Obama weakened as US passes debt bill

The immediate crisis has been averted, but the president has capitulated on nearly all of his key de

Hours ahead of the Treasury deadline that could have seen the US default for the first time in its history, the House of Representatives voted overwhelmingly in favour of a deal to raise the debt ceiling.

Reluctantly, both Democrats and Republicans voted the legislation through, although there were significant revolts on each side. It passed by 269 to 161 votes.

It will now be voted on by the Senate, although this is largely a formality as it has a Democratic majority. The House, which since November's mid-terms has been made up of many hardline Tea Party Republicans, was the main problem. Although the bill is seen by many as a complete capitulation by the president, many Republicans are still angry that the cuts outlined in the legislation do not go far enough.

While there is a sense of relief that the crisis has been ended without a potentially catastrophic default, Democrats are understandably frustrated as they have emerged from weeks of stand-off with little to show for it. Not only has Barack Obama surrendered on most of the key points, promising more than $2tn in spending cuts over the next ten years, but because a deal was reached so close to the deadline, the bill has not undergone the normal scrutiny.

It is a significant shift in fiscal policy at a time when economic recovery is fragile. Unemployment remains above 9 per cent, growth is slowing, and there is now no scope for any economic stimulus. Democrats also fear that it is the poor who will lose the most. In one of his main surrenders, Obama has agreed not to seek extra tax revenue. Given that George Bush's tax cuts for the rich are the main cause of the deficit (see this chart), this means the deficit will stay sky-high. Democrats hope to re-open this debate at a later stage.

The sense that Obama has caved in to the unreasonable voices on the right is also a cause of frustration. Writing last night, the Nobel-winning economist Paul Krugman criticised Obama for refusing to consider tabling the 14th Amendment to push his version through:

Those legal options are still there. Obama can move now; and even if he eventually loses in the courts, that gives him time.

Sure, it's risky. But the whole situation is immensely risky, thanks to the extremism and bloody-mindedness of the right. There are no safe options, and trying to play it safe when there is no safety lands you, well, where Obama is right now.

While laudable in theory, Obama's wish to seek reasonable, bipartisan solutions in the most partisan, extreme era the White House has seen for decades makes him a hostage to fortune.

The immediate crisis may have been averted, but this stand-off has shown how drastically the mainstream debate has been pulled to the right. It has also given a hint of the lines along which the next election will be fought -- drastically differing views on the size and scale of the state. Obama would do well to find his voice and be more assertive by then, if he does not want to lose the support of his own party.

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

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Why Theresa May won't exclude students from the net migration target

The Prime Minister believes the public would view the move as "a fix". 

In a letter to David Cameron shortly after the last general election, Philip Hammond demanded that students be excluded from the net migration target. The then foreign secretary, who was backed by George Osborne and Sajid Javid, wrote: "From a foreign policy point of view, Britain's role as a world class destination for international students is a highly significant element of our soft power offer. It's an issue that's consistently raised with me by our foreign counterparts." Universities and businesses have long argued that it is economically harmful to limit student numbers. But David Cameron, supported by Theresa May, refused to relent. 

Appearing before the Treasury select committee yesterday, Hammond reignited the issue. "As we approach the challenge of getting net migration figures down, it is in my view essential that we look at how we do this in a way that protects the vital interests of our economy," he said. He added that "It's not whether politicians think one thing or another, it's what the public believe and I think it would be useful to explore that quesrtion." A YouGov poll published earlier this year found that 57 per cent of the public support excluding students from the "tens of thousands" target.

Amber Rudd, the Home Secretary, has also pressured May to do so. But the Prime Minister not only rejected the proposal - she demanded a stricter regime. Rudd later announced in her conference speech that there would be "tougher rules for students on lower quality courses". 

The economic case for reform is that students aid growth. The political case is that it would make the net migration target (which has been missed for six years) easier to meet (long-term immigration for study was 164,000 in the most recent period). But in May's view, excluding students from the target would be regarded by the public as a "fix" and would harm the drive to reduce numbers. If an exemption is made for one group, others will inevitably demand similar treatment. 

Universities complain that their lobbying power has been reduced by the decision to transfer ministerial responsibility from the business department to education. Bill Rammell, the former higher education minister and the vice-chancellor of Bedfordshire, said in July: “We shouldn’t assume that Theresa May as prime minister will have the same restrictive view on overseas students that Theresa May the home secretary had”. Some Tory MPs hoped that the net migration target would be abolished altogether in a "Nixon goes to China" moment.

But rather than retreating, May has doubled-down. The Prime Minister regards permanently reduced migration as essential to her vision of a more ordered society. She believes the economic benefits of high immigration are both too negligible and too narrow. 

Her ambition is a forbidding one. Net migration has not been in the "tens of thousands" since 1997: when the EU had just 15 member states and the term "BRICS" had not even been coined. But as prime minister, May is determined to achieve what she could not as home secretary. 

George Eaton is political editor of the New Statesman.