In the wrangle over America's Fiscal Cliff, Barack Obama holds all the cards

There is no incentive for the Democrats to be conciliatory on the budget negotiations; nor, after the last few years of partisan bad feeling, will there be much inclination among them to do so.

As of now, it looks like the US will go off the so-called “fiscal cliff” tonight at midnight. Several days of extraordinary manoeuvring on and around Capitol Hill in Washington have so far resulted in no deal, and with one day left to galvanise America's behemoth political machinery the chances of one looks slimmer and slimmer.

This means that previously agreed measures (under a deal resolved with a kick-the-can-down-the-road Budgetary Control Act in 2011) will slot into place at midnight, removing a whole raft of tax breaks as well and making sadistically deep cuts to federal spending.

At a glance, it is hard to see why the Republicans are trying to make a deal at all. After all, weren't vicious spending cuts exactly what Romney and Ryan spent an election campaign demanding?

Part of the reason is, however, that the Republicans are afraid of public backlash. A recent Reuters/Ipsos poll found that almost twice as many people blamed the Congressional Republicans for the fiscal cliff than the President; a PEW/Washington Post poll from earlier this month said the same. If the country goes off the cliff, the mid-term elections are going to be very hard on the GOP.

Looked at in detail, going off the cliff looks very unpleasant indeed. Sure, it will cut 607 billion dollars from the national deficit – according to the nonpartisan Congressional Budget Office – but its effects on people directly are brutal. Tax breaks for parents will be halved and the Earned Income Tax Credit will go, affecting low and middle-income workers. A 2% payroll tax break for workers will vanish. Capital gains tax will increase, as well as the tax paid on dividends.

Dramatically, more than 40% of the five million people who have been unemployed for longer than six months will lose their unemployment benefits. There will also be cuts to tax credits for families paying college tuition. High-earning Americans won't escape bracing tax hikes either, especially those who earn more than a million dollars a year.

On top of that, all federal services, from roads to schools to homeland security – with a few exceptions including Medicaid and veterans benefits – face cuts, and perhaps redundancies. The defence budget in particular will be hit very hard, and of course that will have a knock-on effect on the vast number of tertiary industries employed by the Pentagon. All of this, experts agree, will hit the stock market hard, perhaps plunging the country back into recession.

Congress, like schoolchildren, have put off doing their homework until the very last minute, and Senators have been told not to make new years' eve plans. This is going right down to the wire: if a deal is going to be reached, it has to happen today.

It is very possible – almost probable – that America will go over the cliff; but – whisper it – it might not actually be so bad. Many of the harsher of these measures can and almost certainly will be reversed straight out of the gate; and the cuts in federal spending are due to be staggered over the course of the next decade. Obama has already stated that if the country goes off the cliff, then the Senate – controlled by Democrats – would act to pass emergency measures to prevent the loss of unemployment benefits and tax increases on lower-income families. In doing so, he would look like the hero. Certainly, there is no incentive for the Democrats to be conciliatory; nor, after the last few years of partisan bad feeling, will there be much inclination among them to do so.

Politically, Obama is holding most of the cards. The situation is lose-lose for the Republican party. If the country goes off the cliff, the House's Republican Speaker John Boehner and his party will probably be percieved as responsible for it – and are going to be forced into helping the Democrats clean up some of the mess. If it doesn't happen, the President is likely to get the credit. Boehner tried to re-cast this narrative with him as the problem solver with his alternative, the so-called “plan B” - but it was a flop, ridiculed by the Democrats and the media.

Now, he and his Congressional colleagues are scrabbling for anything they can to make the deal palatable to Republicans but still acceptable to the Democrats. They aren't being handed many scraps.

Barack Obama returns to Washington. Photo: Getty

Nicky Woolf is a writer for the Guardian based in the US. He tweets @NickyWoolf.

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Ken Clarke: Theresa May has “no idea” what to do about Brexit

According to the former Chancellor, “nobody in the government has the first idea of what they’re going to do next”.

Has Ken Clarke lost the greatest political battle of his career? He doesn’t think so. With his shoes off, he pads around his Westminster office in a striped shirt, bottle-green cords and spotty socks. Parliament’s most persistent Europhile seems relaxed. He laughs at the pervasive phrase that has issued from Downing Street since Theresa May became Prime Minister: “Brexit means Brexit.”

“A very simple phrase, but it didn’t mean anything,” he says. His blue eyes, still boyish at 76, twinkle. “It’s a brilliant reply! I thought it was rather witty. It took a day or two before people realised it didn’t actually answer the question.”

A former chancellor of the Exchequer, Clarke has served in three Conservative cabinets. His support for the European Union is well known. He has represented the seat of Rushcliffe in Nottinghamshire for 46 years, and his commitment to the European project has never wavered over the decades. It has survived every Tory civil war and even his three failed attempts to be elected Tory leader, standing on a pro-Europe platform, in 1997, 2001 and 2005.

“My political career looks as though it will coincide with Britain’s membership of the EU,” Clarke says, lowering himself into an armchair that overlooks the Thames. There are model cars perched along the windowsill – a hint of his love of motor racing.

Clarke won’t be based here, in this poky rooftop room in Portcullis House, Westminster, much longer. He has decided to step down at the next election, when he will be nearly 80. “I began by campaigning [in the 1960s] in support of Harold Macmillan’s application to enter [the EU], and I shall retire at the next election, when Britain will be on the point of leaving,” he says grimly.

Clarke supports Theresa May, having worked with her in cabinet for four years. But his allegiance was somewhat undermined when he was recorded describing her as a “bloody difficult woman” during this year’s leadership contest. He is openly critical of her regime, dismissing it as a “government with no policies”.

For a senior politician with a big reputation, Clarke is light-hearted in person – his face is usually scrunched up in merriment beneath his floppy hair. A number of times during our discussion, he says that he is trying to avoid getting “into trouble”. A painting of a stern Churchill and multiple illustrations of Gladstone look down at him from his walls as he proceeds to do just that.

“Nobody in the government has the first idea of what they’re going to do next on the Brexit front,” he says. He has a warning for his former cabinet colleagues: “Serious uncertainty in your trading and political relationships with the rest of the world is dangerous if you allow it to persist.”

Clarke has seen some of the Tories’ bitterest feuds of the past at first hand, and he is concerned about party unity again. “Whatever is negotiated will be denounced by the ultra-Eurosceptics as a betrayal,” he says. “Theresa May has had the misfortune of taking over at the most impossible time. She faces an appalling problem of trying to get these ‘Three Brexiteers’ [Boris Johnson, David Davis and Liam Fox] to agree with each other, and putting together a coherent policy which a united cabinet can present to a waiting Parliament and public. Because nobody has the foggiest notion of what they want us to do.”

Clarke reserves his fiercest anger for these high-profile Brexiteers, lamenting: “People like Johnson and [Michael] Gove gave respectability to [Nigel] Farage’s arguments that immigration was somehow a great peril caused by the EU.”

During the referendum campaign, Clarke made headlines by describing Boris Johnson as “a nicer version of Donald Trump”, but today he seems more concerned about David Cameron. He has harsh words for his friend the former prime minister, calling the pledge to hold the referendum “a catastrophic decision”. “He will go down in history as the man who made the mistake of taking us out of the European Union, by mistake,” he says.

Clarke left the government in Cameron’s 2014 cabinet reshuffle – which came to be known as a “purge” of liberal Conservatives – and swapped his role as a minister without portfolio for life on the back benches. From there, he says, he will vote against the result of the referendum, which he dismisses as a “bizarre protest vote”.

“The idea that I’m suddenly going to change my lifelong opinions about the national interest and regard myself as instructed to vote in parliament on the basis of an opinion poll is laughable,” he growls. “My constituents voted Remain. I trust nobody will seriously suggest that I should vote in favour of leaving the European Union. I think it’s going to do serious damage.”

But No 10 has hinted that MPs won’t be given a say. “I do think parliament sooner or later is going to have to debate this,” Clarke insists. “In the normal way, holding the government to account for any policy the government produces . . . The idea that parliament’s going to have no say in this, and it’s all to be left to ministers, I would regard as appalling.”

Clarke has been characterised as a Tory “wet” since his days as one of the more liberal members of Margaret Thatcher’s government. It is thought that the former prime minister had a soft spot for his robust manner but viewed his left-wing leanings and pro-European passion with suspicion. He is one of parliament’s most enduring One-Nation Conservatives. Yet, with the Brexit vote, it feels as though his centrist strand of Tory politics is disappearing.

“I don’t think that’s extinct,” Clarke says. “The Conservative Party is certainly not doomed to go to the right.”

He does, however, see the rise of populism in the West as a warning. “I don’t want us to go lurching to the right,” he says. “There is a tendency for traditional parties to polarise, and for the right-wing one to go ever more to the right, and the left-wing one to go ever more to the left . . . It would be a catastrophe if that were to happen.”

Clarke’s dream of keeping the UK in Europe may be over, but he won’t be quiet while he feels that his party’s future is under threat. “Don’t get me into too much trouble,” he pleads, widening his eyes in a show of innocence, as he returns to his desk to finish his work. 

Anoosh Chakelian is deputy web editor at the New Statesman.

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