We averted the so-called “fiscal cliff” right? Obama has signed the bill, markets around the world have exploded with joy, and every second tweet no longer includes the hashtag #fiscalcliff. It does feel like it, but, unfortunately, the real fiscal battle isn't even half over.

Yes there was a deal, and yes the short term drama is over. But the issues that were settled in the bill Obama has signed were never going to be the problem. The bill that Obama signed was almost entirely tax cuts, something that the Republicans and Democrats were already quite close on. Both parties agreed that taxes should not go up, the real difference between the two parties was one of extremes; the Democrats wanted taxes to go up on all but the top 1% of earners, the Republicans wanted taxes to remain low for everyone, the Democrats were pushing for a continuation of the payroll tax cuts, and the Republicans were pushing for the threshold on estate taxes to be higher if not abolished (among other things). Essentially the two parties were in agreement, just haggling over price. The major issue that the bill avoids, and that has been kicked down the road yet again, is that of spending cuts.

The extent and target of spending cuts represents the real nuts and bolts, partisan differences between the two parties. In short the Democrats wish the spending cuts to be smaller, and targeted on programs like the defence budget. Meanwhile the Republicans are pushing for much larger spending cuts, and want the cuts to largely come out of social welfare and entitlement programs. Both parties are deeply entrenched on these issues, and the fight over these issues will be much harder than the fight over the tax cuts.

You think the fight over the fiscal cliff was ugly? Just wait two months for the debt ceiling and the debate over spending cuts. The real fiscal drama isn't half over.