We can all breathe a little easier now that the fiscal cliff has been averted, but we can’t rest on those laurels for much work still remains. In classic Washington style, our political leaders compromised on a few key issues but then punted the harder decisions further down the road.
This week’s fiscal cliff bill involved a deal to raise the top income tax rate on families earning over $450,000 a year -- about 1 percent of households -- and includes about $12 billion in spending cuts.
On the positive side, this scaled down agreement was better than none at all, and Wall Street’s reaction was almost euphoric. The Dow Jones industrial average rose more than 300 points higher on the first trading day of the new year. That certainly bodes well for 2013.
However, the $620 billion in higher taxes over the coming decade barely touches the deficits still expected to be in the $650 billion range by the end of President Obama’s second term.
Nobody is completely happy with the fiscal cliff deal. Democrats say it doesn’t do enough to raise revenue (Obama wanted taxes to go up for families making over $250,000) and Republicans want more cuts to entitlement programs that they say are driving the country deeper into debt.