It's all over, as they say, but the shouting. President Barack Obama's jocular mood gave it away. In New Year's Eve remarks to the nation about the state of negotiations over a deficit-reduction deal, the president said an agreement was in sight, "but it's not done."
Behind the scenes, though, aides circulated the key points of a pending deal that Senate Republican leaders had tentatively agreed to, having brought Vice President Joe Biden into rescue the talks on Sunday evening.
Before we get to the fine print, here's the hedge: As of Monday afternoon, there was so much grumbling from the left that Obama felt he had to appear in public to sell the deal. He needs Democrats to back the package, the highlight of which is a tax increase for household earnings above $450,000 per year, because there won't be enough Republican support -- especially in the House, which has scheduled no vote tonight -- to seal the deal. The package, while more favorable to Democrats than to Republicans, comes with a dose of castor oil.
Any deal to avert the fiscal cliff was always going to have to appeal to lawmakers whose political leanings are between the 20-yard lines -- in other words, not so rigid that they can't swallow a tax increase or a spending cut of any size. This package is designed to do just that. It would raise about $600 billion in revenue by increasing tax rates to 39.6 percent on earnings above $400,000 for individuals and $450,000 for couples. It would reinstate tax provisions, ended by the Bush-era tax cuts, that had phased out personal exemptions and deductions for upper-income taxpayers. Taxes on dividends and capital gains would jump to 20 percent from 15 percent for the top five percent of taxpayers. Estate taxes would rise to 40 percent from 35 percent, with the exclusion from taxation remaining at $5 million, or $10 million for a couple.
All tax rates, including for wage-earners above the new cutoff, would be made permanent. The alternative minimum tax would be stopped from hitting millions of middle-class households, and cuts in Medicare payments to physicians would be halted. Both those fixes would be permanent, as well.
On the spending side, Obama played -- and won -- a strong hand. Expiring unemployment benefits would wisely be extended another year, as would tax credits to encourage production of renewable energy and research and experimentation. An array of tax credits enacted during the financial crisis to help low-income families, students and small-business owners would get another five years.
More good news for Democrats: The package contains no new entitlement cuts and no reduction in cost-of-living increases for Social Security recipients.
All told, it appears to be a very nice belated Christmas present for congressional Democrats. But before you conclude that Obama outfoxed the Republicans, take a look at what's missing: The parties remain at odds over whether and how to stop $110 billion in automatic spending cuts in 2013. Republicans say that, to end the sequestration, as it's called, they want spending cuts of a similar scale elsewhere. The amount of new revenue, $600 billion over 10 years, is also far less than the $1.6 trillion in Obama's opening bid -- and even less than the $800 billion that House Speaker John Boehner once agreed to. Some Democrats are further miffed that the Republicans seem to have redefined the middle class as households earning more than $450,000.
Worst of all, there is no increase in the debt ceiling. In February, Republicans hope to use the debt limit as leverage to force Democrats to find $1 in spending cuts (read: entitlements) for every $1 in new borrowing authority.
That helps explain why the president somewhat awkwardly made his bully pulpit appearance at the Eisenhower Executive Office Building, next to the White House, today. The purpose was to declare that, in Round Three of Washington's ongoing deficit-reduction match (current negotiations are Round Two, while Round One was the 2011 Budget Control Act, in which Congress agreed to $1.1 trillion in spending cuts), he will insist on more tax increases.
Obama said he would be willing to overhaul Medicare, but that any reforms must go hand-in-hand with tax reforms that raise new revenue. And then came the kicker, aimed straight at hesitant Democrats, including Senator Tom Harkin, the Iowa Democrat, and some liberal bloggers, who think Obama has caved: "If Republicans think I will finish the job of deficit reduction through spending cuts" after this package is approved, he said, "then they have another thing coming."
Harkin (or any senator) can singlehandedly hold up a Senate vote on the deal under the rules for expedited action on legislation. After all this, though, doing so would take chutzpah -- and the willingness to take the blame for a stomach-churning market drop on Jan. 2.
(Paula Dwyer is a member of the Bloomberg View editorial board. Follow her on Twitter.)
Read more breaking commentary from Bloomberg View at the Ticker.