A plunge into the so-called "fiscal abyss" would have led the United States and the world into a new recession. Hence the agreement in the US Senate by an ample majority — though pending an uncertain ratification in the Republican-dominated House of Representatives — is positive news, though it does not resolve everything. There are still other abysses to be bridged, beginning with those related to budget and debt.
The White House and at least the Senate — and, it was to be expected, the outgoing House of Representatives as well, since the Republicans had more to lose than win — have at the last minute prevented the automatic application of a sharp tax hike and drastic cutbacks in public spending. But the president's grand plans for putting the American economy back on the rails have had to be parked by the wayside. Indeed, the agreement prevents an across-the-board tax hike only by postponing the negotiation on adjustments to public spending for two months.
This time limit suggests that the negotiation will become mixed up with that of a new ceiling on public debt, the US having officially reached the existing ceiling on New Year's Eve. With creative accounting, the administration may gain two months, but not much more, and it should be remembered that in the summer of 2011 the US was already on the brink of defaulting on its payments — generating acute nerves throughout the world economy.
The ongoing impasse reflects grave political dysfunctions in the world's biggest economy, when a Democratic president faces a Congress dominated by the Republicans.
But both parties have worked hard to reach an agreement, to save not only the situation but also their respective faces: the present pinch being the consequence of Bush-era tax cuts, and of a political deal on spending cuts in 2011. The result highlights the negotiating skill of the vice-president, Joe Biden, in his capacity as Senate speaker.
In the present agreement, everyone has had to give a little. Obama has obtained a hike in taxes on the richest bracket — families whose income exceeds $450,000 per year — though he had promised to lower this threshold to almost half. He has also obtained the continuance of some inputs for the neediest among the unemployed, for healthcare and for other social policies.
In about two months, then, the negotiations will begin on spending cuts and on the debt ceiling, to prevent another plunge into a budgetary or debt abyss, which would have dramatic consequences. The Republicans are caught between their desire to reduce budget headings devoted to social programs, and to preserve military ones.
They will be negotiating this with Obama shortly after the inauguration of his second mandate, and with a new Congress that begins today, perhaps less heavily charged with radical-right ideas on the part of the Republicans — who, however, will still be eager to keep up the ideological tug-of-war with the White House in questions of taxation and spending.