US Politics Feature: Explaining the Next Fiscal Crisis...Coming To You in 6 Weeks

(Cartoon: Monte Wolverton)

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After the recent drama and supposed escape from the "fiscal cliff", two developing stories in Washington will affect the global economy. The first is whether Congress can pass measures to address three additional fiscal dilemmas, all of which need to be resolved by the end of March. The second, a vital sub-plot in the larger play, is the intentions and aims of the Republican-controlled House of Representatives.

Near the end of February, the US Treasury will have exhausted all contingency measures to avoid breaching the debt limit, currently $16.4 trillion, and the US will immediately default on 40% of its fiscal obligations. America could still afford to pay foreign debts through its continual receipts of tax revenues. It could even fund Social Security and other low-income payment programs...provided it is willing to make cuts such as the closure of the FBI.

As the talks on raising the debt limit reach the status of Urgent, Congress will also have to address the "sequestration cuts", delayed for two months by the fiscal cliff deal.

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US Politics Special: A 6-Point Guide to the "Fiscal Cliff"

President Obama calls on Friday for a resolution to avoid the "fiscal cliff"

See also US Audio Feature: So How Serious is This "Fiscal Cliff"? --- Scott Lucas with the BBC

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Editor's Note: As 2012 comes to a close, the emergency story in the US press is the "fiscal cliff". If there is no agreement by midnight, then tax cuts introduced by George W. Bush almost a decade ago will lapse, and funding of Federal programmes --- such as benefits for long-term unemployment and farm subsidies --- will be in jeopardy.

Discussions on Sunday were adjourned without agreement between the Obama Administration and Democratic and Republican leaders in Congress, despite Democratic concessions such as the raising of tax rates only on those making more than $450,000 a year and on an escalation of estate tax.

But as the haggling over details continues to the last minute, what are the basic economic issues? What happens if the clock strikes 12 and there is no dramatic resolution? EA's Lee Haddigan explains....

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US Politics & Economy: Scott Lucas on the BBC "Playing 'Win & Lose' with the Debt Crisis"

I joined BBC Radio Wales this morning in more discussion of the agreement, signed by President Obama yesterday, to raise the US Government's debt ceiling.

The lessons from the chat, which also includes the Vice-Chair of Republicans Abroad, were beyond the content of the broadcast.

1. At least in British media, consideration of the events is almost exclusively on politics, and within that, on "Who won? Who lost?" with a view to the 2012 Presidential election. There is little attention to the economic significance of developments.

2. There is an unwitting illustration of the difficulties for the US in the current episode -- even as some have pointed to the partisan manoeuvring and posturing that led to a debt problem becoming a crisis, the focus of the Republican participant in this brief conversation is to ensure that all the blame resides with the Democrats and President Obama (and, conversely, that any credit and good intentions are held by the GOP).

The item begins just before the 2:34.00 mark.

US Politics Opinion: Loathing and More Loathing in Washington DC

A wise man once told me there were two things in this world you do not want to see made: sausages and a political deal.

And so it is with the news that that the legislative and executive branches of the US Government have reached agreement on lifting the US debt ceiling, a step which should have been a formality. We are being treated to congratulatory statements by America’s political leaders of common sense prevailing and of the spirit of compromise.

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US Politics & Economy: Explaining Washington's Dangerous Game of Chicken on the Debt (First, Look at the Tax Cuts)

Photo: Jewel Samad (AFP)Right now the American conversation is being driven by fear, creating a further crisis in the attempt to solve the initial one.  That fear is embodied in the idea that Obama is driving a far-left social agenda and a tax-and-spend socialism, and in the belief that taxes cannot be raised without killing the American economy. But President Reagan raised taxes 11 times, including during a recession, and Obama has cut taxes. Reagan raised the debt ceiling 18 times, and Obama is trying to pass a plan that will only require him to do it once. President Eisenhower stimulated the economy by subsidizing higher education and by building infrastructure, but today he would be considered a socialist for his initiatives. Fifty years later, taxes are at an unrealistic historic level, far lower than they were under all Republican administrations.

The fear is unfounded. The taxes are too low, the debate has gone on too long, and it is time that the Republicans compromise on revenue so that the nation is brought into line with what all of the facts are telling us.

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