Nobel Prize-winning economist Paul Krugman nailed it right away: "Basically the Republicans [said] we'll blow up the world economy unless you give us exactly what we want, and the president said, OK. That's what happened."
The fine print of the last-minute deal between U.S. President Barack Obama and the speaker of the U.S. House of Representatives, Republican majority leader John Boehner, hardly matters. There will be cuts in government spending, or rather in the rate at which government spending was projected to rise, but the big thing is: There will be no tax increase.
That is pretty bizarre in a country with a huge budget deficit and the lowest tax rate in 50 years. The normal response would be to cut spending and raise taxes. Even the Conservative-led coalition government in the United Kingdom, the poster boy for savage budget-cutting, has done that. But not the United States.