"Fiscal cliff" could knock 6.5% off America's Q1 and Q2 annualised growth

"Taxmaggedon" would hit in January

The American Congressional Budget Office (the inspiration for our own Office of Budget Responsibility) has released a report warning that the impact of the upcoming "fiscal cliff" would be to wipe 4 per cent from GDP growth for 2013.

The fiscal cliff – a phrase coined by federal reserve chairman Ben Bernanke – is the result of a series of several major budget provisions all expiring at once, at the same time as some of the automatic cuts negotiated as part of the debt ceiling crisis last summer come into effect, and several tax cuts time out. More broadly, though, it is the result of America's frankly broken political system.

In March, Congress failed to pass two potential measures which would have ended the crisis:

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.

If something is not passed by the time the various provisions expire, on 31 December, then the CBO estimates that:

Those policies will reduce the federal budget deficit by $607 billion, or 4.0 percent of gross domestic product (GDP), between fiscal years 2012 and 2013. The resulting weakening of the economy will lower taxable incomes and raise unemployment, generating a reduction in tax revenues and an increase in spending on such items as unemployment insurance. With that economic feedback incorporated, the deficit will drop by $560 billion between fiscal years 2012 and 2013, CBO projects.

If all the fiscal blows are deflected, the economy should grow by 5.3 per cent (annualised) in the first half of next year. If they aren't, it will instead contract by 1.3 per cent.

The coming showdown has been compared by many to the debt ceiling crisis, when Congress hit deadlock last summer over a budgetary provision which would have caused America to default on its debt, but in many ways, it is more dangerous still. The debt ceiling itself will reenter the political battleground in spring of 2013, and the Republican leader John Boehner is signalling that he will play hardball over the issue. Then there's the fact that the deal will be happening shortly after the presidential election so there is no incentive for dealmaking to start until November; both parties' incentives will differ greatly depending on who will be inheriting the mess.

Related, Joe Weisenthal suggests the most apocalyptic scenario possible:

It's very easy to imagine Romney winning the popular vote and Barack Obama winning the electoral college. In fact, the electoral college map is VERY favorable to Obama. This scenario is definitely possible and it would be the fiscal cliff Black Swan.

If you thought Congressional Republicans were going to be intransigent on the debt ceiling, multiply that by 10x. Any goodwill would be dead as the Republicans would feel a mandate based on the desires of the majority of the people, and Obama would be weak.

It would be NUTS!

Republican Speaker John Boehner. 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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Theresa May’s stage-managed election campaign keeps the public at bay

Jeremy Corbyn’s approach may be chaotic, but at least it’s more authentic.

The worst part about running an election campaign for a politician? Having to meet the general public. Those ordinary folk can be a tricky lot, with their lack of regard for being on-message, and their pesky real-life concerns.

But it looks like Theresa May has decided to avoid this inconvenience altogether during this snap general election campaign, as it turns out her visit to Leeds last night was so stage-managed that she barely had to face the public.

Accusations have been whizzing around online that at a campaign event at the Shine building in Leeds, the Prime Minister spoke to a room full of guests invited by the party, rather than local people or people who work in the building’s office space.

The Telegraph’s Chris Hope tweeted a picture of the room in which May was addressing her audience yesterday evening a little before 7pm. He pointed out that, being in Leeds, she was in “Labour territory”:

But a few locals who spied this picture online claimed that the audience did not look like who you’d expect to see congregated at Shine – a grade II-listed Victorian school that has been renovated into a community project housing office space and meeting rooms.

“Ask why she didn’t meet any of the people at the business who work in that beautiful building. Everyone there was an invite-only Tory,” tweeted Rik Kendell, a Leeds-based developer and designer who says he works in the Shine building. “She didn’t arrive until we’d all left for the day. Everyone in the building past 6pm was invite-only . . . They seemed to seek out the most clinical corner for their PR photos. Such a beautiful building to work in.”

Other tweeters also found the snapshot jarring:

Shine’s founders have pointed out that they didn’t host or invite Theresa May – rather the party hired out the space for a private event: “All visitors pay for meeting space in Shine and we do not seek out, bid for, or otherwise host any political parties,” wrote managing director Dawn O'Keefe. The guestlist was not down to Shine, but to the Tory party.

The audience consisted of journalists and around 150 Tory activists, according to the Guardian. This was instead of employees from the 16 offices housed in the building. I have asked the Conservative Party for clarification of who was in the audience and whether it was invite-only and am awaiting its response.

Jeremy Corbyn accused May of “hiding from the public”, and local Labour MP Richard Burgon commented that, “like a medieval monarch, she simply briefly relocated her travelling court of admirers to town and then moved on without so much as a nod to the people she considers to be her lowly subjects”.

But it doesn’t look like the Tories’ painstaking stage-management is a fool-proof plan. Having uniform audiences of the party faithful on the campaign trail seems to be confusing the Prime Minister somewhat. During a visit to a (rather sparsely populated) factory in Clay Cross, Derbyshire, yesterday, she appeared to forget where exactly on the campaign trail she was:

The management of Corbyn’s campaign has also resulted in gaffes – but for opposite reasons. A slightly more chaotic approach has led to him facing the wrong way, with his back to the cameras.

Corbyn’s blunder is born out of his instinct to address the crowd rather than the cameras – May’s problem is the other way round. Both, however, seem far more comfortable talking to the party faithful, even if they are venturing out of safe seat territory.

Anoosh Chakelian is senior writer at the New Statesman.

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