Obama rejects Osbornomics: "we can't simply cut our way to prosperity"

The US president's statement on the fiscal cliff deal demonstrates how he has rejected the coalition's approach.

One fact that the many Conservatives who supported Barack Obama's re-election conveniently ignored is that the US president has long rejected the coalition's approach to the economy. Unlike George Osborne, who pushed the UK off its own fiscal cliff in 2010, when he slashed infrastructure spending and raised VAT to 20 per cent, Obama recognises that austerity must not come at the expense of growth. After Congress approved the fiscal agreement reached on New Year's Eve, he commented last night:

We can't simply cut our way to prosperity. Cutting spending has to go hand-in-hand with further reforms to our tax code so that the wealthiest corporations and individuals can't take advantage of loopholes and deductions that aren't available to most Americans. And we can't keep cutting things like basic research and new technology and still expect to succeed in a 21st century economy. So we're going to have to continue to move forward in deficit reduction, but we have to do it in a balanced way, making sure that we are growing even as we get a handle on our spending.

For Obama, economic growth is a precondition of deficit reduction, not a hoped-for outcome (remember Osborne's "expansionary fiscal contraction"?) Having maintained stimulus after 2008, the US is now in a stronger position to withstand austerity. While the UK suffered a double-dip recession (and is at risk of a triple-dip), the US economy has grown for 13 consecutive quarters and is now 2.2 per cent above its pre-recession peak. The UK, by contrast, remains 3.1 per cent below.

The deal reached between Obama and the Republicans postponed, rather than averted, the $109bn of spending cuts that were due to take effect from 1 January. The stage is now set for a showdown on 1 March when the Republicans will once again use a vote on raising the US debt ceiling (hitherto a formality under Republican and Democrat presidents alike) to extort large cuts to social security and Medicare. But while Obama has signalled that he is "very open to compromise" - there will be significant cuts - it is clear that the US president will veto any measures that pose a significant threat to growth. For the UK, however, the wrangling in Washington is an unhappy reminder that its fate was settled long ago.

 
Barack Obama greets George Osborne during an official arrival ceremony on the South Lawn of the White House on 14 March, 2012. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Election 2017: The 50 Labour MPs most at risk of losing their seats

Dozens of Labour MPs are at risk of losing their seats on June 8. Here are the 50 sitting MPs most at risk. 

Labour MPs representing marginal seats are at risk of losing their seats should their party's low polling numbers translate into electoral reality. Here's a full list of the 50 sitting MPs with the smallest majorities. 

Chris Matheson – City of Chester
Majority: 93 (0.2 per cent of total turnout)
Second place in 2015: Conservatives

Rupa Huq – Ealing Central & Acton
Majority: 274 (0.5 per cent)
Second place in 2015: Conservatives

Albert Owen – Ynys Mon
Majority: 229 (0.6 per cent)
Second place in 2015: Plaid Cymru

Ruth Cadbury – Brentford & Isleworth
Majority: 465 (0.9 per cent)
Second place in 2015: Conservatives

Margaret Greenwood – Wirral West
Majority: 417 (0.9 per cent)
Second place in 2015: Conservatives

Holly Lynch – Halifax
Majority: 428 (1 per cent)
Second place in 2015: Conservatives

Daniel Zeichner – Cambridge
Majority: 599 (1.1 per cent)
Second place in 2015: Liberal Democrats

Wes Streeting – Ilford North
Majority: 589 (1.2 per cent)
Second place in 2015: Conservatives

Paul Farrelly – Newcastle-under-Lyme
Majority: 650 (1.5 per cent)
Second place in 2015: Conservatives

John Woodcock – Barrow & Furness
Majority: 795 (1.8 per cent)
Second place in 2015: Conservatives

Tulip Siddiq – Hampstead & Kilburn
Majority: 1138 (2.1 per cent)
Second place in 2015: Conservatives

Joan Ryan – Enfield North
Majority: 1086 (2.3 per cent)
Second place in 2015: Conservatives

Peter Kyle – Hove
Majority: 1236 (2.4 per cent)
Second place in 2015: Conservatives

Paula Sheriff – Dewsbury
Majority: 1451 (2.3 per cent)
Second place in 2015: Conservatives

Cat Smith – Lancaster & Fleetwood
Majority: 1265 (3.1 per cent)
Second place in 2015: Conservatives

Natascha Engel - North East Derbyshire
Majority: 1883 (3.9 per cent)
Second place in 2015: Conservatives

Gareth Thomas – Harrow West
Majority: 2208 (4.8 per cent)
Second place in 2015: Conservatives

Madeleine Moon – Bridgend
Majority: 1927 (4.9 per cent)
Second place in 2015: Conservatives

Karen Buck – Westminster North
Majority: 1977 (5 per cent)
Second place in 2015: Conservatives

Iain Murray – Edinburgh South
Majority: 2637 (5.3 per cent)
Second place in 2015: SNP

Rosena Allin-Khan – Tooting
Majority: 2842 (5.3 per cent)
Second place in 2015: Conservatives

Ian Lucas – Wrexham
Majority: 1831 (5.6 per cent)
Second place in 2015: Conservatives

Richard Burden – Birmingham Northfield
Majority: 2509 (5.9 per cent)
Second place in 2015: Conservatives

Mary Creagh – Wakefield
Majority: 2613 (6.1 per cent)
Second place in 2015: Conservatives
 

Vernon Coaker – Gedling
Majority: 2986 (6.2 per cent)
Second place in 2015: Conservatives

Clive Efford – Eltham
Majority: 2693 (6.2 per cent)
Second place in 2015: Conservatives

Rob Flello - Stoke-on-Trent South
Majority: 2539 (6.5 per cent)
Second place in 2015: Conservatives

Susan Jones – Clwyd South
Majority: 2402 (6.8 per cent)
Second place in 2015: Conservatives

Jim Cunningham – Coventry South
Majority: 3188 (7.3 per cent)
Second place in 2015: Conservatives

Jenny Chapman – Darlington
Majority: 3024 (7.6 per cent)
Second place in 2015: Conservatives

David Hanson – Delyn
Majority: 2930 (7.7 per cent)
Second place in 2015: Conservatives

Gordon Marsden – Blackpool South
Majority: 2585 (8 per cent)
Second place in 2015: Conservatives

Julie Cooper – Burnley
Majority: 3244 (8.1 per cent)
Second place in 2015: Liberal Democrats

Mark Tami – Alyn & Deeside
Majority: 3343 (8.1 per cent)
Second place in 2015: Conservatives

Nic Dakin – Scunthorpe
Majority: 3134 (8.5 per cent)
Second place in 2015: Conservatives

Kerry McCarthy – Bristol East
Majority: 3980 (8.6 per cent)
Second place in 2015: Conservatives

Paul Flynn – Newport West
Majority: 3510 (8.7 per cent)
Second place in 2015: Conservatives

Alan Whitehead - Southampton Test
Majority: 3810 (8.8 per cent)
Second place in 2015: Conservatives

Neil Coyle – Bermondsey & Old Southwark
Majority: 4489 (8.8 per cent)
Second place in 2015: Liberal Democrats

Lindsay Hoyle (Deputy speaker) – Chorley
Majority: 4530 (8.8 per cent)
Second place in 2015: Conservatives

Helen Goodman – Bishop Auckland
Majority: 3508 (8.9 per cent)
Second place in 2015: Conservatives

Thangam Debbonaire – Bristol West
Majority: 5673 (8.9 per cent)
Second place in 2015: Green

Geoffrey Robinson – Coventry North West
Majority: 4509 (10 per cent)
Second place in 2015: Conservative

Graham Jones – Hyndburn
Majority: 4400 (10.2 per cent)
Second place in 2015: Conservatives

David Crausby – Bolton North East
Majority: 4377 (10.2 per cent)
Second place in 2015: Conservatives

Ivan Lewis - Bury South
Majority: 3508 (8.9 per cent)
Second place in 2015: Conservatives

Liz McInnes – Heywood & Middleton
Majority: 5299 (10.9 per cent)
Second place in 2015: Ukip

Alison McGovern – Wirral South
Majority: 4599 (11 per cent)
Second place in 2015: Conservatives

Alan Meale – Mansfield
Majority: 5135 (11.3 per cent)
Second place in 2015: Conservatives

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