Last night, well after most Americans had already celebrated the new year and gone to bed, the Senate finally approved a deal that pulls the nation back from the fiscal cliff. It's not the best deal possible, but it is a far better alternative than the massive, across-the-board tax hikes that otherwise would have gone into effect. The House would be wise to approve it this afternoon.
Despite having nearly two months to settle the matter, Congress and Obama predictably waited until the last minute (or a few hours after it, really) to strike a deal that only offers a partial solution. The agreement more or less resembled what Senate Minority Leader Mitch McConnell had been working on with Vice President Joe Biden.
As disappointing as it is to see the can kicked further down the road with regard to spending cuts, Republicans were right to settle on the most limited deal possible, as we have argued all along. There is no sense in trying to get a grand bargain out of a president who would rather demagogue entitlements than reform them. The abandonment of grand bargain talks was the best thing that could have happened to the negotiation.
The permanency of income tax rates for 99 percent of Americans became the prize, and the cost was a tax increase on individuals and small businesses making $450,000 or more. Also, the so-called "death tax," though not fully eliminated, has much of its sting taken away.
The upper-income tax hikes will not be good for hiring or business investment, but they will hit far fewer Americans than Senate Majority Leader Harry Reid, D-Nev., had wanted. The deal also contains only about one third of the tax hikes Obama originally sought.
Republicans were right to put off as many major issues as they could until they have more leverage. In this negotiation, they really had none because tax rates were set to rise automatically. Stiff resistance would have led to the largest tax increases possible. When the debt ceiling comes up, Republicans stand a far better chance to win spending cuts.
In the end, Republicans showed they could get a better deal by holding out, but not by being totally opposed to compromise. Even as President Obama was taunting his opponents at campaign-style events and further politicizing the negotiation at the eleventh hour, Republicans were serious and smart enough to pull Biden into the talks so that they would have someone they could work with. Making Biden the Democrats' point man was an adroit move by McConnell, and an implicit condemnation of Obama's leadership as well as Reid's.