The centrist fantasy of a Grand Bargain on the budget never had a chance. Even if some kind of bargain had supposedly been reached, key players would soon have reneged on the deal — probably the next time a Republican occupied the White House.
For the reality is that our two major political parties are engaged in a fierce struggle over the future shape of American society. Democrats want to preserve the legacy of the New Deal and the Great Society — Social Security, Medicare and Medicaid — and add to them what every other advanced country has: a more or less universal guarantee of essential health care. Republicans want to roll all of that back, making room for drastically lower taxes on the wealthy. Yes, it's essentially a class war.
The fight over the “fiscal cliff” was just one battle in that war. It ended, arguably, in a tactical victory for Democrats. The question is whether it was a Pyrrhic victory that set the stage for a larger defeat.
Why do I say that it was a tactical victory? Mainly because of what didn't happen: There were no benefit cuts.
This was by no means a foregone conclusion. In 2011, the Obama administration was reportedly willing to raise the age of Medicare eligibility, a terrible and cruel policy idea. This time around, it was willing to cut Social Security benefits by changing the formula for cost-of-living adjustments, a less terrible idea that would nonetheless have imposed a lot of hardship — and probably have been politically disastrous as well. In the end, however, it didn't happen. And progressives, always worried that President Barack Obama seems much too willing to compromise about fundamentals, breathed a sigh of relief.
There were also some actual positives from a progressive point of view. Expanded unemployment benefits were given another year to run, a huge benefit to many families and a significant boost to our economic prospects (because this is money that will be spent, and hence help preserve jobs). Other benefits to lower-income families were given another five years — although, unfortunately, the payroll tax break was allowed to expire, which will hurt both working families and job creation.