Mark Wilson- Getty Images

US House of Representatives has passed fiscal cliff bill

POLITICIANS in the United States finally came to an agreement on tax hikes and government spending on Tuesday, avoiding the dreaded "fiscal cliff".

But President Barack Obama, in announcing the deal, said there were still major challenges ahead as the government moves to cut its deficit, rather than simply treading economic water.

"But we can't simply cut our way to tax prosperity," President Obama said.

"We can't not pay bills that we've already incurred."

The deal will avoid the trigger for automatic tax hikes and spending cuts, but the larger problem of the American deficit remains for negotiations next year.

"Hopefully, in the new year we can put a package together like this with a little less drama." President Obama said.


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