Small steps are enough

The just-in-time budget deal the US Congress passed on New Year's Day calls to mind Samuel Johnson's observation about dogs that walk on their hind legs: "It is not done well; but you are surprised to find it done at all."

The same could be said of US lawmakers. For more than a year, the conversation in Washington focused on achieving a Platonic grand bargain to overhaul the tax code, reform entitlement programmes and reduce the national debt.

Bloomberg's editorial board supported a compromise that would trade Medicare reforms for higher tax rates and a tax code overhaul. It would have been grand if the package sent this week to President Barack Obama accomplished even a bit of that. It doesn't; Congress is too polarised to reach such a deal.

Still, this week's agreement doesn't deserve the derision it's getting from some economists and fiscal policy experts.

For now, Congress has found enough common ground to defuse a US$600 billion fiscal time bomb, no easy feat considering the divided government and the deep ideological differences between the parties. The combatants will have to summon the courage to do it again in two months, when the Treasury will have depleted its borrowing authority, the deadline for stopping US$110 billion in automatic spending cuts arrives, and the law that funds the government expires.

At that point, with the United States on the verge of default, a painful sequestration and a government shutdown, we'd love to see the elusive "grand bargain". But another round of successful small deals will suffice, thank you.

One of the agreement's biggest lessons was that cross-party personal relationships matter. When Obama and House speaker John Boehner failed to work out a deal after repeated attempts spanning 18 months, Senate Republican leader Mitch McConnell turned to Vice-President Joe Biden. The two 70-year-olds served together for about a quarter of a century in the Senate, almost always on opposite sides of the issues yet never forgetting the validity of the other's political imperatives or point of view. In less than two days, they worked out the deal which Congress adopted.