The Fiscal Cliff explained

By Chris Sorensen and Jaime J. Weinman - Wednesday, January 2, 2013 at 1:39 PM - 0 Comments

Saul Loeb/Getty

1. The 11th-hour deal to limit the damage from the U.S. from driving over the “fiscal cliff” on Dec. 31 is being hailed as a success insomuch as it averts an immediate crisis (pushing the world’s largest economy into recession) and represents a rare bipartisan agreement in Washington (although a deal was inevitable given the dire consequences). Under the bill, which is expected to be made retroactive to Jan. 1, income and capital gains taxes raised on the wealthiest Americans for the first time in decades. However, a payroll tax holiday will also be allowed to expire for all American workers. What the deal didn’t address is the other half of the so-called cliff: hundreds of billions worth of planned spending cuts and the debt ceiling.

2. The fiscal cliff was a totally manufactured term referring to a self-manufactured crisis on the part of the U.S. government. It started during another self-manufactured crisis, the debt ceiling crisis of 2011, when as an attempt to kick the can down the road on that fake crisis, the Congress decreed that a “supercommittee” would have to come up with a mix of tax increases and spending cuts. If the supercommitee did nothing by Jan. 1, 2013, a mix of heavy spending cuts and tax increases totaling an estimated $600 billion would happen automatically. Inevitably, the supercommitee turned out not to be so super, and the Congress was faced with trying to pass a law to avoid the problems they could have avoided by simply raising the debt ceiling cleanly in 2011.

3. The fiscal cliff follies are simply a trial run for the next fake crisis, which will occur this year when Congress has to raise the debt ceiling again. Traditionally, the debt ceiling was simply a fait accompli, since it’s just a formality that most countries don’t even have. But during the Obama administration, the Republican House has decided to use the debt ceiling to extract concessions on taxes and spending. Their supporters argue that the U.S. has a spending crisis that needs to be dealt with before the debt ceiling is raised; their detractors accuse them of holding the full faith and credit of the U.S. hostage. But one thing is for certain: this is the new normal, at least while the Republicans control the House – and thanks to gerrymandered districts, they are expected to control the House for the next decade. The “fiscal cliff” was just a preview of things to come.

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Whose Wisconsin: Paul Ryan or Tammy Baldwin?

By Emma Teitel - Tuesday, September 25, 2012 at 11:48 AM - 0 Comments

David Goldman/AP

Republican vice-presidential candidate, and Ayn Rand fan boy, Paul Ryan isn’t the only big thing to come out of Wisconsin this year. There is also his polar opposite: former Wisconsin congresswoman Tammy Baldwin, a Democratic rising star with a labour movement past, whose current Senate race could make her America’s first openly gay senator. Wisconsin, a swing state, has a history of favouring Democrat politicians, but a recent history of electing Republican ones.

At the Democratic national convention earlier this month, Baldwin spoke on the same night as President Obama. She contrasted the Wisconsin “she knows” with the Wisconsin now controlled by her opponents: “You’ve heard a lot about Wisconsin lately,” said Baldwin. “You’ve heard about Paul Ryan, who wants to end Medicare as we know it. You’ve heard about Scott Walker, who took basic rights away from public employees. Maybe you’ve even heard about [former governor] Tommy Thompson, who went to Washington, cashed in on his special interest connections, and never really came back.”

“The Wisconsin I know,” she continued, in one of her only oratory nods to gay rights and marriage equality, “believes that with each passing year and generation, our country must become more equal, not less.” It was a speech about her country, couched in a speech about Wisconsin—especially fitting because the state’s official motto, “Forward,” is the same motto used by the Obama election campaign. Which means it’s the same motto Wisconsinite Republicans like Ryan and Thompson are forced to celebrate in their home state and deride on the national stage.

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The trouble with too much democracy

By Andrew Potter - Friday, August 5, 2011 at 9:00 AM - 30 Comments

Jewel Samad/AFP/Getty Images

The most telling moment of the recent standoff over talks to raise the American government’s debt ceiling came on July 22, when President Barack Obama called a press conference to announce that House Speaker John Boehner had backed out of the negotiations. “I’ve been left at the altar twice now,” Obama pouted. In case the image of the President as a jilted lover was not clear to everyone watching, he added that he had spent the previous day waiting for Boehner to return his phone calls.

The whole affair has left a lot of Americans in a state of bipartisan disgust, with citizens from all points on the political compass cursing out their elected representatives. Yet it doesn’t seem to have occurred to many people that there is something structurally flawed with a system that allows the head of just one legislative house to treat the supposed leader of the free world as his last choice for the senior prom. If there’s anything that needs cursing out it isn’t the elected politicians, but the constitution of the United States.

America is a mess. The economy isn’t growing, the job market is a wasteland, its infrastructure is crumbling. On any number of measures, from education to health care to technological innovation, the country is getting beat by up-and-comers in Asia, Scandinavia, and South America. But the real threat to America right now is not economic decline or technological stagnation—those are just the knock-on effects of a much deeper rot.

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Two crises, but one is far more dangerous

By Andrew Coyne - Monday, July 25, 2011 at 9:00 AM - 4 Comments

Kevin Lamarque/Reuters

On either side of the Atlantic, the scene is the same: dramatic closed-door negotiations; days and nights of brinksmanship and finger-pointing; fears of debt spirals competing with fears of default.

What is different is the reaction to each. The American economy is the largest in the world, its government the biggest spender and heaviest borrower in the world. The consequences if the United States were to default on its debts would be incalculably greater than if Greece were to, harming not only its own borrowing ability but the whole structure of international credit. If the “full faith and credit” of the United States of America is not a safe bet, after all, what is?

And yet, with a possible default just days away, investors seem unperturbed. The interest rate on American 10-year bonds remains among the lowest in the world, and has been falling for months. It is tiny, perennially penniless Greece that has the financial markets in an uproar. This week’s meeting of European leaders is being pitched as a last chance to avert disaster, with agreement on a bailout (a second, actually) far from assured.

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The U.S. Congress is now a parliament; get used to it

By Jaime Weinman - Sunday, March 21, 2010 at 11:50 PM - 39 Comments

The U.S. House of Representatives has passed the Senate health-care bill, which means (because both houses have passed identical bills) that President Obama can sign it into law.

One thing many people have pointed out is that this is the first time in U.S. history that such a huge piece of legislation has passed with votes from only one party. All the big initiatives of Lyndon Johnson’s Presidency, like civil rights and Medicare, passed with votes from both parties. This bill, on the other hand, received not a single Republican vote in either house.

This has been, and will be, cited as evidence that the bill is a bad one. But I don’t think it says much about it one way or the other, because — and this is also frequently pointed out — the two parties in the U.S. are very different from the way they were. Back when Medicare passed, both parties had their liberal and conservative wings. Similarly, the Civil Rights Act was opposed both by segregationist Democrats from the South and conservative Republicans like Barry Goldwater who felt it violated states’ rights. Today, the parties basically don’t have liberal and conservative wings. The Democrats still have something resembling a conservative wing (as witness the fact that a bunch of their members didn’t vote for this bill), and if the Republicans regain the majority, they’ll elect a few members who are to the left of the party on some issues. But it’s clear that one party is the conservative party and the other is a liberal party, and they are expected to vote more or less on party lines. When a member seems like he or she is going to break with the party, he or she usually falls back into line if the leadership requires it, as Bart Stupak did and as moderate Republicans usually do.

What creates a lot of the weirdness in the U.S. system is that it’s one that evolved in an era of lax party discipline, and the rules have never really adjusted to the current quasi-Parliamentary arrangement. The best-known example is the filibuster. It’s something that grew out of the old system where the “nays” and “ayes” didn’t split evenly along party lines, and Senators of both parties might team up to filibuster. Now, with the more ideologically divided parties, it’s as if there’s a Parliamentary system where the majority has no power to pass anything without the minority party’s consent. This may or may not be desirable, but it certainly creates some weird incentives.

The Republicans have done a very good job of adjusting to the new reality. And not only by using the filibuster (which, until Scott Brown was elected, they couldn’t even use without Democratic defections), but by understanding the effect that party discipline has. As Senate Republican leader Mitch McConnell explained recently, he and his House counterpart John Boehner realized they could reduce the popularity of the Democrats’ initiatives by denying them any Republican support:  “Republican unity in the House and Senate,” he said, “has been the major contributing factor to shifting American public opinion.” Though it may operate differently in the U.S., it’s still a dynamic that is familiar in Parliamentary systems. The majority wants to pass something. They have the votes. The minority’s job is to unite in opposition, sour the public on the majority’s ideas and convince the public to put them in charge.

On the other side, one reason Nancy Pelosi has emerged as the star of the Democrats is that she understands this new dynamic. She is famously partisan and disdainful of deals with the opposing party, which means that she has the same attitude as her Republican opposite numbers, and is able to get things done in the new system. So after Scott Brown, some of the more “bipartisan” types wanted the Democrats to go for a scaled-down health care bill that might attract Republican support. As this long article explains, Pelosi said no: she would take nothing less than rounding up the votes for a comprehensive bill, and she convinced President Obama to do it her way.

The reason she was right is that there’s very little likelihood that they could ever have passed the smaller bills. The Republicans and Democrats agree on nothing: they have fundamentally different ideas about the role of government, health care, the environment and almost everything else. Both the Republican leadership and base dislike the idea of giving the Democrats bipartisan cover. Anything important that the Democrats want to do this year (in what might be their last year in the majority) they’ll have to do on party lines, and the same may well apply if the Republicans take back the majority. For better or worse, the U.S. is now becoming more of a Parliamentary government like ours. Well, if they’re going to have Canadian-style Socialized Medicine ™ they might as well have Canadian-style government.

Update: Here’s a link to David Frum’s already much-discussed post, where he argues that the Republicans could have Continue…