The country will go over the fiscal cliff—that became certain late Monday when the House adjourned for the day.

But a deal is definitely forming, tentatively struck between Senate Minority Leader Mitch McConnell and Vice President Joe Biden after talks between McConnell and his Democratic counterpart, Senator Harry Reid, failed. It’s rumored to be as follows: an extension of the Bush rates up to $400,000 in annual income for individuals, and households that earn more than $450,000; a one-year extension of unemployment insurance; putting off both the military and domestic sequesters for two months (though Republicans are still trying to win commensurate cuts for that delay); setting the estate tax at 40 percent for inheritances over $5 million ($10 million for couples, and there’s still negotiations over indexing the estate tax); and capital gains and dividends rates going from 15 to 20 percent. There would be no action on the debt ceiling, and no extension of the payroll tax cut. There would be a handful of stimulative tax credits.

The White House spin on the pending agreement that it’s a good deal because it finally raises rates on top earners, which has the added benefit of finally “shatter[ing] 20 years of Republican orthodoxy on taxes, undercutting a core part of the party identity,” as Politico puts it. There are also zero entitlement cuts. The rest of the White House argument can be summed up like this: stimulus. True, the administration gave in some on the threshold for tax hikes, but it was a necessary concession to win the unemployment insurance extension and the stimulative tax credits. Also, the damaging sequester cuts are put off, at least for now. In short, this leaves the economy as untouched by austerity as is reasonably possible right now.

Republicans, meanwhile, are hanging their hats on the fact that they got Obama off of the $250,000 threshold, and ultimately this deal raises only $600 billion in revenue—which is less than the $800 billion House Speaker John Boehner offered at one point during the negotiations. It rips off the Band-Aid of the expiring Bush tax rates, which the GOP was never going to be able to stop—and now that White House leverage is gone. And crucially, by putting off the sequester for two months—around the time Congress must once again fund the federal government—and by not ceding an inch on the debt ceiling, it leaves the GOP in better position to win future battles, and to get those deep entitlement cuts they so badly want.

The bottom line: the Republicans are right. Obama gave too much revenue away in exchange for extremely paltry stimulus: these tax credits are nothing compared to what Obama was originally proposing, and don’t even make up for the loss of the lapsed payroll tax cut. Meanwhile, Republicans are absolutely correct that they will now be in position to extract painful concessions from the White House down the road, particularly in a debt ceiling fight—and Treasury Secretary Timothy Geithner just notified Congress that we’ve already hit it.

If you don’t think that assessment is true, just look at how the politics have played out today. Republicans reportedly leaked early news of the deal and suggested there was a lot more agreement than actually existed, so as to make Democrats look bad if it fell through. And Democrats in the Senate are indeed wary—numerous reports today indicate that Harry Reid hasn’t brought his caucus on board yet. Senators Sherrod Brown, Al Franken, Tom Harkin and others have told Reid they are opposed. Democrats indeed think the White House gave too much on taxes and are concerned that it didn’t solve the debt ceiling problem.

That’s why Joe Biden is headed to the Hill on Monday evening to try to win hesitant Democrats over. It’s also why President Obama gave a somewhat odd public appearance this afternoon in which he repeatedly grandstanded about Republican intransigence and stall tactics, even as a deal was being finalized. This sent Republicans into a fury, but Obama’s chest-thumping reflects the underlying dynamic: Republicans, in the Senate at least, are behind this deal, and he doesn’t need them. Democrats are not, and Obama was trying to fire up the team.

Progressive groups are working to stop the deal, too. MoveOn and CREDO are organizing against the deal, and this afternoon, the Progressive Change Campaign Committee sent an e-mail to Democratic staffers on the Hill urging them not to accept this deal:

“Progressives have consistently drawn a bright line that coincides with the overwhelming will of the people: Any deal must raise taxes on those making $250,000 at least to the Clinton rates—and no cuts to Social Security, Medicare, or Medicaid benefits. Raising the threshold to $400,000 means billions of dollars of pain will be transferred to the working poor and our grandparents, and that is not acceptable.”

PCCC also emailed its members and urged them to oppose a deal. Meanwhile, the AFL-CIO’s Richard Trumka tweeted that it’s “not a good #fiscalcliff deal if it gives more tax cuts to 2 percent and sets the stage for more hostage taking.”

This is exactly right. It’s worth stressing again. The deal is hugely problematic because it sets the stage for deep entitlement cuts in the future.

First, it shrinks the amount of revenue that will be available for any future deficit deals—the personal income rates, the estate tax, capital gains and dividend rates are all locked in. That’s the whole revenue enchilada.

Then it hands the Republicans several opportunities, in the debt ceiling and the sequester battles, to extract deep cuts. Senator Lindsey Graham touted this on the Senate floor this afternoon: he congratulated Obama for “winning” the tax debate and for possessing “the courage of his convictions,” and then said he was eager to display his own convictions when Congress “addressed” Medicare during the upcoming debt ceiling fight.

Obama said today that for any future negotiations like the debt ceiling, he will demand one dollar in revenue for one dollar in cuts. That’s his defense against this argument. But who can truly believe him? By giving in on the $250,000 threshold and a final debt ceiling resolution—both things Obama said he wouldn’t budge on—he’s made a huge strategic surrender, and don’t think Republicans haven’t noticed. They reportedly aren’t confident Obama will hold firm there—with good reason.

This could still get blown up in various ways. Senate Democrats could kill it. If they don’t, when it goes to the House it could be defeated by a bipartisan coalition of liberals who share the same concerns and right-wing Republicans who will reject a bill that has no spending cuts. My guess is this compromise doesn’t survive, but it’s anyone’s guess at this point.

What’s known for sure is that we are officially going off the cliff. An interesting post-script to this saga: since all taxes will go up at midnight, that means whatever deal is struck to lower tax rates for most Americans—and somehow, that deal will be struck—will be the biggest deficit hike legislation in American history. Funny country we live in.