The fiscal cliff isn't scary to anyone but Republicans

Taxmageddon could be a blessing in disguise.

Now that Barack Obama has won re-election, the focus in the US has turned to the next crisis brewing: the fiscal cliff. The event was named by Fed Chairman Ben Bernanke, and although I have always preferred "taxmageddon", it's stuck.

The "cliff" is the automatic introduction of roughly $600bn of tax increases and spending cuts, and is due to hit in early 2013, and the nature of what it involves has led some, like Annie Lowrey, the New York Times' economics reporter, to argue that a more apposite name might be the "austerity cliff". In fact, if it hit, the fiscal cliff would be one of the most severe austerity policies the world had ever seen. This chart, from Quartz's David Yanofsky, lays it out in comparison to other notable contractions:

But while the cliff is indeed dangerous if the country were allowed to jump off it without a safety net, the political danger it poses for Barack Obama has been overstated.

The policy has been compared to the debt ceiling debacle of last summer, and the similarities are clear. The executive may well end up facing a similar level of obstructionism from a Republican congress determined to use the crisis to their political advantage, and the hard-and-fast deadline of the negotiations – a rarity in politics as normal – lends the whole thing an extra edge.

But the difference between the two comes from the results of letting that deadline lapse – and it's there where the cliff could be a blessing in disguise for Obama.

The debt ceiling involved the Republican party turning what should have been a routine vote to raise the amount of debt that the US can hold (the ceiling has been raised roughly once a year since it was introduced) into a chance to gain huge concessions on the level of spending the government was planning. The game was entirely played out on a political stage, with each side trying to convince the other that if the deadline hit and a full government shut-down ensued, their opponents would take the blame in the eyes of the public.

The negotiations themselves were relatively the simple: the Democrats wanted to change nothing, the Republicans wanted to change something, and the argument was about where those two extremes should fall.

The debates around the fiscal cliff are different, though. Each side wants some, but not all, of the programs which are expiring to be extended. So while the Democrats want to let the Bush tax cuts expire for the richest Americans, the Republicans call for, in the words of Slate's Matt Yglesias:

Draconian reductions in the federal government's commitment to financing health care for the disabled, the elderly, and the poor.

So far, so much like the debt ceiling. The difference comes after the deadline passes.

Currently, the Obama administration is, in effect, arguing for tax rises, while the Republican party argues for spending cuts. But if the deadline passes, what happens is that massive tax rises and spending cuts kick in – far bigger than both parties desire. If that happens, the negotiating calculus changes: from that point, both parties agree on the need for tax cuts and spending increases, and just disagree on the magnitude of it.

The Democrats are then put in a position where they can offer the Republicans targeted tax cuts – re-instating the payroll tax, and the Bush tax cuts for those earning under $250,000 – and even though the Republicans would prefer more, they'll be inclined to take it because it's a preferred alternative.

Similarly, so long as the spending increases the democrats offer are preferred to keeping the across-the-board cuts of the fiscal cliff, the Republican party is likely to take them.

It all comes down to who has the power to set the agenda – and in this situation, that seems likely to be president Obama.

If the players were truly rational actors, of course, all of this would mean that the fiscal cliff wouldn't even need to hit; the Democrats ought to be able to explain this endgame, and the Republicans accept it. That seems unlikely to happen.

The fiscal cliff could actually be a blessing in disguise for Obama. By putting him and the Republicans on the same side of the status quo, he could succeed in opening his second term facing the most obstructionist congress in history with a grand bargain that creates a more liberal America.

Or the Republicans may just throw the baby out with the bathwater and hurt their interests, and America's, to score points against the president. Again.

Cliffs of the non-fiscal variety. 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 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.

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