The battle over the US deficit is not over yet

Obama puts tax rises back on the table - but will his words be matched with action?

 

In the aftermath of a last-minute deal to raise the US debt ceiling, Barack Obama has hinted that tax rises may be back on the agenda.

The immediate crisis of the US potentially defaulting on its debt was averted with a last minute deal, but politicians on both sides of the debate are still unhappy. Much of the attention has been focused on the intransigent Tea Party faction of the Republican Party, but it would be wrong to under-estimate the anger among Democrats.

Many feel that Obama capitulated far too much ground, agreeing to huge scale cuts in public spending.

While Republicans have insisted that the deal does not include tax rises, Obama said in a short statement that the national debt could only be reduced through a combination of spending cuts and tax rises, particularly for big corporations and the very wealthy. In a return to the rhetoric he entered the debt battle using, he said:

Everyone is going to have to chip in. That is only fair. That's the principle I'll be fighting for during the next phase of this process.

And fight he will have to, if he wants to get tax rises through. His attempt to end the Bush-era tax cuts last year triggered outrage and - once again - he relented, agreeing to extend them until 2012. Ending these enormous tax cuts is the obvious way to reduce the deficit (you can see here how much they contributed to the country's huge debt), but Obama may yet decide it is too risky so close to an election.

Putting tax rises back on the table in as serious way will reignite the ideological battle that brought America to the brink of default this week.
Indeed, many Republicans remain dissatisfied with the current deal, arguing that its spending cuts do not go far enough. Many Tea Party activists still oppose it, even though that their representatives successfully pushed the entire debate far to the right despite controlling less than half of one House ("I hate the deal," said Andrew Hemingway, chairman of the Republican Liberty Caucus of New Hampshire)..

Obama has already eloquently argued that those most able to pay should do their bit for deficit reduction, at the start of this battle. There is a clear ideological case to be made at the next election: that tax cuts for corporations and the super-rich should not be maintained at the cost of healthcare for pensioners. However, if his words are not matched by confident, decisive action, there is no point in reopening the debate. He has a lot of work to do if he is to shore up support among his own support-base, let alone the country at large.

 

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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Northern Ireland is another Brexit circle Theresa May must square

The Prime Minister's promise to avoid border controls could collide with the imperative of limiting EU immigration. 

For much of the EU referendum, Theresa May shrewdly adopted the low profile of a "reluctant Remainer". One of her few memorable interventions was over Northern Ireland. During a visit to the province (which voted Remain by 56-44), the then home secretary said that it was "inconceivable" that new border controls would not be imposed in the event of Brexit. "If we were out of the European Union with tariffs on exporting goods into the EU, there’d have to be something to recognise that between Northern Ireland and the Republic of Ireland," May warned. "And if you pulled out of the EU and came out of free movement, then how could you have a situation where there was an open border with a country that was in the EU and had access to free movement?"

Yet as prime minister, May has visited Northern Ireland today with a diametrically opposed message. She will support the Irish government's stance that there should be no "hard border" between Northern Ireland and the Republic and that passport-free travel should continue. 

There is an awareness among the EU of the disruptive effect that new controls would have on the peace process. "It's a special situation and it has to be found a special place in the negotiations," François Hollande said during a recent meeting with Irish Taoiseach Enda Kenny. But how special, like so much else, depends on the deal the UK strikes with the rest of the EU. If Britain imposes limited controls on free movement (such as an "emergency brake") and, at the very least, maintains visa-free travel, it will easier to maintain present arrangements with Northern Ireland. But should May bow to pressure from Conservative MPs and others to fully end free movement, it will be harder to justify an open Irish border.

As in the case of Scotland, the imperative of preserving the UK collides with the imperative of unifying the Tories. "Brexit means Brexit," May has repeatedly stated. But beyond leaving the EU, there is no agreement on what this means. For both Scotland and Northern Ireland, the best Brexit would be a "soft" version that preserves as much of the status quo as possible (through Single Market membership). But Tory MPs and many Leave supporters voted for a harder variety. Reconciling these poles will be the defining task of May's premiership. 

George Eaton is political editor of the New Statesman.