Aloha!

++The President is body surfing in Hawaii after presiding over the conclusion of the Fiscal Cliff Part 1. 

++So how did the President make out? He made good on his campaign promise to keep tax cuts for those making $250,000 or less even though he had to give upwards to $450,000 for a couple. He raised capital gains from 15 to 20%. He had to give a little on the estate tax because Western Democrats wanted a higher amount and Republicans wanted the estate coupled with inflation. He preserved all of the safety net. He enhanced the Earned Tax Credit for poorer families,patched the doctor's pay for Medicare,maintained low income student loans. He let the employers tax lapsed. The last item was the tax cut from the stimulus that lowered the tax on Social Security. The conservatives wanted to cut it even further for their argument that Social Security was in financial trouble. There are tax goodies galore for corporations. The alternative energy subsidies were preserved and the farm bill got rolled into this too. As for progressives, Bernie Sanders voted for it and Harkin voted against. The House progressive caucus--by and large vote for it.

++Progressives in the blogosphere were upset about it. Paul Krugman calmed down enough to worry about the next stages in this fight. "kos" wanted it defeated and wanted the House to defeat it thinking that President Obama would have a stronger hand if all the Bush tax cuts were eliminated and then come back to a new Congress with his own bills. Howard Dean had supported going over the Fiscal Cliff as a way to cut defense spending.

++As for the Right, they have been absolutely off-the-wall with the deal. Everyone from the Club for Growth, the Koch-funded Americans for Prosperity, the Heritage Foundation opposed the deal. Grover Norquist claimed that since technically the Bush tax had expired, the Republicans were actually voting for a tax cut. 

++One of the unseen effects of this whole process was that the Haskert rule of the Republicans, operating their House procedures since 1990s,was broken. The Haskert rule means that a majority of a majority could bring a bill to the floor. Last night,House conservatives tried to amend the bill by tying on $330billion in program cuts. The move failed and surprisingly John Boehner brought the bill for an up and down vote to the floor. The bill only passed because the vast majority of Democrats voted for it.But breaking the Haskert Rule is one of the important ways Obama could end obstructionism.

++The ensuing revolt on the House Floor meant that the bill to provide assistance to victims of Hurricane Sandy could not be voted on. House Republicans were screaming for a vote on the amendment to the Fiscal Cliff deal, which also did not happen. One of the other victims of the mayhem was the Violence Against Women Act, which Republicans had been holding up because it included native American women,who experience the largest percentage of violence of any women. 

++The grand finale of the House vote was fairly open plots to oust John Boehner as speaker. Chris Christie and Peter King were visibly upset with Boehner on the Hurrican aid bill but more importantly the conservatives in the House Caucus were outraged that the bill ever reached an up and down vote. 

++The emotional outrage over the bill by Republicans was that now the Party for the first time since George H.W. Bush voted to massively raise taxes, especially on their wealthy base. Over 20 years of tax orthodoxy ended within 24 hours. The Republican Party had banked on two basic strengths--national security and taxes. Now they have none. 

++What we may have seen acted out was the final chapter of supply side economics. It will be even harder now to make the argument that cutting taxes increases employment and prosperity. After all, the "job creators" had 12 years and didn't create jobs. So why should they get any more tax cuts?

++The Fiscal Cliff deal was dreadfully ugly and we now have before us the Debt Ceiling debate, the fight over sequestration cuts,and the fights over the government "budget" in March. The United States Government has not had a budget since 1996. 

++Conservatives are revving up for these fights. John McCain and Lindsey Graham have vowed to make the United States insolvent if there are not major cuts in the so-called entitlement programs. President Obama told the press after the agreement had been reached that Medicare is the primary driver of the debt. He didn't mention defense. And all this gives progressives concerns. But President Obama vowed not to have a debate over the debt ceiling. He also claimed in weeks before he would not invoke the 14th Amendment in stopping such a fight. For onlookers, it is hard to believe Republicans want to pull another debt ceiling stunt like last year, especially now that they voted to increase the national debt by another 4 trillion.

++Andrew Sullivan wrote a nice analysis of the whole budget fight in the Daily Dish on how President Obama is still taking the long view and winning changes incrementally.

++Progressives fear that the President is not as committed as they are to the trifecta of the social welfare state--Social Security, Medicare, Medicaid. But Obama has said that cuts have to be made surgically and not with an axe like sequestration called for.

++The Democrats wanted to push off the sequestration cuts for a year but President Obama agreed to two months. I believe he sees his maximum leverage being the months after the start of his second term and he didn't want to delay the process until right before the 2014 elections.

++In any event, the Fiscal Cliff deal still only generates revenues of 18% of GDP, when we are spending now 23% GDP on government spending. Paul Krugman's fear that we are slipping down the slope into austerity is real.

++Future Republican candidates for 2016 has a mixed record this past weekend. Marco Rubio voted against the package and Paul Ryan voted for it. Morning Joe spent the morning criticizing Paul Ryan for voting for all of the country's $16 trillion debt. Not something a self-described deficit hawk can be proud of.

++The whole debate has left the GOP in turmoil. Redstate disowned the GOP leadership and the House continues to plot against John Boehner. In dramatic fashion we are seeing the great Conservative Crackup.

++How will the next few months affect President Obama? He will have to navigate through the entitlement cuts and the government budget. He has promised immigration reform and gun control legislation. I would bet on immigration reform because drafts of this legislation are prepared by both Republicans and Democrats in the Senate. Whether he finally broke the back of the House Republicans isn't clear yet. But yesterday he came very close.