US Senate does something unbelievable: passes a bill

Taxmaggedon's not averted, but the competition is on fair ground

The United States got a little more likely to avoid Taxmaggedon yesterday, as the Senate voted narrowly to pass the Democrats' bill extending "middle-class" tax cuts 51-48.

On December 31st, 2012, the tax cuts passed by George Bush will all expire at once, along with a number of other tax cuts and spending provisions. If this isn't averted, the resulting economic shock – dubbed a "fiscal cliff" by Fed chairman Ben Bernanke, and Taxmaggedon by others – has been predicted to knock 4 per cent from US growth in 2013.

The strange thing about the situation, though, is that both parties want to avert it. Unfortunately, their chosen outcomes are different enough that each would rather let the nation burn and blame it on the other than pass something they don't agree with.

The desired outcome for Republicans is keeping all the tax cuts except for two – Obama's payroll tax cut, and the tax cuts implemented in the 2009 stimlus package. Not coincedentally, these are two of the cuts which affect low-income people most, and as a result, the party isn't hugely eager to mention that they are in favour of repealing them with the "Tax Hike Prevention Act of 2013" (which will directly implement tax hikes. America).

The Democrats, however, want to keep those low-income tax cuts, and also all of the Bush tax cuts up to $250,000 per year. Despite the fact that only 2 per cent of the country earns above that, they have come to be called the "middle-class" tax cuts. In return, they want to soak the rich a bit more, reverting marginal tax rates above that level to where they were in the Clinton era, and implementing the so-called "Buffet rule" to prevent brazen tax avoidance.

It is clear, however, that there are a large number of tax hikes which both parties want to avoid. So why the reticence? Because after the election – indeed, after Taxmaggedon actually takes effect – it will be a lot easier to get bipartisan support. Right now, the Democratic position involves tricking or cajoling Repbulicans into voting for tax hikes, even if only on the rich. But coming to that same position in 2013 will involve voting for tax cuts, since the hikes they want will happen automatically. That vote is a far more palatable prospect.

So while the Democrat-controlled Senate passed the their preferred bill, the Republican House of Representatives in gearing up to reject it out of hand. It will not make it to the President's table in this form, and nothing is likely to until at least November. 

But there is, buried in this, a small bit of good news. Because the Senate did something rather unusual: they had a vote which was won by the side with the most people on it. Normally, the arcane standing orders of the Senate require a supermajority, of at least 60, to win any vote - otherwise it can be filibustered indefinitely, preventing any other business from occurring. The fact that this was passed by a simple majority could mean a simmering of tensions on the matter, or an eagerness (however slight) to work together. Or it could be that they knew it wouldn't pass the House and weren't in a mood to fight.

Time, as ever, will tell.

Senate majority leader Harry Reid, the Democrats' man in the Senate. Photograph: Getty Images

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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Tom Watson rouses Labour's conference as he comes out fighting

The party's deputy leader exhilarated delegates with his paean to the Blair and Brown years. 

Tom Watson is down but not out. After Jeremy Corbyn's second landslide victory, and weeks of threats against his position, Labour's deputy leader could have played it safe. Instead, he came out fighting. 

With Corbyn seated directly behind him, he declared: "I don't know why we've been focusing on what was wrong with the Blair and Brown governments for the last six years. But trashing our record is not the way to enhance our brand. We won't win elections like that! And we need to win elections!" As Watson won a standing ovation from the hall and the platform, the Labour leader remained motionless. When a heckler interjected, Watson riposted: "Jeremy, I don't think she got the unity memo." Labour delegates, many of whom hail from the pre-Corbyn era, lapped it up.

Though he warned against another challenge to the leader ("we can't afford to keep doing this"), he offered a starkly different account of the party's past and its future. He reaffirmed Labour's commitment to Nato ("a socialist construct"), with Corbyn left isolated as the platform applauded. The only reference to the leader came when Watson recalled his recent PMQs victory over grammar schools. There were dissenting voices (Watson was heckled as he praised Sadiq Khan for winning an election: "Just like Jeremy Corbyn!"). But one would never have guessed that this was the party which had just re-elected Corbyn. 

There was much more to Watson's speech than this: a fine comic riff on "Saturday's result" (Ed Balls on Strictly), a spirited attack on Theresa May's "ducking and diving; humming and hahing" and a cerebral account of the automation revolution. But it was his paean to Labour history that roused the conference as no other speaker has. 

The party's deputy channelled the spirit of both Hugh Gaitskell ("fight, and fight, and fight again to save the party we love") and his mentor Gordon Brown (emulating his trademark rollcall of New Labour achivements). With his voice cracking, Watson recalled when "from the sunny uplands of increasing prosperity social democratic government started to feel normal to the people of Britain". For Labour, a party that has never been further from power in recent decades, that truly was another age. But for a brief moment, Watson's tubthumper allowed Corbyn's vanquished opponents to relive it. 

George Eaton is political editor of the New Statesman.