The Senate celebrated New Year's Day by overwhelmingly passing a bipartisan bill to extend the Bush tax cuts for all but the wealthiest Americans, in what is being seen in some quarters as a major victory for President Obama. The tax rate for individuals making $400,000 a year, and households earning $450,000, would permanently rise to 39.6 percent, from 35 percent. In addition, certain tax deductions and credits would be eliminated for annual incomes as low as $250,000.

As Steven Sloan and Kelsey Snell at Politico note, the deal, if passed by the House, "would shatter 20 years of Republican orthodoxy on taxes, undercutting a core part of the party identity that had been built around giving no quarter to any tax increase — ever. An eventual vote on this tax package would mark the first time any Republicans have voted en masse on a tax increase since President George H.W. Bush famously recanted on his 'read my lips' promise." (Technically, the Senate voted to extend most existing tax rates, as opposed to positively voting for a rate hike on the wealthy, but in the era of Grover Norquist, the point stands.)

Some liberals have grumbled that Obama squandered his leverage over the GOP by compromising on his campaign pledge to raise tax rates on those earning $250,000 a year. The total amount of revenue that the bill would generate, at $600 billion, is even lower than what House Speaker John Boehner (R-Ohio) initially offered Obama before their talks hit a wall. However, the deal contains other goodies that Democrats love — a one-year extension of unemployment benefits, a five-year extension of tax breaks for low-income Americans, and a two-month delay for $110 billion in spending cuts. In other words, Democrats won new revenue from tax hikes without conceding any cuts to Medicare, Medicaid, or Social Security.

However, the fiscal cliff deal (again, if it is passed by the unpredictable House) sets the stage for a showdown on spending in just a few weeks. The delayed spending cuts — referred to as sequestration — still have to be dealt with. The U.S. is expected to hit the debt ceiling around the same time. And in March, the law funding government operations is set to expire.

Obama has insisted that any deal to avert a trifecta of nastiness — a government shutdown, a default on U.S. debt, and crippling spending cuts — would have to include even more revenue. Republicans disagree. "We've taken care of the revenue side of this debate," said Senate Minority Leader Mitch McConnell (R-Ky.). "Now it's time to get serious about reducing Washington's out-of-control spending. That's a debate the American people want. It's the debate we'll have next. And it's a debate Republicans are ready for."

It's unclear whether Republicans would be willing to hold the economy hostage in order to secure spending cuts to popular entitlement programs. "Plenty of people will point out that, given the last few years of budget fights, relying on House Republicans to act rationally and not do something that looks suicidal is not wise," says Ryan Lizza at The New Yorker. Either way, it's premature for Obama to claim any kind of victory until the dust from that battle has settled. "The major fight at the heart of this whole mess — over the proper scope and role of the safety net of the 21st century, and who will pay for it — remains unresolved," says Greg Sargent at The Washington Post.