current affairs

Analysis: The politics of the United States’ fiscal cliff

For the United States, the next month is crucial as the so-called fiscal cliff issue reaches a climax.

For the United States, the next month is crucial as the so-called fiscal cliff issue reaches a climax. While the economic future of the country remains in question, the politics are also very much at stake.

President Barack Obama has said that a deal would not be accepted unless higher taxes are put on America’s wealthiest persons, as tax cuts put in place by former president George W. Bush for the country’s middle class are to expire at the end of the year. The deal originates with the issue of US government spending, of which Democrats and Republicans have been in conflict with. The Democrats control the Senate chamber of the Congress, while the Republicans control the House of Representatives.

If a deal is not reached before the 31st of December, there will be cuts automatically put in to defence and education programmes, in addition to other government spending, as part of a budget agreement established in 2011, according to a report from the BBC. Taxes on the middle class population are due to go up by $2,200 (£1,373) if a deal is not achieved, according to a report from National Public Radio.

In a visit to a factory of the construction toy K-nex in the US state of Pennsylvania November 30, Obama said the extension of the tax cuts for the middle class was crucial. “I’ve been keeping my own naughty and nice list for [politicians in] Washington, so you should keep your eye on who gets some K-nex this year,” Obama said according to a report from NPR. “There are going to be some members of Congress who get them and some who don’t.”

Speaking to reporters in the US Capitol November 30, the leader of the Republicans, John Boehner of Ohio, said the talks were at a stalemate. “Let’s not kid ourselves,” Boehner said according to the BBC. “Right now, we’re almost nowhere.” Boehner added that a proposal made by the US Treasury Secretary Tim Geithner, which proposed an extra $1.6 trillion (£998.7 million) in revenue from taxes, and the move from the White House to increase taxes on the wealthiest Americans was not the way forward, saying the proposal was not serious, according to NPR.

If a deal was not met, Obama said, the future for Americans would pay more. “That’s sort of like the lump of coal you get for Christmas,” Obama said according to a report from The New York Times. “That’s a Scrooge Christmas.”

Boehner added that increasing taxes on anyone would harm the country’s economy. “Increasing tax rates draws money away from our economy that needs to be invested in our economy to put the American people back to work,” Boehner said according to the Times. “Campaign-style rallies and one-sided leaks in the press are not the way to get things done here in Washington.”

Obama added that in the end, the negotiations would be a long process. “In Washington, nothing is easy,” Obama said according to the Times. “So there is going to be some prolonged negotiations. And all of us are going to have to get out of our comfort zones to make that happen.”

The negotiations that are likely to continue through the end of the year are ones that will have implications for the whole of the global economy, including America and Britain. Yet, with the talks not proceeding, politically, there is very much at stake, and perhaps this is a sample of what is to come when Obama’s new term begins in January.