No fiscal cliff, but some sudden austerity nonetheless: That sums up the last minute legislation that passed Congress yesterday to limit the impact of the 2011 Budget Control Act.

Not surprisingly, it took two long time adversaries and partners, Vice President Joe Biden and Senate Minority Leader Mitch Connell (R-KY), to reach a deal others’ passions and political realities prevented. The particulars pleased no one entirely, and in fact outraged partisans on both sides. And it’s far from the last battle we’ll see on budget issues that will likely dominate the second Obama Administration, despite the president’s best efforts.

This deal, however, does accomplish several things, so far as we investors are concerned. First, it eliminates a dose of austerity so severe it could have pushed the US economy back into recession, despite its recent acceleration.

That doesn’t mean some companies won’t falter in 2013. And to the extent there is a multiplier effect, the economy will run more slowly. But there are likely to be far fewer crackups than if $600 billion in tax increases and government spending cuts had suddenly kicked in. In fact, as we see growth pick up, market valuations should adjust higher to reflect a reduced fear level, at least for companies that do hold it together as businesses.

Second, the deal establishes some surety on taxes. The “permanent” extension of Bush era tax rates for annual income of $400,000 and less ($450,000 for couples) was basically a midpoint of sorts between Democrats’ desire to cap rates for income of $200,000 and less and Republicans’ position of no tax hikes for anyone. And it may not create the certainty the 1993 Budget Act did to speed growth. But it does shield most from a sudden boost in rates that would have begun to show up later this month, though all wage earners will see a rise in Social Security taxes when they get their first paycheck of 2013.

Third, this deal settles the thorny issue of investment taxes. Long term capital gains and dividend tax rates will maintain parity, a huge victory for dividend paying companies that successfully argued for keeping incentives in place for income investors. The top rate goes to 20 percent, or 23.4 percent including the surtax to fund the Affordable Healthcare Act, known popularly as Obamacare. That’s far less than 39.6 percent that would have kicked in for dividends absent a deal on the fiscal cliff, and it’s unlikely to dim the appeal of dividends even at those high brackets.

Master limited partnerships will not see any change in their tax status under the legislation passed this week. And several corporate tax breaks set to expire also got a new lease on life, including apparently for renewable energy.

As for spending cuts, the most drastic of these have been postponed for two months, such as the “sequester” that Defense officials warned could have cost 800,000 jobs. That leaves a fight for another day when the new Congress takes office. Neither is the debt ceiling issue resolved and there’s still much to be hammered out on deductions for upper income taxpayers, which the president wants to cut back.

Even for these matters, however, the deal passed January 1 buys time to reach a deal that softens the impact of sudden austerity. And as investors, that leaves us in far better stead than we were just a few days ago. I’ll have more throughout the month on how these issues affect recommendations.