America's fiscal suicide pact

 
US President Barack Obama speaks on the economy in the East Room of the White House in Washington on 9 November 2012 Barack Obama says he's open to new ideas but both sides are not budging - yet

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America might be forgiven for thinking they suffered a concussion, instead of holding an election, on Tuesday night. The country now has double vision.

The electorate was repeatedly told by both candidates there was a clear choice between two very different visions. After Tuesday, they might feel they have made one.

Republicans in Congress have other ideas. House Speaker John Boehner is insisting tax rises for the wealthy can't be allowed to happen.

Speaking before the president did so this afternoon, he said: "Everyone wants to get our economy moving again. Everyone wants to get more Americans back to work again. Raising tax rates will slow down our ability to create the jobs that everyone says they want."

He called on the president to lead.

Mr Obama did, but not in a direction that will delight Republicans. He is using the moral authority of his re-election to push his case. There is nothing new in his call for Congress to extend "middle-class tax cuts" at once. He's said it repeatedly before the election.

But it's different now. He has a renewed mandate and his demand has a fresh moral weight behind it. He pointed out even people who didn't vote for him told opinion pollsters that taxes should go up for the richest.

First act negotiations

There has to be an agreement. If the two sides can't get behind a plan to cut the deficit there will be pretty horrible consequences.

The ugly phrase "fiscal cliff" has stuck, but it is more like a ticking economic timebomb. The two sides agreed to a suicide pact if they couldn't reach agreement - tax rises and defence spending cuts the Republicans loathe - as well as other spending cuts that are offensive to Democrats.

The trouble is if the bomb goes off, it is not just the politicians who will be hurt. It is American economy that would explode, probably taking what's left of the world economy with it.

President Obama said that people had voted for action but he would refuse to accept any approach that wasn't balanced and made the middle class suffer alone. He said there shouldn't be a long, drawn-out drama.

The Republicans won't play along, and he will presumably portray them as churlish bad losers who won't accept the people's verdict. They will doubtless point out they too (or some of them) also have a fresh mandate.

While both Mr Obama and Mr Boehner sounded consensual they were in fact restating their mutually exclusive positions.

They are heading for confrontation, but this is only the first act - they are both stating a hard line, before the give and take of negotiations. They do have to get a move on. The drama can't run for long before it turns into tragedy for all of us.

 
Mark Mardell, North America editor Article written by Mark Mardell Mark Mardell North America editor

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  • rate this
    +9

    Comment number 25.

    Bone headed republicans will happily allow the debt ceiling to be raised 19 times - but mention tax cuts and they go bananas.
    Where do they think the money to wage wars comes from?

  • rate this
    +1

    Comment number 24.

    Going off the cliff would seriously bring down the deficit. It would also cut military and entitlement spending. It would also put US in recession. Maybe it would be worth it. But no. Compromise: No tax increases per se but tax loop-holes closed that RAISE revenue.

  • rate this
    +18

    Comment number 23.

    @16 you called obama's plan vague and undefined. by that logic, romney's plan was non-existent

    "historically, tax cuts have worked again and again..."

    That statement is not true

    here's one link, not enuf characters for more

    http://www.forbes.com/sites/rickungar/2012/07/17/the-truth-about-the-bush-tax-cuts-and-job-growth/2/

    after ww2 taxes were at 91% for 14 yrs and yet biggest economic growth

  • Comment number 22.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +7

    Comment number 21.

    OMG, I had no idea there were so many American republicans reading the BBC.

  • rate this
    +5

    Comment number 20.

    The best solution is do nothing and it will at least start to address the deficit, since it is clear than neither party has the bravery required to actually address the problem. Given the fiscal cliff rhetoric.

    Tax and spending both need significant reform. Instead there will be finger pointing and some inappropriate cuts and taxes, but at least the deficit will start to be addressed.

  • rate this
    +8

    Comment number 19.

    The Republicans will damage themselves more than Obama if they remain recalcitrant. I almost wish they would.

  • rate this
    +7

    Comment number 18.

    Obama 's victory was more a win over a very inept Romney.its time to end the posturing by both sides and show the maturity and good sense the people want. Simpson Bowles is a good starting point

  • rate this
    -12

    Comment number 17.

    #15.h2oclerk
    "Obama...a thug"

    I'm not so sure. His ideology is thuggish, and perhaps some of his hangers-on and spinmeisters.

    But Obama himself is a charmer, full of smoochy, feel-good rhetoric and adolescently boyish grins that provoke motherly concern from ladies of a certain age.

  • rate this
    -16

    Comment number 16.

    Obama could tax the rich at 100% and it wouldn't cover 1/60th of the shortfall his (vague and undefined) new spending plan calls for. Romney's tax cut and spending plan was closer to being balance, though still short. CNN did the math after the second debate, but everyone apparently had already gone to bed.

    Historically, tax cuts have worked again and again to generate more, not less, revenues.

  • rate this
    -18

    Comment number 15.

    Obama has no learning curve. He has no plan. He still believes that he only has to convince Americans his idiot ideology will magically work despite its historical failure, its crushing abuse of individual liberty, and its rejection of Constitutional principles.

    His call for a "balanced approach" is pure pretense. Obama first and foremost only wants what HE wants, and on his terms. He's a thug.

  • rate this
    +2

    Comment number 14.

    I don't know much about negotiating, but it seems to me if you do it in public you are making it impossible to anything later at the negotiating table.

  • rate this
    +32

    Comment number 13.

    I think 12 yrs of bush tax cuts for the wealthy proves that lower taxes on the rich does NOT make them hire more ppl. They just get richer and the income inequal. increases. Making them pay more will only temp. make them less rich, but they will still be rich, and in a few yrs when the economy picks up b/c of the extra tax rev. they will be even richer again b/c ppl will buy more of their product

  • rate this
    +19

    Comment number 12.

    We should be straight about the facts of this mandate business. The more Liberal candidate has won the popular vote in 5 out of the last six elections. In the year Bush won it, he announced he had a complete mandate. This year the Republicans claim that in losing a number of seats in the Gerrymandered House, they have exactly the same mandate as the President. That's ludicrous and hypocritical.

  • rate this
    +3

    Comment number 11.

    One point that you have missed.

    It is not a fiscal cliff it is just a turn on the road towards addressing the deficit. The cuts are low compared to the Eurozone and are not enough to balance the budget. The combination just halves the rate of increase of the deficit.

    The problem is that the cuts are in areas that both parties want to protect and the tax rises are back to historic levels.

  • rate this
    +11

    Comment number 10.

    Same as it UK - the rich have to have carrots but the poor it is the sticks in the form of welfare cuts. It is the lazy rich that always want a windfall for putting in no effort. The election meant the majority said we wont take any more of your crap. Obama should tough it out and uncover the progressive moderate Republicans who have read correctly the true meaning of Tuesday night.

  • Comment number 9.

    All this user's posts have been removed.Why?

  • rate this
    -6

    Comment number 8.

    Sensitive and accurate article, Mark.

    Just one thing jarred - Obama's alleged "moral authority" from his election win. I don't see much morality in the electioneering - merely who better manipulated half-truths and dazzled with rhetoric & spin. Amoral, if not immoral.

    You're right that we're heading towards a tragedy with the fiscal cliff.

  • rate this
    -10

    Comment number 7.

    ref #4 First Krugman wants no compromise he would rather have us go off a clifff. He does not care about working people.

    Obama has to give something major to the other side remember those of us on the other side have not recieved any help while his speical intrest friends grew fat.

  • rate this
    -17

    Comment number 6.

    Obama never had, never will have a "moral mandate". He is an incompetent and a liar. Many of the people who voted for Obama don't like his policies, but found they liked Romney (personally) less. All of the people who voted for Romney didn't like Obama policies, and some did so despite not liking Romney. Of those who didn't like Obama policies, the majority strongly feel he is an absolute disgrace

 

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