Obama – sort-of – wins the “fiscal cliff” and goes the way of Europe

Well, Obama got some tax increases for the wealthy and a postponement of the fight for spending cuts. The fiscal cliff was little more than a fiscal bump. Republicans are more upset than Democrats – at least judging by the “squeal index” – and the Democrats actually prevailed over the Republican majority in the House of Representatives. So, the view from across the Atlantic based on the belief that the loser squeals the loudest, is that Obama must have won. (The splits in the Republican Party are particularly interesting since these may completely nullify their majority in the Congress!)

But whatever it was that was agreed to, the US debt will rise by some $4 trillion directly as a consequence of this “deal”. The US follows exactly the same way as Europe in putting off the day when the music must be faced. The fight about spending and debt will come in about two months. Years of profligacy and living beyond available means cannot just be wished away. Just wishing that the economy will rebound – faster than has ever happened before – and will increase revenues so that spending cuts can be avoided is not living in the “land of hope” but is living in a fantasy. It is the same fantasy being played out in Europe. Obama is merely following Francois Hollande’s super-tax on the very rich to postpone the cuts in spending that are desperately needed and must come. The fundamental rule of party politics is being upheld: “Tax the voters for the other party and spend on your own”. The pain to come is inevitable. Of course, those who have been profligate have taken their benefits and gone. The pain will have to be borne by others – in the US as in Greece and Spain and Italy. I can’t help suspecting that the goal – whether for Hollande or for Obama – is to just postpone the evil day of spending cuts long enough so that it happens on someone else’s watch. But both Obama and Hollande are at the start of new terms and neither will be able to avoid facing reality.

The high drama at the end of the year in the US bears a strong resemblance to a Christmas farce. It couldn’t possibly have been a pantomime since any kind of music was notably absent. Obama’s performance on the 31st of December was badly out-of-tune and a little embarrassing to watch. And the other bit-players on display – Biden and Reid and Boehner and Cantor and McConnell – with their self-adulation, self-congratulations and mutual admiration were even worse.

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