The budget wars: Who won round one, and what’s next?

Politicians hammered out a deal that postpones any major reckoning, but the drama starts anew in March over the debt ceiling.

Well, that was an anticlimax, said Albert Hunt in Bloomberg.com.For months, the showdown in Washington over the so-called “fiscal cliff” was billed as an epic conflict between competing visions of government. Either the parties would strike a long-term “grand bargain” on taxes and spending, we were told, or massive, automatic tax increases and spending cuts would be triggered, plunging the U.S. back into recession. In the end, though, not much happened. Republicans and Democrats hammered out a “small-bore deal” that postponed any major reckoning once again, and raised a mere $600 billion in new revenue over 10 years by letting the Bush tax cuts expire on the top 2 percent of wage earners—those making more than $400,000 a year ($450,000 for couples). Now the drama starts again. In March, Congress must raise the national borrowing limit—known as the “debt ceiling”—from its current level of $16.4 trillion. Once again, said Paul Krugman in The New York Times, Republicans are trying to blackmail President Obama, insisting that they will not raise the debt limit unless he agrees to massive spending cuts, with not a penny in additional taxes. Their refusal would mean the U.S. government would default on its debt—badly damaging our credit, and perhaps triggering a global recession. If Obama blinks and offers the GOP concessions, his modest victory in the showdown that just ended “could all too easily turn into defeat.”

Republicans did pretty well in the fiscal-cliff deal, said James Capretta in NationalReview.com. Faced with an emboldened president, and the prospect of across-the-board automatic tax hikes from the expiration of all the Bush tax cuts, they somehow achieved “a permanent lowering of the tax burden for the vast majority of American households.” Of the $1.2 trillion Obama was seeking in new revenues, he ended up with only half. Now the GOP needs to hold the line on the debt ceiling, said The Wall Street Journal in an editorial. If Obama won’t agree to significant spending cuts to address our ballooning deficits—he’s already vowed not to negotiate—Republicans, this time, need to be willing to call his bluff. “You can’t take a hostage you aren’t prepared to shoot.”

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