Closing the gap before the 'cliff'

STEVEN HURST
Last updated 14:47 08/11/2012
Reuters

With President Barack Obama elected to a second term and Congress still divided focus turns to the budget battle embodied by the fiscal cliff. Conway G. Gittens reports.

Barack Obama
JASON REED/ Reuters
IN CHARGE: Barack Obama walks with his family after winning a second term as US President.

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The United States moves from the bitter election campaign that produced President Barack Obama’s clear victory for a second White House term, toward a test of whether Republicans and Democrats are now ready to begin setting aside deep partisan divisions and legislative gridlock.

The challenge is to overcome the self-imposed ‘fiscal cliff,’ dramatic and automatic tax increases and spending cuts that could well slam the nation back in to recession.

In day-after-election remarks, Republicans signalled no readiness to give up on their ideological opposition to raising taxes on high-income Americans - as Obama has insisted - but instead were continuing to push for lower rates across the board.

That theory, known as trickle-down economics and dating to the era of President Ronald Reagan, holds that cutting taxes will vastly increase the size of the income and profit pie, thereby producing more revenue even at lower tax rates.

Republican Speaker of the House of Representatives John Boehner laid down that position yet again as the condition for working for any increase in government revenue in return for Obama’s stated - but undefined - willingness to cut spending on crucial social programmes. Republicans maintained control of the House.

The opening gambits did not argue for a quick solution to the country’s skyrocketing debt and stubbornly high deficit that has the government now spending more than US$1 trillion a year more than it collects in taxes.

In the face of those challenges, Obama had told Americans on Election Day that he had never been more optimistic.

‘‘The best is yet to come,’’ he said at his victory rally in Chicago, ticking off his legislative goals of reforming the tax system, working to ease climate change and overhauling the nation’s immigration laws. 

Now the immediate test is whether the country’s deep partisan divide can be narrowed, as Democrats under Obama’s leadership try to work out a compromise with Republicans to avoid the ‘fiscal cliff,’ that could force spending cuts totalling US$800 billion next year alone.

Obama’s victory and exit polling of voters showed a majority of Americans supported or were resigned to higher taxes to begin cutting national red ink. That was shown in Obama’s victory even though he had led the country through a period in which the economy suffered its biggest downturn since the 1930s Great Depression and stubbornly high unemployment that dipped only slightly below eight per cent in the final two months of the campaign.

He campaigned on a pledge to raise taxes on American households earning more than US$250,000 a year.

Republicans could still moderate.

That’s because voter rejection of Republican challenger Mitt Romney and his party’s drift to the far right of the political spectrum will surely bring a deep reassessment of strategy.

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The Republican base - dominated by diminishing numbers of white men - is shrinking, while the country moves toward a day when minorities - blacks, Hispanics and Asians - become the majority.

Obama’s second-term victory was sealed by massive minority support.

Obama’s re-election guarantees the full implementation of his signature legislative achievement, the overhaul of the nation’s health care system, which Republicans had vowed to overturn.

Likely, too, will be a continued US foreign policy that depends on multinational partnerships in dealing with issues like Syria’s civil war and Iran’s nuclear program.

Romney said those tactics were a sign of American weakness. And China, facing its own leadership transition, should be relieved.

Romney had pledged to declare it a currency manipulator, potentially leading to sanctions and escalating trade tensions.

But before Obama faces inauguration in January comes the ‘fiscal cliff’ at the start of 2013.

It includes big tax increases for nearly all Americans and deep spending cuts, including big reductions in spending for the military and popular social programmes, and it grew out of the government’s inability a year ago to reach a deal on cutting the deficit and debt that has climbed above US$16 trillion (NZ$19 trillion).

The automatic cuts and tax increases were put in place as Congress and the White House decided nearly a year ago to push the problem beyond Tuesday’s election. 

As he spoke in Chicago after his victory, Obama forecast the big fight to come, saying it will ‘‘inevitably stir up passions’’.

‘‘That won’t change after tonight, and it shouldn’t,’’ he added.

‘‘These arguments we have are a mark of our liberty.’’ 

That puts a best face on what will be a brutal ideological fight.

Boehner, probably the most powerful Republican in Washington given his leadership of the House, reminded Americans that his party still holds the high cards with their majority in the lower chamber of Congress.

‘‘Voters made clear there is no mandate for raising taxes. Obama has proposed higher taxes on households earning over US$250,000 a year, and that is what killed attempts at compromise a year ago,’’ Boehner said initially after Obama was named winner.

Setting up a continuing legislative gridlock, Democrats continue to hold control of the Senate and are able to trump conservative legislation that originates in the House.

As leader of the Senate minority, Republican Senator Mitch McConnell signalled a readiness at continued obstruction if the Democrats and the president don’t capitulate.

He led the Republican minority in the senate during a period when it used a record number of filibusters to snarl movement of legislation.

‘‘The voters have not endorsed the failures or excesses of the president’s first term,’’ said McConnell, frosty in his postelection remarks.

‘‘Now it’s time for the president to propose solutions that actually have a chance of passing the Republican-controlled House and deliver in a way that he did not in his first four years in office.’’

In the continuing shift in the demographics of the voting public, younger voters and minorities went to the polls Tuesday at levels not far off from the historic coalition Obama assembled in 2008.

Hispanics made up 10 per cent of the electorate, up from nine per cent four years ago.

Republicans won less than 30 per cent of the Hispanic vote and not even one in 10 black voters. 

Romney tried to set a conciliatory tone on his way off the national stage. 

‘‘At a time like this, we can’t risk partisan bickering,’’ Romney said, after a campaign filled with it.

‘‘Our leaders have to reach across the aisle to do the people’s work.’’

- AP

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