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.

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Why Boris Johnson is Theresa May's biggest Brexit liability

The Foreign secretary is loved by Eurosceptics and detested by EU negotiators. 

Boris Johnson is a joke in Brussels but not the funny kind. He is seen as the liar who tricked Britain into leaving the European Union.

Since his election as a MEP in 1999, Nigel Farage has sucked EU money into his campaign to get the UK out of the EU. But the contempt reserved for Boris is of a different order - because he should have known better.

Johnson has impeccable European pedigree. His father Stanley was an MEP and influential European Commission official. Unsurprisingly, Stanley is a Remainer as is Johnson’s brother Jo.  

The fury reserved for Johnson and his betrayal is of a particularly bitter vintage. Johnson was educated in the European School of Brussels in the leafy and well-heeled suburb of Uccle, where, years later, Nick Clegg lived when he was a MEP.

The contempt stems from his time as the Daily Telegraph’s Brussels correspondent. Fake news is now big news. Many in the self-styled “capital of Europe” believe Boris pioneered it.

Johnson was an imaginative reporter. Many still discuss his exclusive about the planned dynamiting of the European Commission. The Berlaymont headquarters stands untouched to this day.

Rival British hacks would receive regular bollockings from irate editors furious to have been beaten to another Boris scoop. They weren’t interested in whether this meant embroidering the truth. 

Johnson invented a uniquely British genre of journalism – the Brussels-basher. It follows a clear template.

Something everyday and faintly ridiculous, like condoms or bananas, fall victim to meddling Brussels bureaucrats. 

The European Commission eventually set up a “Euromyth”website to explode the pervasive belief that Brussels wanted you to eat straight bananas.  Unsurprisingly, it made no difference. Commission staff now insist on being called "European civil servants" rather than bureaucrats.

Commission President Jean-Claude Juncker was so worried about negative headlines that he stalled energy efficiency legislation until after the referendum.

When he shelved sensible laws to restrict excessive energy consumption on toasters and hairdryers, he was rewarded with a Hero of the Week award by the German tabloid Bild, which had developed a taste for Boris-style hackery.  

Many in Brussels draw a direct line from Johnson’s stories to the growing Eurosceptism in the Conservatives, and from that to Ukip, and ultimately Brexit.

To make matters worse, Johnson was the star of the Brexit campaign. His performance confirmed the view of him as an opportunistic charlatan.

The infamous £350m a week bus caused outrage in Brussels, but not as much as what Boris did next.

He compared the EU to Adolf Hitler. Boris knows better than most how offensive that is to the many European politicians who believe that the EU has solidified peace on the continent. 

European Council President Donald Tusk was furious. “When I hear the EU being compared to the plans and projects of Adolf Hitler I cannot remain silent,” said Tusk, a Pole.

“Boris Johnson crossed the boundaries of a rational discourse, demonstrating political amnesia,” he declared, and added there was “no excuse for this dangerous blackout”. It was the first time a leading EU figure had intervened in the referendum campaign.

After the vote for Brexit and his failed tilt at the premiership, Johnson was appointed foreign secretary, to widespread disbelief.

When the news broke, I received a text message from my Italian editor. It read: “Your country has gone mad.” It was the first of many similar messages from the Brussels press pack. 

“You know he told a lot of lies to the British people and now it is him who has his back against the wall,” France’s foreign minister Jean-Marc Ayrault said. Germany’s foreign minister, Frank-Walter Steinmeier called Johnson “outrageous”.

Could Johnson jeopardise the Brexit negotiations?  He can damage them. In November, he was ridiculed by European ministers after telling Italy at a Brussels meeting that it would have to offer tariff-free trade to sell prosecco to the UK.

European Union chiefs moved earlier this week to quell fears they would punish Britain for Brexit. Prime Minister Theresa May had threatened to lure investment away from the EU by slashing corporation tax rates in her speech last week.

Juncker and Joseph Muscat, the prime minister of Malta, which will chair the first Brexit negotiations, both insisted they was no desire to impose a “punitive deal” on the UK. Donald Tusk compared May’s speech and its “warm words” to Churchill. 

An uneasy peace seemed to have been secured. Enter Boris. 

Asked about comments made by a French aide to President Francois Hollande, he said, "If Monsieur Hollande wants to administer punishment beatings to anybody who chooses to escape, rather in the manner of some World War Two movie, then I don't think that is the way forward.”

The European Parliament will have a vote, and effective veto, on the final Brexit settlement. Its chief negotiator Guy Verhofstadt lashed out at Johnson.

“Yet more abhorrent and deeply unhelpful comments from Boris Johnson which PM May should condemn,” he tweeted.

Downing Street wasn’t listening. A spokeswoman said, “There is not a government policy of not talking about the war.”

And just as quickly as it broke out, the new peace was left looking as shaky as ever. 

 

James Crisp is a Brussels-based journalist who is the news editor of EurActiv.com