Now US looks to a fight over cuts

A last-minute deal to avoid the US "fiscal cliff" sent world stocks climbing today but did not solve the massive budget deficit, meaning other battles on deep spending cuts are looming. The Dow Jones industrial average jumped 1.8% as US markets opened. A smiling President Barack Obama said he would sign the law "that raises taxes on the wealthiest 2% of Americans while preventing tax hikes that could have sent the economy back into recession." Then he left for Hawaii to resume his holiday. The deal that squeezed through a sharply divided Congress just hours before most financial markets reopened from the New Year's holiday keeps income taxes from rising on the middle class and the poor, but it puts off major decisions on more than 100 billion dollars in defence and domestic spending cuts. Congress also will have to act as early as February on raising the 16.4 trillion dollar federal borrowing limit, which will allow the country to pay its bills. "If Congress refuses to give the United States 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," Mr Obama said. That...