What You Need to Know About the Fiscal Cliff Before You Go to Your New Year's Party

Yes, we're going over the cliff. Yes, there's probably going to be a bipartisan deal. No, you shouldn't freak out.

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So, you want to go out drinking for New Year's Eve, but you also want to know what's going on with the fiscal cliff. (Surely this describes most Atlantic readers: both fun-loving and well-informed.) Do we have a deal or what? If we do, what's in it? Is it good or bad? Here's a quick FAQ to make you sound smart -- at least until the third glass of champagne. After that, we can't help you.

Is there going to be a deal? What's the latest? A deal appeared imminent late Monday, with Senate Minority Leader Mitch McConnell declaring shortly before 3 p.m. that the two sides were "very, very close" and had "reached an agreement on all of the tax issues." President Obama said earlier in the afternoon that a deal was "within sight." Led by McConnell (for the Republicans) and Vice President Biden (for the Democrats), the two sides had come to tentative agreement on making permanent the current tax rates for individual income under $400,000 and family income under $450,000, and allowing rates to rise to their Clinton-era levels for higher incomes. Accord had also been reached on permanent fixes to the Alternative Minimum Tax, capital gains tax, and estate tax, plus temporary measures to address the child tax credit and earned income tax credit. National Journal's Chris Frates has the details here.

What are they still haggling about? The fact that the parties have agreed on tax rates resolves the No. 1 sticking point up to now and bodes extremely well for a deal on the rest. But "the rest" still has to be worked out. Remember, the major components of the so-called fiscal cliff are (1) the expiration of the Bush tax cuts, and (2) the spending cuts set to kick in automatically as a result of the "sequester" agreement that resolved the 2011 debt-ceiling fight. With the former largely dealt with, the latter is the biggest thing still on the table. Neither side wants to see defense and discretionary spending indiscriminately slashed as the sequester would do, but Republicans would like to see substantially more spending cuts in other areas to compensate.

How is the president feeling about all this? Obama gave a remarkably loose, jokey statement before a backdrop of middle-class Americans at the White House Monday afternoon, upbraiding Congress for not getting its you-know-what together on a more overarching agreement that would more meaningfully reduce the deficit and fix the tax code. Republicans acted stung by the president's performance, but it appeared aimed primarily at convincing Senate Democrats that the deal was good enough to support. "My preference would have been to solve all these problems in the context of a larger agreement, a bigger deal, a grand bargain, whatever you want to call it," Obama said. "But with this Congress, that was obviously a little too much to hope for at this time."

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Molly Ball is a staff writer covering national politics at The Atlantic.

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