For the second time in 18 months the US has pulled back from the brink of economic crisis. A last-minute bipartisan deal between the White House and Congress late on Tuesday (US time) headed off across-the-board tax rises and public spending cuts worth more than US$600 billion. This was the so-called fiscal cliff, a legacy of failure to agree on budget deals in the past, which threatened Americans with recession and the fragile global economy with a slowdown.
The political drama was a rerun of August 2011, when the US was on the brink of national default. Then, Congress finally reached a deal to raise the national debt ceiling so the government could continue to borrow to meet its obligations. This flirtation with the unthinkable prompted incredulity at the way the world's most powerful economy conducts its affairs. Recent events will reinforce that belief.
The difference this time is the degree of political theatre. Once the White House forged a deal with Republican senators, there was little doubt it would pass the House of Representatives. Some Republicans abandoned a plan to hold out for spending cuts. Not only did they realise that failure to pass the deal could roil financial markets when they reopened after the New Year holiday, but opinion polls made it clear the public would lay the blame at their door.
More serious brinkmanship looms in two months, when the government runs out of borrowing authority and asks Congress to raise the debt ceiling again. This will coincide with the next "cliff" - the expiry of two months' suspension of military and domestic spending cuts worth more than US$100 billion. Because of the way events have unfolded, without any meaningful attempt to address massive sovereign debt and the deficit, Republicans will hold a stronger hand next time in a fight for meaningful spending cuts that promises to be ugly.
An impasse over the debt ceiling could pose an even greater risk to the global economy than the fiscal cliff. China is not the only country to remind the US that it has a global economic responsibility to put its house in order. Australia's treasurer, for one, says it needs to reach a wider agreement before the world sees the threat as having passed.
If a divided Washington can no longer deliver the grand bargains with which it once bridged major differences, it still needs to rediscover a bipartisan spirit if rancour is not to drive a step-by-step process to an unnerving brink again and again.