The best thing you can say about the New Year's Day fiscal cliff deal is that it's unlikely to hurt the U.S. economy. Unfortunately, it does almost nothing to help it. Congress may have avoided the "fiscal cliff," but the economic issues that created this situation in the first place are far from being resolved.
First, let's look at what they did do. The budget bill passed last night raises the top marginal tax rate for people making more than $400,000 a year to 39.6 percent (the level it was under President Bill Clinton); raises the capital gains tax rate for those same people to 20 percent; makes the Bush-era income tax rates, including the Alternative Minimum Tax, permanent for everyone below that level; raises the estate tax rate to 40 percent (but raises the threshold to only include estates worth $5 million or more); and extends emergency unemployment benefits for one more year. Oh, and it includes an eight-month extension of the farm bill, temporarily avoiding an increase in milk prices. (Update: And an extension of wind farm tax credits.)
All told, these tax changes will raise about $620 billion in new revenue over the next decade. That won't even make a small dent in the annual budget deficit. Those increases also come with no new spending cuts. Rather than reach an agreement on the automatic sequester that was set to happen on January 1, it merely delayed those cuts until late February, right about the time that a vote will be required on raising the debt ceiling.