Inevitable deal finally gets done
Both sides knew they had to compromise, so they finally did.
Going over the fiscal cliff was never really an option, so it's no surprise that President Barack Obama and congressional Republicans and Democrats finally got together on a compromise agreement on tax hikes.
All it took was the looming Dec. 31 deadline when the Bush tax cuts of 2001 and 2003 would have expired on rich and poor alike and automatic federal spending cuts would start to be implemented. Economists suggested the double-shock would push the country back into recession, and, despite all the saber rattling, no one wanted to run that risk.
Negotiations went past the last minute as rival negotiators angled for the best deal. Finally and predictably, they settled for the best deal they could get.
The bigger question, however, is whether the agreement is good for the country.
Obama won big on the question of spending cuts. He didn't want any, and there aren't many. That can't help but be a problem in the face of a $16 trillion national debt and $1 trillion-plus federal budget deficits. Obama also won on tax increases, but not nearly so much as he wanted.
Obama originally sought $1.6 trillion in tax hikes, with Republican House Speaker John Boehner offering $800 billion. By the time the deal was done, Obama got $600 billion in tax hikes over a 10-year period.
Tax rates will not only increase on big earners ($400,000 for singles and $450,000 for married couples), but also anyone who gets a paycheck. That's because Obama and Congress agreed to allow a 2-percentage-point decrease in payroll taxes to expire Monday, meaning everyone who collects a paycheck will pay more.
Most notable about the agreement is that Obama and Democrats, who had been so vocal in their criticism of the Bush tax cuts, presided over the permanent extension of most of them. Lower tax rates for earned income, dividends and capital gains now are permanently in place, no longer subject to expiration at a certain date, as was the case previously.
Much of the current debate has focused on the politics — more than the substance — of this especially interesting political showdown. Obama has been widely characterized as the winner, and he was, to a considerable degree.
But it's not just hard-core conservatives who don't like the deal because of the lack of spending cuts. Equally unhappy are hard-core liberals who believe Obama gave away far too much on taxes.
There are loose ends in these negotiations. The deal puts off scheduled across-the-board budget cuts — so-called sequestration — for two months while also leaving unresolved the impending issue of an increase in the federal debt ceiling.
Republicans say they'll seek more spending cuts as those issues draw closer. Obama said he'll demand more tax hikes if the GOP wants spending cuts. More fireworks can be expected.
But the big news is the cliff dive that didn't happen. Tension, of course, remains, but that's part and parcel of the legislative process under divided government.