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.

Photo: Getty
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The Brexiteers have lost battles but they are still set to win the war

The prospect of the UK avoiding Brexit, or even a “hard” version, remains doubtful. 

Before the general election, the Brexiteers would boast that everything had gone their way. Parliament had voted to trigger Article 50 by a majority of 372. The Treasury-forecast recession hadn't occurred. And polls showed the public backing Brexit by a comfortable margin

But since the Conservatives' electoral humbling, the Leavers have been forced to retreat on multiple fronts. After promising in May that the dispute over the timetable for the Brexit talks would be "the fight of the summer", David Davis capitulated on the first day.

The UK will be forced to settle matters such as EU citizens' rights, the Irish border and the divorce bill before discussions begin on a future relationship. Having previously insisted that a new trade deal could agreed by 29 March 2019 (Britain's scheduled departure date), the Brexiteers have now conceded that this is, in Liam Fox's words, "optimistic" (translation: deluded). 

That means the transitional arrangement the Leavers once resisted is now regarded as inevitable. After the eradication of the Conservatives' majority, the insistence that "no deal is better than a bad deal" is no longer credible. No deal would mean the immediate return of a hard Northern Irish border (to the consternation of the Tories' partners the DUP) and, in a hung parliament, there are no longer the votes required to pursue a radical deregulatory, free market agenda (for the purpose of undercutting the EU). As importantly for the Conservatives, an apocalyptic exit could pave the way for a Jeremy Corbyn premiership (a figure they previously regarded as irretrievably doomed). 

Philip Hammond, emboldened by the humiliation of the Prime Minister who planned to sack him, has today outlined an alternative. After formally departing the EU in 2019, Britain will continue to abide by the rules of the single market and the customs union: the acceptance of free movement, European legal supremacy, continued budget contributions and a prohibition on independent trade deals. Faced with the obstacles described above, even hard Brexiteers such as Liam Fox and Michael Gove have recognised that the game is up.

But though they have lost battles, the Leavers are still set to win the war. There is no parliamentary majority for a second referendum (with the pro-Remain Liberal Democrats still enfeebled), Hammond has conceded that any transitional arrangement would end by June 2022 (the scheduled date of the next election) and most MPs are prepared to accept single market withdrawal. The prospect of Britain avoiding Brexit, or even a "hard" version, remains doubtful. 

George Eaton is political editor of the New Statesman.