Revelers gather in NY's frigid Times Square on New Year's Eve

1 of 8. National Guardsman John Cebak (R) kisses his fiancee Sonja Babic at the start of the new year in Times Square in New York January 1, 2013.

Credit: Reuters/Keith Bedford

By Peter Rudegeair and Greg Roumeliotis

NEW YORK | Tue Jan 1, 2013 12:43am EST

NEW YORK (Reuters) - Throngs of revelers in and around New York's Times Square bid farewell to 2012 and extended a raucous greeting to 2013 early Tuesday.

The crowd in midtown Manhattan, which police expected to approach 1 million, cheered and counted down the final seconds of 2012 as a large lighted crystal ball descended for the last minute of the old year - a tradition started in 1907.

Thousands cheered as the new year officially began and a blizzard of colorful confetti fell on the famous square. But the cheers - and a spirited crowd rendition of the song "New York, New York" - were quickly drowned out by a fireworks show.

Paul Hannemann, the head of an incident response team at the Texas Forest Service, was in New York to help with the reconstruction efforts in areas hit by Superstorm Sandy.

Even as he spent his first New Year's Eve in Times Square, Hannemann's thoughts were on Washington, D.C., where lawmakers worked late into the night to reach a deal to avoid the so-called fiscal cliff of automatic tax hikes and spending cuts that many economists fear could send the nation back into recession.

"I hope everybody can come together in 2013 so our country can get its finances in order and our economy back in place," Hannemann, 60, said.

In addition to the crowd on hand in Times Square, another billion people were expected to watch on television, city officials said.

People filled pens in the center of Times Square hours before the end of 2012. Police set up barricades to keep away the overflow crowd. Once people entered the police pens, they were not allowed to leave, no alcohol was permitted and there were no restrooms.

At 6 p.m. the ball rose to the top to the top of its 70-foot (21-meter) pole and fireworks went off.

A few minutes earlier, the cheering crowd turned silent when the ceremony released balloons for each of the victims of the December 14 elementary school shooting in Newtown, Connecticut.

Mark Barrigan, a medical software product manager, traveled from Dallas to witness the ball drop live for the first time this year, fulfilling a longtime wish.

"It was one of those bucket list items," Barrigan said, referring to a list of activities people plan to do before they die.

Asked what he was hoping for in the new year, Barrigan replied, "Hopefully they'll make some good decisions in Washington, D.C."

Elsewhere in America, same-sex marriage became legal at 12:01 a.m. in Maryland.

Maryland, Maine and Washington state became the first three U.S. states to approve gay marriage by popular vote on November 6. Nine states and the District of Columbia now have statutes legalizing gay marriage.

FREEZING TEMPERATURES

The temperature in Times Square was predicted to hover just above freezing around midnight, with a possibility of rain or snow flurries, forecasters said.

The revelers came for the people-watching for which Times Square is famous, and to see performers such as Taylor Swift, Psy, Carly Rae Jepsen and Neon Trees.

"For me, 2013 is about leaving everything behind and starting from scratch," said Mara Trevin, a 26-year-old who moved from Buenos Aires to New York last week to start a new life.

"That's my resolution."

The illuminated, crystal-covered ball - some 12 feet in diameter and weighing nearly 12,000 pounds (5,443 kg) - began its descent on schedule at 11:59 a.m. EST, dropping 70 feet in 60 seconds.

One of those crystals was engraved with the name of Dick Clark, the American entertainer who hosted a popular television presentation of the Times Square New Year's celebrations for decades.

He died in April of a heart attack. Clark had suffered a stroke in 2004 that sidelined from the New Year's Eve show for the first time since he launched the annual broadcast in 1972.

But he gamely returned to the program the following year, and had continued to announce the annual countdown to midnight.

As part of the city's New Year's Eve celebration, more than one ton of confetti was to be released from the rooftops of surrounding buildings in Times Square.

The end-of-the-year crowds capped a year in which 52 million people visited New York City, the third straight record-breaking year for tourism, city officials said on Monday.

More than a million additional tourists visited the city in 2012 compared to 2011, a 2.1 percent increase, they said.

The first version of the ball in Times Square descended in 1907 from a flagpole.

(Additional reporting by Joshua Lott; Editing by Daniel Trotta, James B. Kelleher, David Gregorio, M.D. Golan and Eric Walsh)

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Senate leaders work to avoid New Year's "fiscal cliff"

1 of 12. Senate Majority Leader Harry Reid (D-NV) (2nd L) walks with unidentified aides and security to his office at the U.S. Capitol after returning from a meeting with President Barack Obama at the White House in Washington December 28, 2012.

Credit: Reuters/Mary Calvert

By Richard Cowan and Rachelle Younglai

WASHINGTON | Sat Dec 29, 2012 7:22pm EST

WASHINGTON (Reuters) - Congressional negotiators burrowed into their offices on Saturday to see if they could stop the U.S. economy from falling off of a "fiscal cliff" in just three days when the biggest tax increases ever to hit Americans in one shot are scheduled to begin.

Aides to Senate Majority Leader Harry Reid, a Democrat, and Senate Republican leader Mitch McConnell worked through the day on a possible compromise that would set aside $600 billion in tax increases and across-the-board government spending cuts that are set to kick in next week.

A variety of lower taxes are scheduled to expire at the end of Monday, the last day of the year. If allowed to rise, the approximately $500 billion value of the revenue increases would represent a historic hike when taken together.

The combined punch of the tax increases and spending cuts could push the U.S. economy back into recession.

"We're now at the point where, in just a couple days, the law says that every American's tax rates are going up. Every American's paycheck will get a lot smaller. And that would be the wrong thing to do for our economy," President Barack Obama said in his weekly radio and Internet address, which was broadcast on Saturday.

McConnell left the U.S. Capitol after spending seven hours in his office. "We've been trading paper all day and talks continue into the evening," he told reporters on his way out.

A source with knowledge of the talks, speaking on condition of anonymity, said: "We are still very far apart with almost no time left on the clock."

TEMPORARY PATCHES

One congressional aide close to the talks said that most of what was being discussed late on Saturday would provide temporary patches to the "fiscal cliff" dilemma. The negotiations, the aide said, likely could extend into Sunday.

"They continue to go round and round," the aide said of the negotiations, with ideas constantly in flux.

The aide, who asked not to be identified, said negotiators were discussing the possibility of putting off for a few months the $109 billion in automatic spending cuts due to start on Wednesday. Those cuts would be divided equally between military and non-military programs. It is feared that they could cause severe disruptions inside federal agencies if allowed to occur.

Earlier this week, talk of a temporary delay in the spending cuts was met with derision by some congressional aides.

The extension of the low income tax rates first put in place under Republican former President George W. Bush would also be on a temporary basis, probably one year, the aide said.

No deal had been reached on the most difficult question: Democrats' demand that upper-income earners - families making more than $250,000 a year - see their tax rates go up.

Republicans had been opposed to any rate increase, but lately have signaled a willingness to go along with a higher threshold - and a $400,000 figure has been floating around for days.

Under proposals being discussed, top earners could see their income tax rate rise to 39.6 percent, from the current 35 percent, in order to help tame budget deficits.

The aide added that Republicans still had not agreed to Obama's call for extending long-term unemployment benefits, but that they were demanding some spending cuts to be included in a stop-gap deal.

Disagreements over what to do about low estate taxes that are expiring also had not been worked out, the aide said.

Unless Congress acts, the tax is set to jump on Tuesday - the first day of 2013 - to 55 percent with the first $1 million exempted for individuals. Currently, there is a 35 percent tax and a $5 million exemption.

A Senate Republican leadership aide said that it might not be known until sometime on Sunday whether these talks bear fruit. That is when the leaders are expected to brief their rank-and-file members.

The Senate is scheduled to hold a rare Sunday session beginning at 1 p.m. EST (1800 GMT), but it was not clear whether the chamber would have "fiscal cliff" legislation to act upon.

One Democratic aide was pessimistic that McConnell would come up with a counteroffer that Reid would find acceptable. Such a counteroffer would have to be calibrated in a way that also could attract votes from conservative House of Representatives Republicans, many of whom have balked at tax rate increases on anyone.

'HARD TO SEE'

A senior House Republican aide on Saturday voiced pessimism about prospects for a deal.

"It's hard to see Reid agreeing to anything that can get the votes of the majority of the (Republican) majority in the House, thereby allowing a bipartisan accomplishment," the aide said. A "majority of the majority" refers to the 241 Republicans who are in the 435-member House.

The Republican aide placed the blame squarely on Democrats, as many Republican members have done publicly, saying that going off the "fiscal cliff" is a "policy upside" for them. "Higher taxes, devastating defense cuts. The polls tell them they can win the PR (publican relations) war in January. From their perspective, why stop the cliff dive?"

Democrats, in turn, have publicly accused House Speaker John Boehner, the top Republican in Congress, of preferring to put off any tough "fiscal cliff" votes until after a January 3 House election in which he is expected to win another two-year term as speaker.

If McConnell and Reid can manage to reach a deal on inheritance taxes and raising income tax rates on the wealthiest Americans, they likely would throw into the compromise some other "fiscal cliff" solutions.

Those could include extending an array of other expiring tax breaks such as one that encourages companies to conduct research and development. Also, Congress wants to prevent a steep pay-cut in January for doctors who treat elderly patients under the Medicare health insurance program.

Lawmakers also want to prevent middle-class taxpayers from inadvertently creeping into a higher tax bracket, known as the alternative minimum tax, intended for the wealthiest.

If the Reid-McConnell effort fails, Obama has asked the Senate to hold a vote on Monday on a "basic package" that would stop taxes from going up on the middle class and would extend long-term unemployment benefits that are about to expire. If it passes the Senate, its fate would be in the hands of the Republican-controlled House.

(Additional reporting by Thomas Ferraro and Jeff Mason; Editing by Will Dunham)

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