The fiscal cliff agreement approved by Congress is the worst of both worlds – increasing taxes while boosting spending at the same time, according to David Malpass, president of economic consulting firm Encima Global and former deputy assistant Treasury Secretary during the Reagan administration.

“[T]he damage can't be undone,” he writes in The Wall Street Journal. “Taxes are going up for all working Americans. And so is the size of government.”

The increase in payroll taxes assures that even the middle class will owe more to Uncle Sam, Malpass says. And spending won’t be cut.

Editor's Note: The IRS’ Worst Nightmare — How to Pay Zero Taxes

“[T]he president made clear that his goal isn't to get business going again but instead to expand government and redistribute income,” he writes. And he doesn’t foresee Washington making any progress on budget issues in coming months.

So what’s the solution? Congress should insist on a debt-to-gross domestic product limit, he suggests.

If that limit is broken, the president should have the right to underspend congressional appropriations and propose fast-track entitlement reductions. But the president would have to provide public monthly reports on excess spending and government employees earning more than $100,000 wouldn’t receive raises.

In the financial markets, meanwhile, the dominant sentiment is relief.

“We sold off on the uncertainty of what it means to go over the fiscal cliff and that’s been removed,” James Paulsen, chief investment strategist at Wells Capital Management, tells Bloomberg. “We’re re-valuing the [stock] market based on what’s closer to the underlying economy.”

Editor's Note: The IRS’ Worst Nightmare — How to Pay Zero Taxes