Today's big story is that Obama cut a deal with Republicans on taxes; they get their two year extension on the tax cut on incomes above $250,000 and I think also some kind of extension relating to the estate tax, in return for extended unemployment benefits for 13 months and a partial payroll tax holiday.
I don't have very much original to add to this. I think Nate Silver is probably right about how it would have played out if Obama had taken a more we-don't-negotiate-with-terrorists approach to the Republicans. I don't think you have to be a nutty supply sider to think that this might not be a good time for an across the board tax hike (or rather, tax cut non-extension), and that it might help to be a fairly well off journalist to actually see that as the best case scenario. (As a good liberal, I am theoretically ok with my taxes going up at any time...but then I look at my budget, and even I have to admit that it wouldn't be as easy for me to make the sacrifice as it would have been 3 years ago. And there are a lot of people living closer to the line than I am). I do agree with Megan McArdle that the important thing now (in terms of the deficit at least) is what happens in two years. A lot of people are pointing out that 2012 is an election year, and so of course this is going to become a major campaign issue, and of course the Democrats will cave to the same voodoo economics political pressure they always cave to. What I haven't seen discussed yet is that two years from today would actually be post-election. I think they could decide whether to extend the tax cuts or not in August 2012 or September 2012, just like they could have this year...but couldn't also the same political considerations that pushed this off into the lame duck session this year happen again in 2012? It'll be a campaign issue to be sure, but it seems at least possible that the actual decision will not be made until after the results are in. And in that case, what would we expect lame duck President Obama to do ...or newly re-elected President Obama? Would he need to make the same concessions to Republicans that he's making now? It seems at least hopeful to me.