taxes on investment income and estates, and extend unemployment benefits for a year, the congressional sources added.
"The end is in sight," said a Democratic aide with Senate Majority Leader Harry Reid's office. "If everyone cooperates, it's possible things can move pretty quickly."
After the Biden meeting, Sen. Charles Schumer, D-N.Y., said there was "strong" support for the plan among Senate Democrats.
"There is a feeling that it's not that this proposal is regarded as great or as loved in any way, but it's a lot better than going off the cliff," he said.
Sen. Dianne Feinstein, D-Calif., called the compromise the "best" that could be done.
Even with progress in the Senate tonight, the "cliff" deadline will pass without action by the House, where Republican leaders said they would "consider" the deal starting tomorrow.
"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," said House Speaker John Boehner, Majority Leader Eric Cantor, Majority Whip Kevin McCarthy, and Republican Conference Chair Cathy McMorris Rodgers in a statement.
The failure of a deal to pass Congress by Jan. 1 technically triggers an income tax hike on all Americans and automatic spending cuts, though lawmakers could still prevent a tax hike by making retroactive any legislation that passes in the weeks ahead, experts said.
The deal at hand will not entirely solve the problem of the "fiscal cliff," however. In fact, it could set up a new showdown over the same spending cuts in just two months that would be amplified by a brewing fight over how to raise the debt ceiling beyond $16.4 trillion. That new fiscal battle has the potential to eclipse the "fiscal cliff" in short order.
Earlier, during a midday news conference, Obama said he was optimistic about compromise in the short-term.
"It appears that an agreement to prevent this New Year's tax hike is within sight, but it's not done," he said. "There are still issues left to resolve, but we're hopeful that Congress can get it done."
In addition to extending current tax rates for households making $450,000 or less, the latest plan would raise the estate tax from 35 to 40 percent for estates larger than $5 million; and prevent the alternative minimum tax from hammering millions of middle-class workers, according to sources familiar with the talks.
Capital gains taxes would rise to 20 percent from 15, according to a senior White House official.
The deal would also extend for one year unemployment insurance benefits set to expire Tuesday, and avert a steep cut to Medicare payments for doctors, congressional sources said.
"I can report that we've reached an agreement on the all the tax issues," said Senate Minority Leader Mitch McConnell in an afternoon speech on the Senate floor.
At the time, McConnell said that federal spending cuts remained a sticking point. That hurdle later appeared to be cleared by postponing the debate two more months, though it is unclear whether House Republicans will go along.
"In order to get the sequester moved, you're going to have to have real, concrete spending cuts," said Rep. Mike Rogers, R-Mich. Without that, he said, "I don't know how it passes the House."
Some Republicans also said Obama unduly complicated progress toward an agreement by seeming to take a victory lap on taxes at his campaign-style event at the White House.
"Keep in mind that just last month Republicans in Congress said they would never agree to raise tax rates on the wealthiest Americans," Obama said, raising the ire of several Republicans. "Obviously, the agreement that's currently discussed would raise those rates, and raise them permanently."
Those words drew a sharp retort from Republican Sen. John McCain.
Rather than staging a "cheerleading rally," McCain said, the president should have been negotiating the finishing touches of the deal.
"He comes out and calls people together and has a group standing behind him, laughs and jokes and ridicules Republicans. Why?" said McCain.
Several Democrats also voiced disappointment with the president and the emerging deal.