The Republican controlled House approved the deal with a 257-167 vote with bipartisan support an hour before midnight Tuesday after Republican leaders decided not to try and tack on an amendment to the Senate version of the legislation approved around 2 a.m. Tuesday with an overwhelming 89-8 vote.
The package that heads to President Barack's desk for his signature now puts off budget cuts for two months and preserves Bush-era income tax cuts for individuals earning less than $400,000 or couples earning less than $450,000.
Without the compromise deal the fiscal cliff, analysts feared, could spark a new recession with the resulting reduction in consumer spending.
Shortly after the passage of the deal brokered by Vice President Joe Biden, Obama delivered a statement at the White House, saying he will sign the legislation, but made clear the government still needs to take a balanced approach on reducing the deficit.
"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 passed," Obama said, referring to the upcoming debt ceiling debate.
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"I will sign a law that raises taxes on the wealthiest 2 percent of Americans while preventing a middle class tax hike that could have sent the economy back into recession and obviously had a severe impact on families all across America," he said.
The central premise of his campaign for president was to change the tax code that was "too skewed towards the wealthy at the expense of middle class Americans," Obama said.
"Tonight we have done that," he added, thanking the leaders of the House and Senate.
With the deal done, the White House announced Obama will depart late Tuesday to resume his vacation in Hawaii. He left his family on the island last week, putting his vacation on hold and returning to Washington to deal with the fiscal cliff negotiations