Obama has won only temporary respite

Sat, Jan 5, 2013, 00:00

WORLD VIEW:Ostensibly, the apocalypse – the temporarily averted fiscal cliff crisis – was all about finally getting to grips with the $16 trillion (€12.25 trillion) US national debt.

In the end, the breakthrough “mini-deal” fashioned by US vice-president Joe Biden and Senator Mitch McConnell did little for debt, barely stabilising the deficit and actually increasing taxes. It was really all about evading the elaborate elephant trap of automatic cutbacks – known as “sequestration” – that both parties and US president Barack Obama had created to force themselves into an uncomfortable decision.

Of its nature the presidential/Congress legislative system is appallingly bad at making long-term decisions with politically unpopular consequences. And so, to force its hand, it becomes necessary to rebundle a long-term decision into one with immediate short-term implications in the hope that the price of an immediate political downside – in this case being blamed for a threatened recession – will outweigh the price of long-term potential voter disapproval.

It’s a crude and clumsy device that depends on making the alternative to a decision so irresponsible and so unpalatable to both sides that inaction is inconceivable. But it was a close thing this week, and really not a sensible way to do business.

Obama’s problems, however, are that the automatic sequestration has only been bumped back two months to allow for impossible discussions on where spending cuts should fall, and that there will also be a vote next month on raising the federal debt ceiling.

The latter renews the 2011 conflict that brought the US to within days of default and led to the first downgrading of the federal government’s credit rating. It is also, if anything, more difficult to overcome than the fiscal cliff challenge.

Once again a legislative pitfall created by Congress is set to trip up both Congress and the president.

Debt ceiling

While the constitution grants Congress ultimate power over spending, during the first World War a legally binding debt ceiling was introduced to give the treasury day-to-day discretion to raise cash.

Congress has until recently, and albeit grumblingly, agreed to raise the ceiling dozens of times over the years as the national debt grew. Not any more. And once again Republicans are determined to leverage any increase in the ceiling to ensure deep spending cuts in welfare and medical entitlements.

When Obama presented Republican House speaker John Boehner with his “fiscal cliff” plan in late November, one element was a suggestion to remove the debt ceiling decision more or less permanently from Congress (it would have the right to overturn a presidential veto only by supermajority). No dice, both Boehner and McConnell echoed unsurprisingly.

Obama insists he is not negotiating this time round. “I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed,” he warned on Tuesday night, a first shot in another round of brinkmanship.

Republican fears

Without the same leverage of threatened automatic tax increases, Obama will be counting on Republican fears that they will be blamed for the economic chaos ensuing from default. A recent Washington Post poll on who should be blamed if there were no deal this week broke 53/27 in Obama’s favour.

The president’s hand is strengthened by the moral authority of his renewed mandate – a five million margin on Mitt Romney in an election that revolved around precisely these issues of taxing wealth and securing historic welfare entitlements.

But the 113th Congress, which opened on Thursday, has a House still dominated by Republicans even though the Democrats beat them in the popular vote. (In Pennsylvania, for example, despite a Democratic majority, Republicans, currently in control of the redistricting process courtesy of sweeping gains in the state in 2010, took 13 of the state’s 18 House seats).

The Republicans also remain dominated by Tea- Party-endorsed ideologues determined on major cuts to pension, medical and welfare benefits, many of whom appear to relish the prospect of the chaos of default.

In the House, although two-thirds of Republicans backed the compromise Bill on Monday, not a single one of their leaders came to the floor to speak in its favour, and maj- ority leader Eric Cantor and the number-three Republican, Kevin McCarthy, voted no.

Boehner, no liberal he, but a reluctant backer of the compromise, was lucky on Thursday to be re-elected speaker, endorsed by his divided party because they could find no other acceptable compromise candidate.

Obama has won only a very temporary respite.

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