US retreats from fiscal cliff in drama that "scared the heck out of people" AFTER DAYS of brinkmanship between Republican and Democratic politicians, the United States pulled back from the dreaded "fiscal cliff" with a late-night vote that blocked a $600 billion (£370bn) package of spending cuts and tax rises. But as President Obama returned from Washington yesterday to his family's winter holiday in Hawaii, he attacked Congress for "scaring the heck" out the American public, and warned of a looming global economic catastrophe if it stood in the way of his deficit reduction plans. The vote, late on New Year's Day, in the House of Representatives effectively rubber-stamped a bill passed earlier in the Senate that postponed the cuts for two months and renewed lower tax rates for the majority of the population. Without the measures, economists warned, the US would have plunged back into recession with far-reaching consequences for the global economy. For most of the day, the passage of the American Taxpayer Relief Act of 2012 appeared in jeopardy, with many House Republicans opposing the Senate bill. They wanted tougher action over government spending cuts, which they said were essential to reduce the country's national debt of $16.3 trillion, and were critical of the bill's tax increases for those earning more than $400,000 (£246,000) annually. Ultimately, however, 85 Republicans joined the minority Democrats in approving it, fearing they would be blamed for hitting voters with some of the biggest tax rises in US history. "I don't know if playing chicken with the American people at this point is in the best interest of the people," said Pennsylvania Congressman Lou Barletta, who joined House Speaker John Boehner and several other prominent Republican "rebels" in a 257-167 vote. Among those who voted "no" was Virginia Congressman Rob Wittman, who said the bill was "the epitome of what is wrong with Washington - waiting until the very last minute to pass a package negotiated by only a few." He added: "Unfortunately, it does what Congress does best, kicks the can down the road. I could not vote for this bill because it does nothing to reform our long-term spending problems, which are the real drivers of our debt and deficits. Mr Obama, who cut short his winter break last week to lead White House negotiations with the Senate, thanked politicians for agreeing a deal. But he said that the law was "just one step" and warned Congress that much more work lay ahead to avoid another showdown in two months. "As I've demonstrated in the past several weeks, I am very open to compromise," he said. There's further unnecessary spending in government that we can eliminate but we can't simply cut our way to prosperity. Cutting spending has to go hand in hand with further reforms to our tax code. 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. If Congress refuses to give the US government the ability to pay these bills on time, the consequences for the entire global economy would be catastrophic, far worse than the impact of a fiscal cliff. Stock markets reacted warmly to the deal yesterday. New York's Dow Jones index rose 1.7 per cent in morning trading while share prices in London and Europe were up about 2 per cent. China, however, said that while the US fixed the fiscal cliff, it was still staring at a "fiscal abyss" because it chose only short-term measures. State news agency Xinhua said: "The politicians have chosen to kick the can down the road again and again. But as we all know, the can will never disappear. Sometime and somewhere, you might trip over it and fall hard on the ground, or in the US case, into an abyss you can never come out of.