WASHINGTON, DC - DECEMBER 31: U.S. President Barack Obama delivers remarks about the fiscal cliff negotiations in the Eisenhower Executive Office Building next to the White House December 31, 2012 in Washington, DC. Obama said he was hopeful that an agreement could be found to avert the fiscal cliff in Congress, which is closing in on a deal that would raise taxes on households that make more than $450,000 a year and individuals who make more than $400,000. (Photo by Chip Somodevilla/Getty Image
This fiscal cliff: averted.
Next fiscal cliff: ahead.
Partisan divisions and brinksmanship politics defined the outgoing Congress right up to the final scramble to avoid the "fiscal cliff." The last-ditch deal dodged income-tax hikes for nearly all Americans and delayed for two months spending cuts for the Pentagon and domestic programs.
Still, the compromise didn't solve, or even seriously address, the deficit problems that prompted Congress to write the laws that nearly forced the nation over the cliff in the first place.
"This was the overture for the opera that's to come," says Robert Reischauer, a veteran of Washington's budget wars, "and that opera's going to be a lot more discordant than the overture was." The new Congress starts at noon Thursday.
In the end, the eight-week "fiscal cliff" battle required an all-out effort by President Obama and tested his relationship with House Speaker John Boehner, R-Ohio. Their failure to reach an accord brought a surprise late entry by Vice President Biden, a Senate veteran who wrangled a deal with Senate Minority Leader Mitch McConnell after talks floundered with his Senate counterpart, Majority Leader Harry Reid.
The battle spotlighted not only the burgeoning debt problem the country faces but also the political system's inability, at least so far, to come to a long-term or lasting solution on how to fix it.
In the aftermath, there are some lessons that could be helpful for the next time around - about the players who mattered, and the issues that divided. Because there is going to be a next time, and soon.
Lesson 1: The danger of ignoring spending cuts
Before the dust settles from the fight over the fiscal cliff, policymakers are positioning for looming battles between Obama and a divided Congress over issues that will affect the bottom line for the nation's economy and American households.
Republicans are relishing a debate over federal spending in the new 113th Congress, particularly for entitlement programs such as Medicare and Social Security. They see three big opportunities as Washington faces deadlines in February on the debt ceiling and in March on spending cuts and government funding.
"We intend to use the debt-ceiling debate and the government-funding debate as a way to negotiate real spending reductions," vows Rep. Mick Mulvaney of South Carolina, a fiscal conservative elected in the 2010 Tea Party wave. Like many fellow Republicans, he expresses frustration at the GOP's record of cutting spending in the past two years. "Fiscal conservatives - and you can include Tea Party people in that but it's more than just that - we're frustrated that the battle over spending is always going to be next time."
Republicans waged a similar fight in 2011 over the debt ceiling, which rattled financial markets and prompted Standard & Poor's to downgrade the nation's credit rating. It led to the creation of a special congressional panel to come up with a deficit reduction package - it failed - as well as the automatic spending cuts that were part of the fiscal cliff. The new deal defers that so-called budget sequester for two months.
Also ahead: Funding to keep the government running ends March 27.
Obama has declared he won't allow Congress to use the debt ceiling as a lever to win spending concessions, but it's not clear how he can avoid that. McConnell said Wednesday that Republicans are working on a package of spending cuts they want to see enacted, including entitlement reforms, in exchange for voting to raise the nation's borrowing limit.
The potential for the United States to default on its debt is a far more terrifying economic threat than the fiscal cliff posed, Hoagland says. "That's what scares me more than anything else," he says of the global ramifications of a default. "If we lose the ability to be the best place in the world to lend money to, then we really have real problems."
GOP willingness to battle over the debt ceiling again has exacerbated the ideological divide between the two parties. "These artificial crises create uncertainty that's reflected in the economy, and the economy is not growing as fast because of these crises we're manufacturing," says Rep. Jim McGovern, D-Mass. "I feel like this is the 'Twilight Zone' Congress. It just never ends."
Lesson 2: Delivering a united GOP is elusive
The fiscal cliff revealed an uncomfortable reality for Speaker Boehner: In the old Congress, he couldn't command a majority of his caucus on the fiscal cliff vote; Republicans opposed it 151-85. That raises questions about his ability to deliver votes and potentially undermining his negotiations with a Democratic president and U.S. Senate in upcoming budget fights in the new Congress.
His rank-and-file refused to support his "Plan B" last month to avert the fiscal cliff during his early unsuccessful negotiations with Obama. There is little precedent for a speaker failing to pass a bill over which he has personal ownership. It weakened Boehner's role in the fiscal cliff talks going forward, which were ultimately resolved in large part by Biden and McConnell.
House Republicans initially threatened to take down the compromise on Tuesday, which had earlier passed the Senate with an overwhelming show of support, 89-8.
Economic and political realities forced GOP leaders to bring the bill to the floor, upending an earlier Boehner promise to not allow a vote on anything that could not muster the support of most of his members. That's the informal "majority of the majority" rule that has governed House Republican internal politics for more than a decade.
Among the 236 Republicans who voted on the measure, only 85 voted for the fiscal cliff deal. Passage was secured by 172 Democrats who voted for it.
While Boehner and Budget Chairman Paul Ryan, R-Wis., supported the compromise, the speaker's chief deputies, Majority Leader Eric Cantor, R-Va., and Majority Whip Kevin McCarthy, R-Calif., voted against it, highlighting fractures among the leadership team.
When the House convenes today, its first act will be to elect the speaker, which is voted on by the full House because it is a constitutional officer, not a partisan one.
There is little doubt that Boehner will be re-elected. No other lawmakers have said they will challenge him. He remains personally well-liked among his members. Boehner allies contend the Ohio Republican is in good standing with his members because he allowed the party to work its will, versus a top-down style of management that has historically defined House politics.
"Not at all. Why should it?" Rep. John Fleming, R-La., said when asked whether Boehner's speaker post was in doubt. "I think we're more together on the same page now than we have been in a long time." Like McConnell, Boehner has pledged to make fiscal issues a top priority, particularly an overhaul of the federal tax code and using the upcoming budget fights to attempt to win more spending cuts.
He begins that task with a trust deficit, though. "It's about whether or not they can lead, particularly Boehner, to see if he can lead that particularly raucous group he has to deal with," Hoagland says.
He also begins with a smaller majority. Following the 2012 elections, Republicans will have eight fewer seats in the next Congress, 234-201. The Democratic majority in the Senate will grow by two seats, to 55-45.
Lesson 3: The indespensible Joe Biden
Vice President Biden has been a favorite of late-night comics for his tendency toward verbosity and the occasional malapropism, not to mention a campaign photo of him holding a tattooed woman biker in his lap.
The fiscal cliff debate negotiations underscored a different facet of Biden and one of the major reasons Obama picked him to be his running mate in 2008: The former Delaware senator's four decades of experience in Congress, a venue where the president has struggled to develop close friends and personal allies.
When Obama popped into the White House briefing room on Tuesday night, after the House and Senate had voted, he praised not only the congressional leadership but also "my extraordinary vice president, Joe Biden."
"Biden is a pro," says Thomas Mann, a congressional scholar at the Brookings Institution, citing his legislative experience and energy. "He's done a lot of heavy lifting for him."
When negotiations between McConnell and Senate Majority Leader Harry Reid, D-Nev., flagged last weekend, the Republican leader announced he had called Biden. The two men spent hours on the phone late Sunday, early Monday and beyond. They helped negotiate the deal that eventually passed the Senate by a decisive 89-8, then, after some contentious objections, passed the House 257-167.
Meanwhile, Obama's comments at a campaign-style event Monday as the Senate was debating the deal brought criticism from Republicans who said his tone was derisive toward them. "I know the president has fun heckling Congress," Tennessee Republican Sen. Bob Corker said. "But I think he probably lost a number of votes with this."
Biden and McConnell already had become one of the most significant bipartisan acts in Washington.
In the debt-ceiling debate in 2011, negotiations between Obama and Boehner for a "grand bargain" deteriorated in mutual recrimination, Biden and McConnell stepped in and cut a smaller deal.
In the upcoming negotiations, Biden could be tapped again. He's already a key figure in another big battle this year. Obama has given him until the end of January to develop proposals addressing gun violence in the wake of the bloody rampage last month at Sandy Hook Elementary School in Newtown, Conn., that left 20 children and six educators dead.
That high-profile role is fine with Biden. He's made it clear he hopes to run for the Democratic presidential nomination in 2016.
Lesson 4: Fixing the deficit? It's hard
Ads urging the White House and Congress to "fix the debt" are on display in the Washington Metro stations that congressional staffers and administration officials use to catch the subway. But one clear lesson from the negotiations that were just concluded: It's not easy.
Not when the major drivers of the debate are the spiraling costs of some of the country's most popular programs, among them Medicare and Social Security. Not when neither side will even broach the idea of raising taxes on the 98% of Americans who earn less than $250,000 a year in household income. And not when most House Republicans are willing to oppose their own leadership and vote against all tax hikes.
Looked at one way, the dollar number in new revenue sounds huge. The deal cuts about $600 billion from budget deficits over the next 10 years by raising taxes on the wealthy.
However, that represents just 7% of the projected increase in the national debt over that time. Instead of a $25.4 trillion debt in 2022, the debt would be $24.8 trillion.
"They did the politically easy thing," says Douglas Holtz-Eakin, a former director of the Congressional Budget Office who advises Republicans.
Little wonder that bond-rating agencies, not to mention both Democratic and Republican budget experts who have worked on deficit deals in the past, are unimpressed.
The tax rate increase in income above $400,000 for individuals and $450,000 for couples is one of three ways taxes will rise this year. Most Americans will see their payroll taxes rise back to the customary 6.2% rate. Higher-income families will have to pay more to help finance the Affordable Care Act, Obama's health care law.
Still, the desserts outweigh the vegetables in the package. Tax cuts for more than 98% of Americans, enacted in 2001 as temporary, were made permanent, and a host of other tax breaks were extended. The automatic spending cuts, scheduled to bite $110 billion this year, were delayed for two months.
"Our generation created this mess, and I thought this was a real opportunity for us to clean it up," says Erskine Bowles, who negotiated the 1997 balanced budget agreement for President Clinton and co-chaired Obama's fiscal commission that recommended nearly $4 trillion in deficit reduction. "My hope is we don't put everything off again to the very last second."
That last second will come several more times this winter. Before spring arrives, the government's $16.4 trillion borrowing limit will be breached, some $1 trillion in across-the-board spending cuts will be triggered and a government shutdown will be threatened unless the White House and Congress can agree on more compromises.
Moody's Investors Service isn't counting on those compromises. The rating agency, which last year gave the government's triple-A rating a "negative outlook," announced no improvement as a result of this week's deal. "Further measures that bring about a downward debt trajectory over the medium term are likely to be needed to support the AAA rating," it said.
Translation: cut spending, raise more revenue or risk a credit-rating crisis later this year.
But if the president and Democratic lawmakers were worried about that Wednesday, they didn't show it. Obama boarded Air Force One for Hawaii on Tuesday night; he was on the golf course 16 hours after the House passed the fiscal cliff compromise. Democratic leaders were urging swift passage of $60 billion in disaster relief for states affected by Superstorm Sandy in October.
Republicans, meanwhile, were calling for swift action on spending cuts. "We've taken care of the revenue side of this debate," McConnell said. "Now it's time to get serious about reducing Washington's out-of-control spending. That's a debate the American people want. It's a debate we have next. And it's a debate Republicans are ready for."
But the bad blood from the fiscal cliff "did nothing but make further cooperation more difficult," warns Reischauer, also a former director of the Congressional Budget Office. That doesn't bode well for Obama's top priorities, among them an immigration overhaul, energy legislation and gun control measures - each a tough fight on their own.
"What we fought for in 2012," the president told supporters in an online video posted Wednesday, "we've got to fight just as hard for in 2013."
By Susan Davis, David Jackson, Richard Wolf and Susan Page