During the months when the Congress and the press kept everyone on the edge of their seats wondering about the dreaded fiscal cliff, business behavior went on as normal -- and a mediocre normal at that. The lousy rate of job creation hardly changed. Detroit enjoyed a good fourth quarter as very low-interest rates stimulated auto sales. Christmas sales were about what was predicted, as consumers turned to their credit cards. To the extent that the economy has remained stuck in first gear, it has everything to do with high unemployment and lagging wages, and just about nothing to do with the fiscal cliff or worries about the debt ratio 20 years down the road.
The White House and Senate have agreed to make the Bush tax cuts permanent for 99 percent of households, starving the federal government of funds. Even Mitt Romney could never have accomplished for the Republicans what Obama has just done for them. The Democrats in the Senate would have soundly rejected the plan if the Republicans had put it forward. There has been a special absurdity to the entire negotiating process, which has violated every standard of rationality and transparency. And meanwhile, the Federal Government is being dangerously weakened in its capacity to help America address the economic, environmental, and social challenges of the 21st century.