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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Labour to strip "abusive" registered supporters of their vote in the leadership contest

The party is asking members to report intimidating behaviour - but is vague about what this entails. 

Labour already considered blocking social media users who describe others as "scab" and "scum" from applying to vote. Now it is asking members to report abuse directly - and the punishment is equally harsh. 

Registered and affiliated supporters will lose their vote if found to be engaging in abusive behaviour, while full members could be suspended. 

Labour general secretary Iain McNicol said: “The Labour Party should be the home of lively debate, of new ideas and of campaigns to change society.

“However, for a fair debate to take place, people must be able to air their views in an atmosphere of respect. They shouldn’t be shouted down, they shouldn’t be intimidated and they shouldn’t be abused, either in meetings or online.

“Put plainly, there is simply too much of it taking place and it needs to stop."

Anyone who comes across abusive behaviour is being encouraged to email validation@labour.org.uk.

Since the bulk of Labour MPs decided to oppose Labour leader Jeremy Corbyn, supporters of both camps have traded insults on social media and at constituency Labour party gatherings, leading the party to suspend most meetings until after the election. 

In a more ominous sign of intimidation, a brick was thrown through the window of Corbyn challenger Angela Eagle's constituency office. 

McNicol said condemning such "appalling" behaviour was meaningless unless backed up by action: “I want to be clear, if you are a member and you engage in abusive behaviour towards other members it will be investigated and you could be suspended while that investigation is carried out. 

“If you are a registered supporter or affiliated supporter and you engage in abusive behaviour you will not get a vote in this leadership election."

What does abusive behaviour actually mean?

The question many irate social media users will be asking is, what do you mean by abusive? 

A leaked report from Labour's National Executive Committee condemned the word "traitor" as well as "scum" and "scab". A Labour spokeswoman directed The Staggers to the Labour website's leadership election page, but this merely stated that "any racist, abusive or foul language or behaviour at meetings, on social media or in any other context" will be dealt with. 

But with emotions running high, and trust already so low between rival supporters, such vague language is going to provide little confidence in the election process.