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 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 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.”

It’s Republicans who are bluffing, said Michael Tomasky in If they weren’t prepared to take us over the fiscal cliff, “a mostly fictional and chimerical precipice” that would probably have just roiled the markets for a few days, does anyone really believe they’re serious about “destroying the world economy and absorbing the political blame for it?” The White House, by contrast, is “well positioned” going into the debt-ceiling fight, said Ezra Klein in Obama has already proposed a round of deficit reduction consisting of a 50-50 split of entitlement cuts and new tax revenues. That’s a plan that “will sound reasonable to most people,” in contrast to the GOP’s typically wild-eyed demand for $1 trillion in unspecified spending cuts and no new revenue.

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Does it sound “reasonable” for Obama to insist that $16.4 trillion in national debt isn’t enough? said Rich Lowry in Our nation is heading for economic collapse, but neither the Democrats—for ideological reasons—nor the Republicans—for political ones—are willing to address the problem. Let’s face it, said Chris Cillizza in The two parties have simply become too bitterly polarized over taxes and spending for the bipartisan action needed to fix the nation’s finances. If the idea of a “grand bargain isn’t dead, it’s darn close.”

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