Molly Ball Dec 31 2012, 4:39 PM ET

Yes, we’re going over the cliff. Yes, there’s probably going to be a bipartisan deal. No, you shouldn’t freak out.

Reuters

So, you want to go out drinking for New Year’s Eve, but you also want to know what’s going on with the fiscal cliff. (Surely this describes most Atlantic readers: both fun-loving and well-informed.) Do we have a deal or what? If we do, what’s in it? Is it good or bad? Here’s a quick FAQ to make you sound smart — at least until the third glass of champagne. After that, we can’t help you.

Is there going to be a deal? What’s the latest? A deal appeared imminent late Monday, with Senate Minority Leader Mitch McConnell declaring shortly before 3 p.m. that the two sides were very, very close and had reached an agreement on all of the tax issues. President Obama said earlier in the afternoon that a deal was within sight. Led by McConnell (for the Republicans) and Vice President Biden (for the Democrats), the two sides had come to tentative agreement on making permanent the current tax rates for individual income under $400,000 and family income under $450,000, and allowing rates to rise to their Clinton-era levels for higher incomes. Accord had also been reached on permanent fixes to the Alternative Minimum Tax, capital gains tax, and estate tax, plus temporary measures to address the child tax credit and earned income tax credit. National Journal ‘s Chris Frates has the details here.

What are they still haggling about? The fact that the parties have agreed on tax rates resolves the No. 1 sticking point up to now and bodes extremely well for a deal on the rest. But the rest still has to be worked out. Remember, the major components of the so-called fiscal cliff are (1) the expiration of the Bush tax cuts, and (2) the spending cuts set to kick in automatically as a result of the sequester agreement that resolved the 2011 debt-ceiling fight. With the former largely dealt with, the latter is the biggest thing still on the table. Neither side wants to see defense and discretionary spending indiscriminately slashed as the sequester would do, but Republicans would like to see substantially more spending cuts in other areas to compensate.

How is the president feeling about all this? Obama gave a remarkably loose, jokey statement before a backdrop of middle-class Americans at the White House Monday afternoon, upbraiding Congress for not getting its you-know-what together on a more overarching agreement that would more meaningfully reduce the deficit and fix the tax code. Republicans acted stung by the president’s performance, but it appeared aimed primarily at convincing Senate Democrats that the deal was good enough to support. My preference would have been to solve all these problems in the context of a larger agreement, a bigger deal, a grand bargain, whatever you want to call it, Obama said. But with this Congress, that was obviously a little too much to hope for at this time.

How should Republicans be feeling about this? As a deal lurched into view Monday, McConnell was urging quick passage of the agreed-upon tax components, with spending cuts to be decided and passed later. That was leading to some grousing among conservative Republicans who noted, with some accuracy, that when the tax increases come up front, the hypothetical future spending cuts often have a way of evaporating. But a lot of Republicans seemed to be resigned to their fate, like Senator Lindsey Graham, who said on Fox News Sunday. Hats off to the president. He won. Graham added, I want to vote for it even though I won’t like it.

How about Democrats? Some on the left, like Senator Tom Harkin and commentator Jonathan Chait. were fretting that Obama was giving away the store by not holding to his initial threshold of $250,000 in income to be protected from tax hikes. This looks like a very bad deal the way this is shaping up, Harkin said on the Senate floor, noting that it would make permanent the vast majority of the tax cuts Democrats fought so hard against when they were proposed by President George W. Bush in 2001-03. Obama, in his statement, tried to quell such qualms, talking up the GOP’s concessions and warning of the consequences of the sequester cuts to liberal priorities like Head Start. Keep in mind that just last month Republicans in Congress said they would never agree to raise tax rates on the wealthiest Americans, Obama said. Obviously, the agreement that’s currently discussed would raise those rates, and raise them permanently.

Wait, don’t they still have to vote on this? Why are they all going home? ARE WE GOING OVER THE CLIFF? Calm down. Yes, the House was headed home late Monday and would not vote on any prospective deal before the dawn of the New Year. Yes, that technically means we’ll miss the December 31 deadline and go over the fiscal cliff. But what does that mean? It means tax rates have gone up on the income taxes you don’t have to file until April 2014; it means the government is supposed to start gradually implementing some cuts to programs. Both of these automatically-triggered events can be fixed retroactively by a vote in the next couple of days with no material effects. The biggest immediate danger of going over the cliff — which the anti-cliff-alarmists have always preferred to call a slope or a curb for exactly this reason — is that it would freak out the stock market. But the markets are closed until Wednesday, and investors aren’t likely to panic as long as it’s clear a deal is in the works.