The vote Tuesday night in the House of Representatives brought to a close the latest Washington master class in dereliction of duty. After a few days of arguing about who won or lost, we can move on to the next manufactured crisis.
In itself, not much of a surprise, the fiscal-cliff deal avoids most of the tax increases and postpones almost all of the spending cuts that were about to be triggered. Throughout this farce, financial markets had refused to believe that the U.S. government would inflict a recession rather than strike a budget agreement, especially because they knew that, all posturing aside, the distance between the two parties was small. Markets wobbled but didn't collapse.
Let's hope they react with similar equanimity to the next pointless quarrel, over the debt ceiling. Treasury Secretary Timothy Geithner told Congress last week that the current limit on government borrowing was about to be reached. He said "extraordinary measures" (essentially, shuffling funds among government accounts) would be used to prevent the debt from breaking through the ceiling.How long can that go on? Geithner wasn't sure. Maybe two months under normal circumstances, he said, but "given the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures." The latest fiscal deal does little to resolve those uncertainties. The spending-cut part has merely been delayed by two months. The tax increase for couples making more than $450,000, together with other changes and estimated savings in debt interest, shaves about $700 billion from the 10-year deficit. Savings of about $2 trillion will be needed to stabilize the ratio of public debt to national income. Bringing that ratio down to a safer level requires spending cuts and tax increases worth $4 trillion -- the original "grand bargain" ambition.