A brief perspective on the cliff deal
So it seems that a deal on the fiscal cliff has been reached, and was approved by a large margin, 89 to 8, in the Senate. The deal basically raises income taxes to pre-Bush tax cuts levels on families making more than $450,000 a year and individuals making $400,000, and raises the estate tax on the biggest inheritances too. Estates of more than $5 million would be taxed at 40%, up from the current 35%. It also does not include any cuts in Social Security or Medicare (the main tactics used for cuts were changing the price index for Social Security adjustments and increasing the age limit for Medicare).
More importantly no spending cuts really, which means the long term unemployed will continue to receive a check every week, and we will not add another drag on a very mild recovery. If no concessions are made on the debt limit in the next two months, a double dip recession this year might be averted. So progressives should be really happy.
The NYTimes editorial is unhappy because "this deal is a weak brew that remains far too generous to the rich and fails to bring in enough revenue to deal with the nation’s deep need for public investments." In all fairness, that's silly. It is true that Dems could have gotten more revenue from tax increases on the wealthy, but the US has no long term deficit problem other than rising costs of health, and no problem to finance public investment at all. To deal with the first a public option is the solution, and the limits to public investment are purely political.
The agreement actually makes the US political system look less dysfunctional than the European, which continues to be tangled in their austerity policies. All in all, a pretty decent start for 2013.
PS: Not sure why Krugman thinks that the agreement has left "a bad taste in progressive's mouths." Seems that he is afraid that the insufficient increase in taxes will let welfare programs vulnerable to the starve the beast argument. Again I think that risk is purely political, and a bit more revenue from the wealthy would have done little to eliminate it.