US President Barack Obama has praised a last minute deal to avoid the fiscal cliff, which could have plunged the economy back into recession.

But the fiscal headache is far from over as talks over spending cuts go on and the US Treasury announced the country has hit its borrowing limit again.

Obama was speaking at a press conference shortly after the House of Representatives passed a Senate-backed bill to stop massive tax rises and spending cuts, by 257 votes to 167.

A day before it had cleared the Senate by a majority of 89 votes to 8.

The 'fiscal cliff' - scheduled tax rises of around $536bn and spending cuts of $109bn - was widely expected to throw the US economy back into recession if politicians couldn't break months of impasse.

But last minute wranglings saw politicians come up with a deal that extended tax cuts for Americans earning under $400,000 - around £246,000.

Republican loss
This was up from the $250,000 level Democrats had originally sought but the agreement was a loss for their Republican rivals who campaigned vigorously against any income tax rises.

The deal will mean over the next 10 years the wealthiest members of US society will suffer a $620bn tax hike.

Other measures included rises in inheritance and capital taxes, while a temporary payroll tax cut will expire, costing workers around $2,000 a year each.

The amount of deductions people can make to lower their tax bills will also be curtailed.

There will be a one-year extension for unemployment benefits, which affects two million people, as well as a five-year extension for tax credits for poorer and middle-class families.

However, spending cuts of $109bn in military and domestic programs were only delayed for two months, so the political battle over them will soon recommence.

Debt ceiling
"I will sign a law that raises taxes on the wealthiest 2% of Americans... while preventing a middle-class tax hike," President Obama told a White House press conference.

He asked for "a little less drama" when politicians meet again to slug it out.

The non-partisan Congressional Budget Office said the new bill would increase budget deficits by nearly $4tr over the coming 10 years, compared to the measures included in the 'fiscal cliff'.

However, President Obama said he would not let the US increase its debt ceiling again in return for a deal on spending cuts.

On December 31st the US Treasury said the country had hit its borrowing limit of $16.394trn.

It has enacted a series of "extraordinary measures" giving politicians around two months to come up with a solution.

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