The fiscal cliff was meant to force Congress to come to an agreement on deficit reduction. It failed. Their eleventh-hour solution — if it passes the House, which is now in doubt — won't move the needle by very much on the deficit, though the price tag depends on what you're comparing it with.
The nonpartisan Joint Committee on Taxation estimates that the entire package will increase the deficit by $3.9 trillion over 10 years, with a $280 billion increase in 2013 alone. That's because the JCT is comparing the deal to what would happen if the entire fiscal cliff were allowed to take effect — about $4.5 trillion in deficit reduction over 10 years, according to the Congressional Budget Office. It looks worse if you include interest on the debt and the $30 billion in federal unemployment insurance, which is not offset.
The numbers look better if you compare the deal to a world in which we had kept the tax code the way it was in 2012: Then, the package raises more than $600 billion in additional revenue (and cuts interest payments by about $50 billion). But it comes from a far smaller portion of taxpayers than Obama had been hoping for. Letting the Bush tax cuts expire at the $450,000 family/$400,000 income threshold affects just 0.7 percent of all taxpayers, or a little over 1 million Americans, according to Tax Policy Center's latest analysis.
The cost of letting everyone else off the hook is significant: The JCT estimates that extending the Bush tax cuts for the other 99.3 percent of the population would cost $1.9 trillion over 10 years. And its permanent patch for the Alternative Minimum Tax to avoid a tax hike on the middle class is nearly as costly, with a $1.8 trillion price tag.
Extending the 2009 stimulus tax breaks for the working poor for five years would cost $134 billion, and continuing the tax-extenders—special breaks for businesses, energy companies and some individuals— would cost $77 billion. The bill generates $12 billion in outside revenue to offset the suspension of the sequester, but that's just a drop in the bucket.
That said, it's worth remembering how much the deficit was cut before the fiscal cliff negotiations even began, as the 2011 Budget Control Act has already cut discretionary spending by more than $1 trillion. And legislators have created another "mini cliff" to force themselves into further action on the budget: They still have to deal with 10 months of the scheduled $1.2 trillion spending sequester and the debt ceiling, which Republicans want to turn into yet another forcing mechanism for budget cuts.