A US government shutdown could crash the recovery

Red alert.

Relax: the Russians are not about to invade! Washington, however, is staring at collapse: in mid-October, the Treasury has announced that it will be down to its last $30bn which, believe it or not, will only pay for half-a-day’s Federal expenditure. Yes, it’s that time of year again, when Washington stares at its Fiscal Cliff, as Congress must vote through the budget and the increased Total Federal Debt Limit.

This used to be an automatic agreement, but now it’s become a partisan issue between the Republican and Democrat parties. The problem is that the man in the White House is a Democrat president and the men of the Tea Party Republicans don’t like this at all. In particular they don’t like Obamacare, the President’s flagship policy, which begins enrolling the uninsured next Tuesday, as the rich will have to pay far higher taxes to pay for this universal healthcare for all, but especially for the poor.

So the Republicans argue that if the president wanted to bring in this hugely costly measure at a time of global economic recession and banking crisis, he should have cut other expenditures to pay for it. The president saw it differently: he was looking at higher taxes. Last year they struck a deal, which finally ended up with the Republican $80bn sequestration, or expenditure cuts, which hit the military procurement budget hard.

This year, however, the hard men of the Republicans are in no mood to compromise. They perceive a lame duck president, who has just lost a one-armed wrestling match with Vlad the Bad Putin over Syria. They perceive a chance to kill off Obama, Obamacare and the Democrats all in one go. They can see Hillary in the wings getting ready to stand, and the thought of Bill "I didn’t inhale!" back in their White House is just too much for them. This, they perceive, is their last chance but one to prevent the loss of four elections in a row – a calamity for the ageing, predominantly white GOP.

Who will blink first this time? If no one blinks, the US Federal government is bust and out of business. Washington will close and go into shut-down mode by lunchtime. It cannot pay its debts and cannot incur any more debts it cannot pay. The vote on all this is on Sunday, and it looks like a total impasse as we head for the weekend, with a 21-hour filibuster taking up all of last Wednesday.

What happens in a shut-down, the last of which was in 1996? Schools are shut, pensions aren’t paid and thousands of suppliers have to wait for their money. More seriously, the chances are that one of the many expenditures to be cut will be interest on Treasury Bills, which could wreak global market havoc, send interest rates sharply up and kill off the recovery, and even trigger the next banking crisis and a global depression. This is nasty, and could get serious, fast.

Stephen Hill writes for Spear's Magazine

This piece first appeared here.

Photograph: Getty Images

This is a story from the team at Spears magazine.

Photo: Getty
Show Hide image

The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

0800 7318496