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And I'm Steve Inskeep.
Let's talk about everything that was left out of the fiscal cliff compromise approved by Congress yesterday. The measure does raise taxes for the wealthy and preserve tax cuts for others, and extend unemployment insurance again, among other things. But it left a huge amount of fighting for the New Year.
We're going to talk about that with NPR economics correspondent John Ydstie and NPR White House correspondent Scott Horsley. Gentlemen, good morning.
SCOTT HORSLEY, BYLINE: Good morning.
JOHN YDSTIE, BYLINE: Good morning, Steve.
INSKEEP: OK, this was referred to as a scaled-down deal, John Ydstie. What's not there?
YDSTIE: Well, there's not a lot of deficit reduction there, first of all. The most charitable accounting would be that there's maybe $650 billion in deficit reduction over 10 years, compared...
INSKEEP: (Unintelligible) higher taxes on the wealthy.
YDSTIE: That's right, versus about two trillion that we're talking about if we had a grand bargain that included entitlement reform. And, speaking of entitlement reform, no effort at reining in entitlements here, which are ultimately the biggest threat to the nation's finances going forward.
Also, no action on spending cuts. The automatic spending cuts that were part of the fiscal cliff were put off for two months, so we'll have a battle that's going to be fought then, along with the battle to raise the debt ceiling.
INSKEEP: And on the spending cuts, they were put in place because the national debt is getting too large.
YDSTIE: That's right.
INSKEEP: Everyone agreed there needed to be spending cuts. Everyone seemed to agree they hated these particular spending cuts. But they've neither gotten rid of them or reworked them or anything.
YDSTIE: Absolutely. So there's a big battle ahead.
INSKEEP: That's coming in the next few months.
Scott Horsley, what happens now?
HORSLEY: Well, House Republicans tried to shoehorn more spending cuts into this deal at the last minute. And that effort fell short, but they're no doubt going to keep trying. As John suggests, we're going to have another fight when the automatic spending cuts return. And the big leverage point for Republicans is going to be the upcoming fight over the debt ceiling. President Obama insisted again last night he won't play that game.
PRESIDENT BARACK OBAMA: While I will negotiate over many things, I will not have another debate with this Congress over whether or not they should pay the bills that they've already racked up through the laws that they passed.
HORSLEY: Mr. Obama insists if Republicans want more spending cuts, those will have to be balanced with more tax increases. But, you know, he'll never have a stronger hand to win tax increases than he did right now when he could get them automatically without Republican votes. And that's why a lot of liberals are unhappy with the president for in effect leaving money on the table in this round.
INSKEEP: Oh, because they were talking about more than a trillion dollars in higher taxes, weren't they, Scott, and ended up with this 650 billion or so.
HORSLEY: That's right. And he could've had, you know, bigger tax increases simply by going over the cliff.
INSKEEP: Oh, simply by letting the higher taxes take affect that were already part of current law. Now, it's interesting that you say what you said, Scott Horsley, because we heard yesterday on this program from Tom Cole, a member of the House Republican leadership. And he was arguing that as this battle goes ahead, the leverage that you mentioned is going to be on the Republican side.
REPRESENTATIVE TOM COLE: Honestly, from a Republican standpoint, you're in a much stronger position now because the tax issue is off the table. It's basically been settled. The chances of raising taxes now on anybody, anytime soon - absent some sort of deal that lowers rates as it eliminates deductions - is really nil.
INSKEEP: So they're able to turn the focus back on spending cuts, which is something Republicans would rather be talking about.
And John Ydstie, Scott mentioned the debt ceiling.
INSKEEP: Federal borrowing authority, it's going to run out again in the next couple of months. And there's talk of a fight again. Can the country afford that, given what a disaster it was in 2011?
YDSTIE: Well, I think most business people and economists think we can't. We can't go through that again. The rating agencies have threatened further downgrades if we do. And...
INSKEEP: Oh, because the national debt was downgraded. The quality of the debt was downgraded last time.
YDSTIE: Well, yeah. It was downgraded last time, partly because of the political situation in Washington. And if you look back at the last debt ceiling standoff, it clearly led to uncertainty, erosion of confidence, and it slowed growth - kept businesses from hiring. So I think we don't want to go through that again, if we can avoid it.
INSKEEP: Well, Scott Horsley, given all the business that was left undone as part of this compromise, is there anything that lawmakers or the White House are feeling good about this morning?
HORSLEY: Well, yes. The president did win some victories in this deal. You mentioned the extension of unemployment benefits for a year. The president also won a five-year extension of some tax credits that primarily benefit working families. Together those are worth about $160 billion. There's also the certainty that comes from having middle class tax rates sustained without weeks of more bargaining. That's worth something.
But you know, the two parties have really different ideas about this deal and here's why. It's a classic compared-to-what question. Compared to last year's tax rates, this deal represents a tax hike for 98 percent of millionaires. That's why it's a tough bill for the GOP to swallow. But compared to the rates the wealthy would have been paying automatically this year, what the president could have gotten by going over the fiscal cliff, this deal represents a tax cut for 96 percent of millionaires.
So that's why you're hearing a lot of howling from the left.
INSKEEP: Okay. So a lot to argue about in the months ahead and we'll continue following it here. That's NPR's Scott Horsley and NPR's John Ydstie. Gentlemen, thanks to you both.
HORSLEY: You're welcome.
YDSTIE: You're welcome. Transcript provided by NPR, Copyright NPR.