First, and most importantly, they've done what's right for the country by refusing to burden any Americans (including the upper income crew who consume goods and services and create jobs) with new taxes.
They've also reassured nervous Americans that someone in Washington understands it's not that Americans are overtaxed -- it's that the politicians have overspent. That is going to boost the confidence (at least slightly) of those who have wondered, with good reason, whether the runaway train that's federal spending will ever be put back on track.
Second, it's a great political victory, as well. The left is in hysterics, threatening the President with defeat in 2012 as a result of the cave-in, even as the GOP remains united. What's more, by agreeing to a two-year extension of the cuts, the President has created a situation in which he is going to have to either argue for tax increases as he kicks off his reelection campaign, or else brave the wrath of the left once again.
Some Democrats are threatening to scuttle the tax deal. It would be TERRIBLE for the country if they succeeded. But it's a gift to the GOP to have Democrats out themselves once again as a group who would rather see everyone suffer from a tax increase than allow the most productive Americans to keep more of their own money -- during a recession, no less.
In other words, many Democrats simply want to keep feeding at the federal trough, and don't care what kind of economic damage they have to impose on the country in order to do it. Thanks for spelling it out, guys.