Bigger fights loom after US 'fiscal cliff' deal

President Barack Obama and congressional Republicans face even bigger budget battles in the next two months after a hard-fought "fiscal cliff" deal narrowly averted devastating tax hikes and spending cuts.

The agreement, approved late on Tuesday by the Republican-led House of Representatives, was a victory for Obama, who had won re-election in November on a promise to address budget woes, partly by raising taxes on the wealthiest Americans.

But it set up potentially bruising showdowns over the next two months on spending cuts and an increase in the nation's limit on borrowing. Republicans, angry the fiscal cliff deal did little to curb the federal deficit, promised to use the debt-ceiling debate to win deep spending cuts next time. Republicans believe they will have greater leverage over Democrat Obama when they must consider raising the borrowing

limit in February because failure to close a deal could mean a default on U.S. debt or another downgrade in the U.S. Credit rating. A similar showdown in 2011 led to a credit downgrade.

"Our opportunity here is on the debt ceiling," Republican Senator Pat Toomey of Pennsylvania said on MSNBC. "We Republicans need to be willing to tolerate a temporary, partial government shutdown, which is what that could mean."

But Obama and congressional Democrats may be emboldened by winning the first round of fiscal fights when dozens of House Republicans buckled and voted for major tax hikes for the first time in two decades.

"We believe that passing this legislation greatly strengthens the president's hand in negotiations that come next," House Minority Leader Nancy Pelosi told NBC in an

interview to air on Thursday. Deteriorating relations between leaders in the two parties do not bode well for the more difficult fights ahead. Vice President Joe Biden and Republican Senate leader Mitch McConnell had to step in to work out the final deal as the relationship between House Speaker John Boehner and Obama unraveled.

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