By Kim Dixon and Jeff Mason

WASHINGTON, Dec 31 (Reuters) - The United States was headed

over the 'fiscal cliff' - at least temporarily - at midnight on

Monday as time was running out for lawmakers to back a

last-minute deal between the White House and Senate leaders to

avert severe tax increases and spending cuts.

After months of fruitless argument between Republicans and

Democrats, the White House and Senate reached an agreement that

would delay harsh spending cuts by two months, administration

sources said.

The Senate might hold a rare New Year's Eve vote on the plan

worked out between Biden and Republican Minority Leader Mitch

McConnell, but the House of Representatives is unlikely to get

around to it until Tuesday at the earliest.

That would mean Congress failed to meet its own deadline to

avert t he 'fiscal cliff,' some $600 billion of tax hikes and

spending cuts due to kick in on Tuesday.

The fiscal measures could push the U.S. economy into

recession and roil global financial markets. But the damage

would not be severe if lawmakers can at least finalize a deal in

the coming days.

House approval is unsure as many of the Republicans who

control the chamber complain that President Barack Obama has

shown little interest in cutting government spending to try to

reduce the U.S. budget deficit.

House Republicans are also likely to balk at planned tax

hikes on the wealthy that were part of the agreement negotiated

by Biden.

As New Year's Day approached, members were thankful that

financial markets were closed, giving them a second chance to

return on Tuesday to try to blunt the worst effects of the

fiscal mess.

Despite the New Year's Eve deadline, there is no major

difference whether a law is passed on Monday night, Tuesday or

Wednesday. Legislation can be backdated to Jan. 1, for instance,

said law firm K&L Gates partner Mary Burke Baker, who spent

decades at the Internal Revenue Service.

'This is sort of like twins and one being born before

midnight and one being born after. I think the date that matters

is the day president signs the legislation,' she said.

House Republicans wished each other 'Happy New Year' and

left the Capitol building, but their leaders told them to avoid

too much New Year partying and be available for a vote on Monday

night if needed.

'We were encouraged to stay close to the Capitol and in a

good state of mind,' said Representative Steven LaTourette of

Ohio.

The House was to convene on Tuesday at noon (1700 GMT).

(Additional reporting by Mark Felsenthal, and Rachelle

Younglai; Writing by Alistair Bell and Peter Cooney)

((fred.barbash@thomsonreuters.com)(202 409 4548)(Reuters

Messaging: fred.barbash@thomsonreuters.com))

(For more 'fiscal cliff' coverage, click)

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