A week before his inaugural, President Obama says he won’t negotiate with Republicans over raising the debt limit. 

At an unexpected news conference on Monday he said he won’t trade cuts in government spending in exchange for raising the borrowing limit. 

“If the goal is to make sure that we are being responsible about our debt and our deficit - if that’s the conversation we’re having, I’m happy to have that conversation,” Obama said. “What I will not do is to have that negotiation with a gun at the head of the American people.”

“It’s not all I would have liked,” says Republican Senator Lindsey Graham of South Carolina, speaking of the deal on the fiscal cliff, “so on to the debt ceiling.”

The battle over the fiscal cliff was only a prelude to the coming battle over raising the debt ceiling—a battle that will likely continue through early March, when the Treasury runs out of tricks to avoid a default on the nation’s debt.

The White House’s and Democrats’ single biggest failure in the cliff negotiations was not getting Republicans’ agreement to raise the debt ceiling.

The last time the debt ceiling had to be raised, in 2011, Republicans demanded major cuts in programs for the poor as well as Medicare and Social Security.

Why is the president back to making premature and unnecessary concessions to Republicans? Two central issues in the 2012 presidential election were whether the Bush tax cuts should be ended for people earning over $250,000, and whether Social Security and Medicare should be protected from future budget cuts. The president said yes to both. Republicans said no. Obama won.

I keep hearing that the billionaires and big corporations that poured all that money into the 2012 election learned their lesson. They lost their shirts and won’t do it again.

Don’t believe that for an instant.

It’s true their political investments didn’t exactly pay off this time around.

The “fiscal cliff” is a metaphor for a government that no longer responds to the biggest challenges we face because it’s paralyzed by intransigent Republicans, obsessed by the federal budget deficit, and overwhelmed by big money from corporations, Wall Street, and billionaires.

If we had a functional government America would address three “cliffs” posing far larger dangers to us than the fiscal one:

The child poverty cliff.

A half century ago America’s largest private-sector employer was General Motors, whose full-time workers earned an average hourly wage of around $50, in today’s dollars, including health and pension benefits.

Today, America’s largest employer is Wal-Mart, whose average employee earns $8.81 an hour. A third of Wal-Mart’s employees work less than 28 hours per week and don’t qualify for benefits.

There are many reasons for the difference—including globalization and technological changes that have shrunk employment in American manufacturing while enlarging it in sectors involving personal services, such as retail.

When the applause among Democrats and recriminations among Republicans begin to quiet down—probably within the next few days—the President will have to make some big decisions. The biggest is on the economy.

His victory and the pending “fiscal cliff” give him an opportunity to recast the economic debate. Our central challenge, he should say, is not to reduce the budget deficit. It’s to create more good jobs, grow the economy, and widen the circle of prosperity.

The deficit is a problem only in proportion to the overall size of the economy. If the economy grows faster than its current 2 percent annualized rate, the deficit shrinks in proportion. Tax receipts grow, and the deficit becomes more manageable.