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.

Photo: Getty
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Emmanuel Macron can win - but so can Marine Le Pen

Macron is the frontrunner, but he remains vulnerable to an upset. 

French presidential candidate Emmanuel Macron is campaigning in the sixth largest French city aka London today. He’s feeling buoyed by polls showing not only that he is consolidating his second place but that the voters who have put him there are increasingly comfortable in their choice

But he’ll also be getting nervous that those same polls show Marine Le Pen increasing her second round performance a little against both him and François Fillon, the troubled centre-right candidate. Her slight increase, coming off the back of riots after the brutal arrest of a 22-year-old black man and Macron’s critical comments about the French empire in Algeria is a reminder of two things: firstly the potential for domestic crisis or terror attack to hand Le Pen a late and decisive advantage.  Secondly that Macron has not been doing politics all that long and the chance of a late implosion on his part cannot be ruled out either.

That many of his voters are former supporters of either Fillon or the Socialist Party “on holiday” means that he is vulnerable should Fillon discover a sense of shame – highly unlikely but not impossible either – and quit in favour of a centre-right candidate not mired in scandal. And if Benoît Hamon does a deal with Jean-Luc Mélenchon – slightly more likely that Fillon developing a sense of shame but still unlikely – then he could be shut out of the second round entirely.

What does that all mean? As far as Britain is concerned, a Macron or Fillon presidency means the same thing: a French government that will not be keen on an easy exit for the UK and one that is considerably less anti-Russian than François Hollande’s. But the real disruption may be in the PR battle as far as who gets the blame if Theresa May muffs Brexit is concerned.

As I’ve written before, the PM doesn’t like to feed the beast as far as the British news cycle and the press is concerned. She hasn’t cultivated many friends in the press and much of the traditional rightwing echo chamber, from the press to big business, is hostile to her. While Labour is led from its leftmost flank, that doesn’t much matter. But if in the blame game for Brexit, May is facing against an attractive, international centrist who shares much of the prejudices of May’s British critics, the hope that the blame for a bad deal will be placed solely on the shoulders of the EU27 may turn out to be a thin hope indeed.

Implausible? Don’t forget that people already think that Germany is led by a tough operator who gets what she wants, and think less of David Cameron for being regularly outmanoeuvered by her – at least, that’s how they see it. Don’t rule out difficulties for May if she is seen to be victim to the same thing from a resurgent France.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.