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Leader: The world cannot afford a defeat for Barack Obama

A Romney victory would greatly increase the chances of war with Iran, embolden the most reactionary elements in Israel and further accelerate climate change.

If Barack Obama has fallen short of the expectations of many of his supporters, it is partly because they were so high to begin with. During his election campaign in 2008, Mr Obama spoke lyrically of “hope” and “change” and promised a new era of post-partisan politics. His unique status as his country’s first black president encouraged the sense that the limits of the possible had been redefined. Liberals embraced him as the man who would close Guantanamo Bay, bring peace to the Middle East and slow “the rise of the oceans”.

But Mr Obama did not reckon on the recalcitrance of a Republican opposition that has sought to undermine his presidency at every turn, or the intransigence of leaders such as Mahmoud Ahmadinejad and Binyamin Netanyahu. Four years on from his election, Guantanamo Bay remains open, the Middle East peace process has collapsed and the oceans have continued to rise. Yet, if the initial adulation for him was excessive, then so, too, is much of the subsequent disdain.

Mr Obama entered office in more difficult circumstances than any US president since Franklin D Roosevelt. The economy was in the deepest recession in 70 years and losing jobs at a rate of 750,000 a month; the automobile industry appeared destined for bankruptcy; the US was embroiled in a ruinous and unjust war in Iraq. It was, as we said at the time of his election, “the in-box from hell”. In view of this inheritance, he has performed creditably.

Early in his presidency, he acted to prevent another Great Depression by introducing a fiscal stimulus of $787bn, a mixture of tax cuts, infrastructure projects and increased unemployment benefits. Republican claims that the stimulus was “a failure” are entirely unsupported by evidence. A study by Mark Zandi, a former economic adviser to John McCain, and Alan Blinder, a former vice-chairman of the Federal Reserve, concluded that the policy had created or saved 2.7 million jobs and added 3.4 per cent to US GDP. The US economy has now grown for 13 consecutive quarters, a record that compares favourably with that of the austerity-fixated UK. A more appropriate criticism of the stimulus is that it was too small – yet it is doubtful that a bigger package would have passed Congress, and the final bill, 50 per cent larger in real terms than the entire New Deal, stands as a considerable achievement.

Similarly successful, as Nicky Woolf reports on page 18, was the government-led bailout of Chrysler and General Motors, an intervention dogmatically opposed by the Republicans. “Let Detroit go bankrupt,” declared Mr Obama’s opponent Mitt Romney in November 2008. Should he fail to win Ohio, a state that no Republican has ever won the presidency without carrying, that could be his epitaph.

It is in the sphere of foreign policy that Mr Obama has disappointed. While fulfilling his pledge to withdraw all US troops from Iraq, he has vastly expanded the use of predator drones in Pakistan, a form of warfare that is neither just nor efficacious. In the Middle East, he has been con­sistently outmanoeuvred by Mr Netanyahu, who, in violation of international law, has continued the expansion of Israeli settlements in the West Bank. Yet any temptation to suggest that the world can afford a defeat for Mr Obama is dispelled by the prospect of a Romney presidency. A victory for the Republican candidate, who, as Mehdi Hasan writes on page 38, has surrounded himself with Bush-era neoconservatives, would greatly increase the chances of war with Iran, embolden the most reactionary elements in Israel and further accelerate climate change.

On the domestic level, Mr Romney’s pledge to reduce government spending by a fifth would likely plunge the US into a double-dip recession, while his plans to cut taxes for the rich and slash spending on Medicaid, food stamps, housing subsidies and job training would result in a marked redistribution of wealth from the poorest to the richest. Mr Obama’s health-care reform act – his single greatest domestic achievement – would be repealed and Roe v Wade, the Supreme Court judgment that established the legal right to abortion, would be overturned. Let no one claim that there is nothing to choose between the candidates.

Mr Obama stands in a noble liberal tradition that supports an active state as a precondition for individual flourishing. His opponent, by contrast, stands for a shrivelled public realm in which the market rules all and the poor are treated with contempt. In order that the former vision may triumph, Mr Obama must be returned as president on 6 November and Mr Romney decisively rejected.

This article first appeared in the 05 November 2012 issue of the New Statesman, What if Romney wins?

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Q&A: What are tax credits and how do they work?

All you need to know about the government's plan to cut tax credits.

What are tax credits?

Tax credits are payments made regularly by the state into bank accounts to support families with children, or those who are in low-paid jobs. There are two types of tax credit: the working tax credit and the child tax credit.

What are they for?

To redistribute income to those less able to get by, or to provide for their children, on what they earn.

Are they similar to tax relief?

No. They don’t have much to do with tax. They’re more of a welfare thing. You don’t need to be a taxpayer to receive tax credits. It’s just that, unlike other benefits, they are based on the tax year and paid via the tax office.

Who is eligible?

Anyone aged over 16 (for child tax credits) and over 25 (for working tax credits) who normally lives in the UK can apply for them, depending on their income, the hours they work, whether they have a disability, and whether they pay for childcare.

What are their circumstances?

The more you earn, the less you are likely to receive. Single claimants must work at least 16 hours a week. Let’s take a full-time worker: if you work at least 30 hours a week, you are generally eligible for working tax credits if you earn less than £13,253 a year (if you’re single and don’t have children), or less than £18,023 (jointly as part of a couple without children but working at least 30 hours a week).

And for families?

A family with children and an income below about £32,200 can claim child tax credit. It used to be that the more children you have, the more you are eligible to receive – but George Osborne in his most recent Budget has limited child tax credit to two children.

How much money do you receive?

Again, this depends on your circumstances. The basic payment for a single claimant, or a joint claim by a couple, of working tax credits is £1,940 for the tax year. You can then receive extra, depending on your circumstances. For example, single parents can receive up to an additional £2,010, on top of the basic £1,940 payment; people who work more than 30 hours a week can receive up to an extra £810; and disabled workers up to £2,970. The average award of tax credit is £6,340 per year. Child tax credit claimants get £545 per year as a flat payment, plus £2,780 per child.

How many people claim tax credits?

About 4.5m people – the vast majority of these people (around 4m) have children.

How much does it cost the taxpayer?

The estimation is that they will cost the government £30bn in April 2015/16. That’s around 14 per cent of the £220bn welfare budget, which the Tories have pledged to cut by £12bn.

Who introduced this system?

New Labour. Gordon Brown, when he was Chancellor, developed tax credits in his first term. The system as we know it was established in April 2003.

Why did they do this?

To lift working people out of poverty, and to remove the disincentives to work believed to have been inculcated by welfare. The tax credit system made it more attractive for people depending on benefits to work, and gave those in low-paid jobs a helping hand.

Did it work?

Yes. Tax credits’ biggest achievement was lifting a record number of children out of poverty since the war. The proportion of children living below the poverty line fell from 35 per cent in 1998/9 to 19 per cent in 2012/13.

So what’s the problem?

Well, it’s a bit of a weird system in that it lets companies pay wages that are too low to live on without the state supplementing them. Many also criticise tax credits for allowing the minimum wage – also brought in by New Labour – to stagnate (ie. not keep up with the rate of inflation). David Cameron has called the system of taxing low earners and then handing them some money back via tax credits a “ridiculous merry-go-round”.

Then it’s a good thing to scrap them?

It would be fine if all those low earners and families struggling to get by would be given support in place of tax credits – a living wage, for example.

And that’s why the Tories are introducing a living wage...

That’s what they call it. But it’s not. The Chancellor announced in his most recent Budget a new minimum wage of £7.20 an hour for over-25s, rising to £9 by 2020. He called this the “national living wage” – it’s not, because the current living wage (which is calculated by the Living Wage Foundation, and currently non-compulsory) is already £9.15 in London and £7.85 in the rest of the country.

Will people be better off?

No. Quite the reverse. The IFS has said this slightly higher national minimum wage will not compensate working families who will be subjected to tax credit cuts; it is arithmetically impossible. The IFS director, Paul Johnson, commented: “Unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average.” It has been calculated that 3.2m low-paid workers will have their pay packets cut by an average of £1,350 a year.

Could the government change its policy to avoid this?

The Prime Minister and his frontbenchers have been pretty stubborn about pushing on with the plan. In spite of criticism from all angles – the IFS, campaigners, Labour, The Sun – Cameron has ruled out a review of the policy in the Autumn Statement, which is on 25 November. But there is an alternative. The chair of parliament’s Work & Pensions Select Committee and Labour MP Frank Field has proposed what he calls a “cost neutral” tweak to the tax credit cuts.

How would this alternative work?

Currently, if your income is less than £6,420, you will receive the maximum amount of tax credits. That threshold is called the gross income threshold. Field wants to introduce a second gross income threshold of £13,100 (what you earn if you work 35 hours a week on minimum wage). Those earning a salary between those two thresholds would have their tax credits reduced at a slower rate on whatever they earn above £6,420 up to £13,100. The percentage of what you earn above the basic threshold that is deducted from your tax credits is called the taper rate, and it is currently at 41 per cent. In contrast to this plan, the Tories want to halve the income threshold to £3,850 a year and increase the taper rate to 48 per cent once you hit that threshold, which basically means you lose more tax credits, faster, the more you earn.

When will the tax credit cuts come in?

They will be imposed from April next year, barring a u-turn.

Anoosh Chakelian is deputy web editor at the New Statesman.