Austerity averted in US

Country hauled back from the fiscal cliff.

At 10:59 PM EST yesterday, the US House of Representatives voted 257-167 to pass a bill originating in the Senate to prevent the government from being forced to implement a damaging mixture of spending cuts and tax rises – popularly known as the fiscal cliff.

To understand how much of a misnomer that title was, consider this: The US had already gone over the "cliff" at midnight on 31 December, 23 hours before the House passed its preventative bill.

The cliff was in fact the date at which the United States would, unless it passed new legislation, implement a series of European-style austerity measures. While these all became law at the stroke of midnight, implementation was to be phased out throughout the next few months. Unemployment benefits would have been cut within a week, while the full tax hikes – caused by the automatic expiration of Bush II's tax cuts – were to have taken several more months to implement. If we must keep the cliff metaphor, then the plummet was slow enough that the House was able to throw a rope down a day later and haul the nation back off the precipice.

Not that everything is peachy. The compromise that the Democrat- controlled Senate and the Republican-controlled House came to was 154 pages of legislation, but still involved kicking a couple of hand-grenades down the road.

Included in the bill was:

  • an agreement to return taxes to Clinton-era levels for families with income above $450,000 (a compromise between the Democrats' desire to do so above $250,000 and Republicans' desire to do so above $1m – or preferably not at all)
  • a similar rise in capital gain and dividend tax above that threshold
  • another rise in estate tax above that threshold (although, for no good policy reason, the estate tax threshold and only the estate tax threshold is to be indexed to inflation)
  • a civil service pay-freeze
  • unemployment benefits extended for another year
  • The Alternative Minimum Tax, which was intended to impose high taxes on the rich but has been affecting more and more middle-class families, will be "patched" to prevent any further mission-creep.
  • And an extension of Obama's tax breaks for low-income households.

In other words, nearly every measure extended yesterday was a tax break, with the exception of the three headline tax rises. There were also – because there always are – a host of other smaller measures added to the bill to ensure its passage. Joe Weisenthal finds six, including tax breaks for Puerto Rican rum and market loss assistance for asparagus farmers.

But two things weren't dealt with yesterday, instead booted down the line. On 1 March, the "sequester" will be enacted. This is the bundle of spending cuts agreed to in summer 2011 as part of the deal which raised the debt ceiling. It is similar in degree to the spending cuts implemented by the UK coalition, and most of the American establishment – the Republican party excepted, as usual – appear to have learned from the lesson Cameron provided, and have no intention to enact austerity in the midst of a depression.

The second fight due to come is over the debt ceiling. Exactly the same debt ceiling which was "dealt with" by enacting the sequester. The ceiling was raised – not abolished – and current Treasury projections suggest that it will have to be raised again in about two months.

The battlefields are drawn, in other words. The White House wants the sequester and debt ceiling extended or abolished; the Republicans want the sequester – and probably further spending cuts – enacted, and are prepared to see government spending hit the ceiling to do so. And unlike the "fiscal cliff", the debt ceiling is a real cliff. If the US hits it, a full government shut-down is required to stop it defaulting on its bonds.

The comparison with the UK is fascinating. Much has been made of the fact that the fiscal cliff, which has taken so much effort to avoid, is more accurately called "austerity"; but while the US legislature has been hosting fake debates in which the Republican party pretends it is fine with the whole thing and the Democrats pretend they don't want to negotiate, there is broad understanding in the rest of the US establishment (including the media) that to do so would be a very bad thing. That serves only to highlight how strange the UK right is in persisting in its defence of austerity. So while it's for the best for the US that it prevented the crippling austerity, it does mean that the evidence-based debate in Europe is deprived of yet another data point showing the damage such policies do.

Republican Speaker of the House 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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Commons Confidential: Smith, selfies and pushy sons

All the best gossip from party conference, including why Dennis Skinner is now the MP for Selfie Central.

Owen Smith discovered the hard way at the Labour party conference in Liverpool that one moment you’re a contender and the next you’re a nobody. The party booked a luxurious suite at the plush Pullman Hotel for Candidate Smith before the leadership result. He was required to return the key card the day after Jeremy Corbyn’s second coming. On the upside, Smith no longer had to watch his defeat replayed endlessly on the apartment’s giant  flat-screen TV.

The Labour back-room boffin Patrick Heneghan, the party’s executive director of elections, had good cause to be startled when a TV crew pounced on him to demand an interview. The human submarine rarely surfaces in public and anonymity is his calling card. It turns out that the bespectacled Heneghan was mistaken for Owen Smith – a risky likeness when vengeful Corbynistas are on rampage. There’s no evidence of Smith being mistaken for Heneghan, though. Yet.

Members of Labour’s governing National Executive Committee are discovering new passions to pass the time during interminable meetings, as the Mods and the Corbs battle over each line of every decision. The shadow cabinet attack dog Jon “Sparkle” Ashworth, son of a casino croupier and a bunny girl, whiles away the hours by reading the poetry of Walt Whitman and W B Yeats on his iPad. Sparkle has learned that, to echo Whitman, to be with those he likes is enough.

I discovered Theresa May’s bit of rough – the grizzled Tory chairman, Patrick McLoughlin, a former Derbyshire coal miner – does his gardening in steel-toecapped wellies stamped “NCB” from his time down the pit thirty years ago. He’ll need his industrial footwear in Birmingham to kick around Tories revolting over grammar schools and Brexit.

Another ex-miner, Dennis Skinner, was the MP for Selfie Central in Liverpool, where a snap with the Beast of Bolsover was a popular memento. Alas, no cameras captured him in the Commons library demonstrating the contorted technique of speed-walkers. His father once inquired, “Why tha’ waddling tha’ bloody arse?” in Skinner’s younger days, when he’d top 7mph. Observers didn’t dare.

The Northern Poorhouse minister Andrew Percy moans that he’s been allocated a broom cupboard masquerading as an office in the old part of parliament. My snout claims that Precious Percy grumbled: “It’s so small, my human rights are violated.” Funny how the only “rights” many Tories shout about are their own.

The son of a very prominent Labour figure was caught trying to smuggle friends without passes into the secure conference zone in Liverpool. “Don’t you know who I am?” The cop didn’t, but he does now.

Kevin Maguire is the associate editor (politics) of the Daily Mirror

Kevin Maguire is Associate Editor (Politics) on the Daily Mirror and author of our Commons Confidential column on the high politics and low life in Westminster. An award-winning journalist, he is in frequent demand on television and radio and co-authored a book on great parliamentary scandals. He was formerly Chief Reporter on the Guardian and Labour Correspondent on the Daily Telegraph.

This article first appeared in the 29 September 2016 issue of the New Statesman, May’s new Tories