Thursday 27 November 2014

Tim Stanley: You picked a terrible moment to be partisan, Mr President

Tim Stanley

Published 02/01/2013 | 05:00

BARACK Obama did something bizarre on New Year's Eve.

While Republican and Democratic Senate leaders were locked in delicate negotiations to prevent America going over the fiscal cliff, we might have expected him to issue a bipartisan call for compromise on taxes and spending – something presidential. Instead, he held a White House press conference, and gave a campaign speech.

There was laughter as he mocked his Republican critics and applause as he called for higher taxes on the rich. It was a performance aimed not at healing his country's wounds but at whipping up his party's base.

The root cause of America's brush with the fiscal cliff is its $16 trillion (€12trn) debt. But the reason why it has teetered so close to the edge is politics.

The cliff itself was partly the product of an arrangement made in 2011 between the parties to defer dealing with the budget problem until a later crisis would compel them to do so. That crisis was a jump in tax rates and a cut in spending scheduled for January 1, 2013. If the parties failed to reach a budget deal before the deadline, the markets would shudder, unemployment benefits would cease for 2.1 million people and nearly everyone would face tax increases.

Given how high the stakes were, the level of political leadership was disappointing. Republicans and Democrats engaged in economic brink- manship as they argued about the right mix of tax increases and spending cuts.

After a failed effort to pass a bill through the Republican-controlled House, the battle moved to the Democrat-controlled Senate. Eventually, the Senate settled on a compromise of raising taxes a little and delaying decisions about spending cuts for a further two months. It was a far cry from the "grand bargain" that everyone agrees America sorely needs, and even this was only passed through the Senate two hours after the January 1 deadline.

With all this complex yo-yoing back and forth, it's tempting to blame the crisis on America's system of divided government, which makes it difficult to take big, tough decisions about domestic policy.

But the conservatism of the system can be overcome when the political will exists to do so. The problem in this instance is that both parties had a stake in being stubborn. The Republicans have become enthralled by a Tea Party base obsessed with reducing the size of government, so they were reluctant to anger the Right by accepting substantial "recovery killing" tax rises.

The problem is that many Democrats are equally obsessed with increasing government. We can infer that Mr Obama is one of them.

Republicans came to suspect that they were doomed to lose any budget negotiations with the President because he wasn't really worried about going over the fiscal cliff. He took the crisis as an opportunity to argue that the Republicans were risking the economic health of the nation in defence of low tax rates for the rich, whereas he was simply trying to preserve low rates and unemployment benefits for the middle class.

The deal thrashed out in the Senate, has been dubbed a "win" for the President by most commentators: it was all about new tax revenues and had little to offer on spending reform.

It was also a win because it compelled a Republican leadership to vote for higher taxes for the first time in two decades. The fracturing of the GOP that will result will set Mr Obama up nicely to push through the rest of his agenda for 2013, including immigration reform, climate change regulation and gun control.

In short, the fiscal cliff has shown that on both sides of the political divide there is a surfeit of ideology and self-interest. Mr Obama is enjoying his moment of glory after the 2012 election and sees no need to reconfigure his political style. Even though he has nothing to lose by being bipartisan, he continues to campaign tirelessly. The president doesn't seem to understand where the politics ends and the governing begins. (©Daily Telegraph, London)

Irish Independent

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