CLIFF DEAL REACHED

And no one thought a deal could be reached before the new year. The Senate voted before dawn on Tuesday—yes, on New Year's Day—to pass a deal that would avert the fiscal cliff. Even rarer than the New Year's Eve vote? The 89–8 final vote tally. The deal prevents automatic tax increases on much of the country, but will put tax hikes in place for the richest Americans—a major concession for Republicans. The House is likely to vote on Tuesday, to avoid any market effects of the breach of the so-called fiscal cliff from happening on Wednesday. The reported dealmaker, Vice President Biden, will reportedly meet with House Democrats Tuesday afternoon to sell the deal.

Read it at The Daily Beast

January 1, 2013 11:35 AM

--------------------------------------------------------

NY TIMES

Under the agreement, tax rates would jump to 39.6 percent from 35 percent for individual incomes over $400,000 and couples over $450,000, while tax deductions and credits would start phasing out on incomes as low as $250,000, a clear victory for President Obama, who ran for re-election vowing to impose taxes on the wealthy.

Democrats also secured a full year’s extension of unemployment insurance without strings attached and without offsetting spending cuts, a $30 billion cost. But the two-percentage point cut to the payroll tax that the president secured in late 2010 lapsed at midnight and will not be renewed. In one final piece of the puzzle, negotiators agreed to put off $110 billion in across-the-board cuts to military and domestic programs for two months while broader deficit-reduction talks continue. Those cuts begin to go into force on Wednesday, and that deadline, too, might be missed before Congress approves the legislation.

 

To secure votes, Senator Harry Reid, the Senate Democratic leader, also told Democrats the legislation would cancel a pending Congressional pay raise — putting opponents in the politically difficult position of supporting a raise — and extend an expiring dairy policy that would have seen the price of milk double in some parts of the country.

 

-----

 

With the legislation now headed to the House, Republicans there signaled that enough of them, in combination with Democrats, could most likely pass the legislation, just weeks after Republicans shot down Mr. Boehner’s proposal to raise taxes only on incomes over $1 million.

----------------------------------------------------

Read it at The Washington Post

January 1, 2013 8:42 AM

Despite the drama of months of negotiations between President Obama and House Speaker John Boehner, it was a day of phone calls between Vice President Joe Biden and Senate Minority Leader Mitch McConnell on Monday that finally resulted in a deal to avert the fiscal cliff. It is the third time that Biden and McConnell have saved the day at the last minute. In 2010, they struck a deal over the expiring Bush-era tax cuts and in August 2011, they came up with a bargain during the showdown over the debt ceiling. One Republican aide said, “It’s a buddy thing. The two of them can do business, they can find solutions together.”

-----------------------------------------------

 

 

MICHAEL TOMASKY, DAILY BEAST
... most liberals were stewing at Barack Obama yesterday for his “capitulation” on tax rates, I confess that I was feeling philosophical about it, and even mildly defensive of him. He is negotiating with madmen, and you can’t negotiate with madmen, because they’re, well, mad. I also spent part of yesterday morning re-reading a little history and reminding myself that rascality like this fiscal-cliff business has been going on since the beginning of the republic. So now I’d like to remind you. It’s always the reactionaries holding up the progressives—and usually, needless to say, it’s been the South holding up the North—and always with the same demagogic and dishonest arguments about a tyrannical central government. We’ll never be rid of these paranoid bloviators, and if no other president could stop them I don’t really see why Obama ought to be able to.

----( Read more at -MICHAEL TOMASKY, DAILY BEAST )-----

So I’m feeling for Obama. A number of presidents have had to deal with this kind of behavior, and most haven’t done it very well. If the House will pass today the deal Obama and Joe Biden worked out last night with the Senate—higher tax rates at $400,000 and up, a higher estate tax rate, an extension of unemployment benefits, and a delay in the sequester—he will have done all right. Liberals who think he should just stand tough because he “holds all the cards” aren’t recognizing two important things.

First, he simply doesn’t hold all the cards. The Republicans control the House, and they have enough to block in the Senate. Where I come from, those are cards, and serious ones. Second, they aren’t remembering that his opponents draw on and are part of this nation’s long and often tragic history of people who represent an obsolescing minority viewpoint but do so all the more tenaciously precisely because they secretly know the viewpoint to be both of those things. We will never be rid of them. Obama is having to cross swords with a particularly intense concentration of the type, and right now, he’s doing alright.

-------------------------------------------------
 

 PAUL KRUGMAN

To make sense of what just happened, we need to ask what is really at stake, and how much difference the budget deal makes in the larger picture.

So, what are the two sides really fighting about? Surely the answer is, the future of the welfare state.
Progressives want to maintain the achievements of the New Deal and the Great Society, and also implement and improve Obamacare so that we become a normal advanced country that guarantees essential health care to all its citizens. The right wants to roll the clock back to 1930, if not to the 19th century.

There are two ways progressives can lose this fight. One is direct defeat on the question of social insurance, with Congress actually voting to privatize and eventually phase out key programs — or with Democratic politicians themselves giving away their political birthright in the name of a Grand Bargain. The other is for conservatives to successfully starve the beast — to drive revenue so low through tax cuts that the social insurance programs can’t be sustained.

The good news for progressives is that danger #1 has been averted, at least so far — and not without a lot of anxiety first. Romney lost, so nothing like the Ryan plan is on the table until President Santorum takes office, or something. Meanwhile, in 2011 Obama was willing to raise the Medicare age, in 2012 to cut Social Security benefits; but luckily the extremists of the right scuttled both deals. There are no cuts in benefits in this deal.

The bad news is that the deal falls short on making up for the revenue lost due to the Bush tax cuts. Here, though, it’s important to put the numbers in perspective. Obama wasn’t going to let all the Bush tax cuts go away in any case; only the high-end cuts were on the table. Getting all of those ended would have yielded something like $800 billion; he actually got around $600 billion. How big a difference does that make?

The bad news is that the deal falls short on making up for the revenue lost due to the Bush tax cuts. Here, though, it’s important to put the numbers in perspective. Obama wasn’t going to let all the Bush tax cuts go away in any case; only the high-end cuts were on the table. Getting all of those ended would have yielded something like $800 billion; he actually got around $600 billion. How big a difference does that make?
Well, the CBO estimates cumulative potential GDP over the next decade at $208 trillion.So the difference between what Obama got and what he arguably should have gotten is around 0.1 percent of potential GDP. That’s not crucial, to say the least.
And on the principle of the thing, you could say that Democrats held their ground on the essentials — no cuts in benefits — while Republicans have just voted for a tax increase for the first time in decades.
So why the bad taste in progressives’ mouths? It has less to do with where Obama ended up than with how he got there. He kept drawing lines in the sand, then erasing them and retreating to a new position. And his evident desire to have a deal before hitting the essentially innocuous fiscal cliff bodes very badly for the confrontation looming in a few weeks over the debt ceiling.
If Obama stands his ground in that confrontation, this deal won’t look bad in retrospect.