Taken on its own and without context, the deal isn't that bad. Significant taxes were raised on the wealthy, unemployment benefit extensions were passed, the "milk cliff" was averted, and sundry other positive things were done. There's some ugly stuff in there, too, of course: not enough increase in the capital gains rate, an indexing of the estate tax to inflation, and a continuation of various corporate tax giveaways among the nastiness. But the biggest problem with the final deal is that we're now set up for the debt ceiling fight with no leverage whatsoever against the Republican ideological cult if the President doesn't either take the Constitutional option or mint the $1 trillion platinum coin. As I argued before, little absent going over the cliff completely would have denied the Republicans that leverage, anyway. Still, the thought of this Republican Congress negotiating with Grand Bargain-desperate Obama over the debt ceiling is a terrifying prospect. It's going to take massive progressive mobilization over the next two months to block the worst from happening.
But perhaps the biggest negotiation failure of the day wasn't over the fiscal cliff at all, but over Hurricane Sandy relief. To the shock of decent people the world over, Republicans adjourned the House without even taking up a vote on relief funding for the states hardest hit by the hurricane.
The deal sucks, and is well worse than a deal they could have negotiated in only a few days with a new (more democratic) congress, and all the tax rates resetting. But whether because of his lust of a deal or someone convincing him that there could be genuine economic problems if a deal wasn't reached, Obama chose this path. So the deal sucks, but the deal isn't the worst part of this deal. The most problematic part of the deal is what it sets up in two months:
But Republicans are vowing to channel their anger and disappointment into a new round of brinksmanship near the edge of a new cliff. The bill that passed the House Tuesday night pays down the sequester for only two months. By no coincidence, that’s right around the time when the country’s borrowing authority is expected to be exceeded and the debt ceiling will have to be lifted. A month later, funding for the federal government will also lapse.
Republicans insist they’ll be better positioned to exploit that much steeper and more dangerous cliff to force the White House to swallow deep cuts to federal safety net programs like Medicare, Medicaid, and Social Security.
The White House insists it will not negotiate with Republicans over raising the debt limit. But even if the President sticks to his guns, and even if the debt limit issue gets set aside, there’s still the sequester, and still a very real chance that Republicans will gore a Democratic sacred cow early this year, months after a decisive Democratic victory in November.
Forcing the White House to "swallow" cuts to Medicare and Social Security is a bit rich, considering they are the ones that initially made them a part of this game. And considering that Obama floated serious benefit cuts to social security and Medicare when he had all the leverage, you can bet those will be back on the table for this next deal. And unfortunately for us, failing to pass a debt ceiling increase would send the world economy into a depression, so this is not a made up "fiscal cliff" type crisis, and instead one that needs to be averted.
Obama can claim he "won't negotiate" over the debt ceiling, but taking that type of stance in bargaining requires you to have a viable alternatives to take if Republicans don't pass a clean debt ceiling bill (which they won't). The methods to do this are controversial, but possible. It's in Obama's power to invoke the 14th amendment or mint a platinum coin to pay down the debt. Republicans would most definitely attempt to impeach him for either of those actions, but you should have either of these options in your back pocket and at least let Republicans know you're willing to do either of them if they refuse to pass a clean bill. Obama won't do this, so this makes his threat about being unwilling to negotiate completely pointless and obviously toothless.
So the most likely scenario is another set of negotiations similar to this last round where a "grand bargain" is attempted that would prevent the sequester cuts and raise the debt ceiling. I'm pretty sure this is how this problem gets resolved, the only major question mark would be how big/terrible the deal is for progressives. There could actually be a grand bargain that include all the horrible things those deals include, or it could fall apart and some small deal gets through with made up cuts and minimal other elements. This is probably the best option to hope for, even though it, much like this entire process, is painfully stupid and an abomination of democratic (small d) values.
So in two months, we'll be doing this same game, all over again, except with much realer consequences and probably steeper cuts on the table. Can't wait!