Debt ceiling, round two

The USA is once again on course for financial disaster through no fault but their own.

Remember the debt ceiling debacle, when the broken American political system led to the country losing its triple-A credit rating, and nearly resulted in the largest economy in the world defaulting on its debt? Well, joy of joys, in nine months, it's all going to happen again.

The problem is the basic disagreement was never actually resolved, but merely postponed until after the election so that the Republicans could get back to the important business of tearing their party apart with excruciating primaries and loony-fringe candidates. The deal that raised the ceiling required a spending bill to be passed in both houses of congress that substantially removes the deficit. If no such bill is passed, then on January 1st 2013, a whole raft of automatic spending cuts are introduced at once, bringing in what American commentators breathlessly describe as "European levels of austerity".

Not only that, but on the same day those cuts come in, the the Bush tax cuts and the Obama payroll tax cuts both expire, increasing the tax burden on millions of Americans. Oh, and emergency unemployment benefits also time out.

Congress has had ample warning to sort out the mess (almost as much warning as it had before the initial face-off), but yesterday the House of Representatives rejected two possible solutions. The first, a bipartisan bill which has the most chance of passing in the Democrat-controlled Senate, was defeated 382-38; the second, the White House's preferred option, was unanimously rejected 414 to 0. Instead, it seems likely that the House will pass, along strict party lines, Republican Congressman Paul Ryan's bill, which has no hope of passing getting through any Democrats, calling as it does for "draconian reductions in the federal government's commitment to financing health care for the disabled, the elderly, and the poor", in the words of Slate's Matt Yglesias. So the Senate will reject the bill, and the whole damn thing will start again.

Faced with the unappealing task of repeating last summer, Fed chairman Ben Bernanke has weighed in, telling the House Financial Services Committee:

Under current law, on Jan. 1, 2013, there’s going to be a massive fiscal cliff of large spending cuts and tax increases. I hope that Congress will look at that and figure out ways to achieve the same long-run fiscal improvement without having it all happen at one date.

All those things are hitting on the same day, basically. It’s quite a big event.

Barclays Capital has calculated that the combined effect of all these cuts hitting at once would wipe 2.8 per cent off the annualised growth rate for the first quarter of 2013, bringing them from 3 per cent to 0.2 per cent growth. For comparison, the UK – which is voluntarily enacting "European levels of austerity" – is currently forecast by the OBR to have 2.0 per cent growth over the year, and the OECD forecast yesterday had us on minus 0.4 per cent over the first quarter of 2012, with the USA already at growing at 3 per cent annualised.

The worst case scenario is unlikely to happen; just as an actual default was unlikely to happen when the debt ceiling needed to be raised. The most likely outcome is that Congress will simply postpone everything once again, renewing the tax cuts and shrinking, but not removing, the automatic spending cuts. But all of this has led Bloomberg's Clive Cook to declare:

But there’s a much bigger threat to U.S. power [than the growth of China]: the increasingly abject failure of the country’s own political class.

Congressman Paul Ryan. Credit: Getty

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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The government has quietly shut the door on vulnerable child refugees

The government has tried to halt the Dubs Amendment, a scheme designed to save thousands of vulnerable child refugees.  

The "Dubs Amendment" to the Immigration Bill of last year, in which the government begrudgingly promised to accept 3,000 unaccompanied child refugees from other countries in Europe, was halted this month after only 350 children had been admitted.

It has since become absolutely clear that the government is wriggling out of its obligation to accept child refugees, shutting the door on the most vulnerable. 

The amendment was named after my Labour colleague in the House of Lords. Alfred Dubs, who grew up in Britain and was saved from the hands of the German Nazi regime by Nicholas Winton, who rescued 669 children virtually single-handedly from Czechoslovakia.

The decision – announced at a time when the media was mainly concentrating on Brexit - has since been the source of much outcry both within Parliament and beyond. People across Britain are clear that the government must end these efforts to prevent refugees arriving here, and this is not who we as a society are.

Labour simply cannot accept the government’s decision, which seems to breach the spirit of the law passed with cross-party support. I have challenged Home Secretary Amber Rudd on the issue. 

The government's actions have also been criticised by Yvette Cooper, who heads Labour’s refugee task force and the Home Affairs select committee, the Archbishop of Canterbury, Justin Welby, and Scotland’s First Minister, Nicola Sturgeon, who called it “a clear dereliction of the UK’s moral and global duty”. 

Then at the recent Bafta awards, a number of those in attendance including the actor Viggo Mortensen, also wore lapel badges reading “Dubs now”.

And we have seen more than 200 high-profile public figures including Ralph Fiennes, Keira Knightley, Sir Mark Rylance, Gary Lineker, Michael Morpurgo and the band Coldplay write to Theresa May calling on her government not to close the scheme, decrying the decision as “truly shameful” and adding that “the country we know and love is better than this". 

As the letter states, it is embarrassing, that this government cannot match even Winton’s total. As his own daughter put it in her letter to the Prime Minister, “I know we can’t take in every unaccompanied child in Europe, but I suppose there was a sense when the government accepted the Dubs Amendment that they would make a bigger contribution than they have.”

We need to be clear that where safe and legal routes are blocked for these children, they are left with a terrible choice between train tracks on the one hand, and people traffickers on the other. These children have been identified as the most vulnerable in the world, including girls without parents, who are susceptible to sex traffickers.

The government’s decision is particularly disappointing in that we know that many local authorities across Britain, which assume responsibility for the children once they are admitted to the country, are willing to accept more refugees.

Yet the public outcry shows we can still force a change.

Interestingly, former Conservative minister Nicky Morgan has argued that: “Britain has always been a global, outward-facing country as well as being compassionate to those who need our help most. The Conservative party now needs to demonstrate that combination in our approach to issues such as the Dubs children.”

Let’s keep the pressure up on this vital issue. The internationally agreed principles and the Dubs Amendment were never conceived as a “one-off” - they should continue to commit to meeting their international treaty obligations and our own laws.

And on our part, Labour commits to meeting the obligations of the Dubs Amendment. We will restore the scheme and accept some of the most vulnerable children in the world.

 

Diane Abbott is Labour MP for Hackney North and Stoke Newington, and shadow home secretary. She was previously shadow secretary for health.