Editorial: Mr Obama wins, with or without a budget deal

The broad principles of a long-term solution to the US budget deficit are clear

Elections, it is said, have consequences. However, you would be hard pressed to think so in the US right now. Six weeks after Barack Obama's solid win over Mitt Romney, the President seems as far away as ever from striking a deal with Republicans to prevent the country tumbling over the so-called "fiscal cliff", that many fear would halt the current slow recovery and send the US and perhaps the world into a new recession.

Time is running short. In just 17 days, if nothing is done, the 2001 and 2003 tax cuts passed under George Bush will expire, while mandatory reductions in government spending – part of the compromise that averted disaster in the 2011 deadlock over increasing the US debt ceiling – will kick in. The approaching Christmas holidays mean that, for all intents and purposes, the framework of an agreement should be in place by the end of this week, so that legislation can be passed before the new Congress convenes on 3 January. But there is precious little sign of that happening.

In fact, the broad principles of a long-term solution to the federal budget deficit – now running at seven per cent of GDP – are clear: a modest rise in personal tax revenue, coupled with spending cuts and, above all, steps to rein in the cost of the government's main social programmes, Medicare, Medicaid and Social Security, which, left unattended, threaten a debt explosion in the coming decades.

For the moment, however, there is stalemate, as both sides refuse to compromise on core beliefs. The President insists that taxes must be allowed to rise for wealthier Americans, while Republicans, who still control the House of Representatives that must approve the legislation, are holding out for larger cuts than Democrats can stomach in federal spending and curbs on entitlement programmes. Matters are not helped by the distant personal relationship between the two key players, Barack Obama and John Boehner, the House Speaker, and by the President's instinctive reluctance to wheel and deal – a crucial skill at moments like this.

What happens in the next fortnight is anyone's guess. Conceivably, the tough talk is posturing, and a deal will be reached. The gap between the parties, after all, is not unbridgeable: Mr Obama is seeking $1.4trn of tax increases over 10 years, while Republicans are offering $800bn of extra revenue, to be achieved mainly by closing loopholes in the existing tax code. The biggest sticking point appears to be the White House insistence that, while the Bush tax cuts would be extended for middle-income Americans, the wealthy must accept an increase in the top rate from 35 per cent to the 39 per cent that obtained before the Bush tax cuts.

Alternatively, the deadlock will persist, leading to a $2,000 increase in the average family's tax bill in 2013. Or – and precedent suggests this is most likely – there will be a stop-gap solution that postpones the day of reckoning by a few months. Never underestimate the politicians' ability to procrastinate.

In the longer term, though, November's election has had consequences – and none of them to the Republicans' advantage. With their vote, Americans told the party it had moved too far to the right, while the arch-conservative Tea Party movement had its wings severely clipped. Moreover, every poll since the election shows that a majority support higher taxes for the wealthy and would hold Republicans responsible for a failure to reach a deal. Which would lead to a splendid or disastrous irony, depending on your point of view. The party that since Ronald Reagan's day has fought for lower taxes would be blamed for bringing about America's biggest tax increase of modern times.