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.

Getty
Show Hide image

How Ukip’s Douglas Carswell made himself obsolete

The brightest possible future for him now involves joining one of those sinister US think tanks.

On a muggy day in August 2014, Douglas Carswell, the Conservative MP for Clacton in Essex, defected to Ukip, saying that he hoped to see “fundamental change” in British politics. He won the ensuing by-election comfortably, becoming the first person elected to parliament on the purple ticket. The next day, in a column in the Daily Express, his new leader, Nigel Farage, asked how many more Tory MPs would follow suit: “Two, seven, ten?”

Farage wasn’t alone. There were rumours that other Tory right-wingers were poised to follow Carswell over the top. The bookies started laying odds on who would go next. In the end, just one did: Mark Reckless, the MP for Rochester, who defected on 27 September 2014, donning the chain mail and gormless expression of a particularly unthreatening crusader for an ill-judged Sunday Times photo shoot. (Reckless, unlike Carswell, lost his seat in the 2015 general election; he now fights the good fight as a Ukip member of the Welsh Assembly.)

Not only did Farage’s predicted flood never happen, it has now gone into reverse. On 25 March, Carswell quit the party to sit as an independent. This time, oddly, he seems unconcerned that the “only honourable thing” to do would be to call a by-election. Ukip, once again, is left without an MP.

The party’s grandees are delighted. Farage has dismissed Carswell, without irony, as a “Tory party posh boy”, too much of a wuss to talk about immigration. Arron Banks, formerly Ukip’s main donor, was even threatening to stand against him – an interesting approach to take to the only man ever to win your party a seat at a general election.

It’s hard to imagine that Carswell feels too heartbroken, either. He claimed that he only defected in the first place to pressure David Cameron into promising a referendum and to stop Ukip from wrecking the Leave campaign’s chances of victory. On both counts, he succeeded: the referendum was included in the Tories’ 2015 manifesto; official recognition as the voice of the Leave campaign went to the cross-party Vote Leave group, rather than the Ukip-dominated (and Banks-funded) Leave.EU. In this version of events, Carswell was never really a Ukip man at all: the reason so few Tory MPs followed him is that he made sure they didn’t need to.

So has Carswell won? He has achieved his big goal of getting Britain out of the European Union. Yet there’s a measure of pathos in this victory, because he was wrong. It wasn’t his liberal, free-trading vision of Brexit that swung the referendum. It was Banks’s and Farage’s warnings that 70 million Turks were going to move in and take over.

More than that, the tone set by the referendum has put the rest of Carswell’s agenda out of reach. The Plan: Twelve Months to Renew Britain, the 2008 book that he co-wrote with the Conservative MEP Daniel Hannan, painted a liberal picture of Brexit, all Norway model and free trade. It spoke of other libertarian pipe dreams, too: moving powers from prime minister to parliament, local democracy and (God forbid) more referendums.

This now looks quaintly irrelevant. It’s hard to see Theresa May’s newly authoritarian Conservative Party embracing these ideas. If Ukip is dying, that’s largely because the ideas that it espoused have been adopted by the governing party.

As for Carswell, he has given up any influence he once had. May, not one to forget betrayals, is unlikely to welcome him back. The Tories will probably throw everything at retaking his seat in 2020 to show that they have conquered the Ukip threat.

How the Clacton MP, aged just 45, will fill the second half of his life is an open question. His CV is not one that points towards a career as a well-paid City adviser. He has neither the passion nor the charm (nor, frankly, the looks) for a broadcast career. The brightest possible future for him involves joining one of those sinister US think tanks that talk a lot about freedom while plotting to make poor people poorer.

Carswell joined Ukip to drag it in a more liberal direction. He ended up pushing the Tories in a more Farageist one. Today, he is best described by an epithet that he once reserved for the EU: obsolete.

Jonn Elledge edits the New Statesman's sister site CityMetric, and writes for the NS about subjects including politics, history and Daniel Hannan. You can find him on Twitter or Facebook.

This article first appeared in the 30 March 2017 issue of the New Statesman, Wanted: an opposition