One of the most difficult questions I’ve had to answer this week has been to explain what the deal done in the US between the President and Congress actually means. So, assuming people want to know, here is the view of the American labor movement. Basically, Obama managed to avoid any significant cuts in welfare benefits – especially unemployment benefit, which is obviously a big deal despite this week’s slightly encouraging job figures. And while he didn’t get all the tax increases on the rich that he asked for ($800bn over the next ten years), he got at least three-quarters ($600bn-$700bn, depending on how you calculate them).
AFLCIO President Rich Trumka says:
The agreement passed by the Senate last night is a breakthrough in beginning to restore tax fairness and achieves some key goals of working families. It does not cut Social Security, Medicare or Medicaid benefits. It raises more than $700 billion over 10 years, including interest savings, by ending the Bush income tax cuts for families making more than $450,000 [£280k] a year. And in recognition of the continuing jobs crisis, it extends unemployment benefits for a year. A strong message from voters and a relentless echo from grassroots activists over the last six weeks helped get us this far.
For a more satirical take (too soon?) Andy Borowitz described it in the New Yorker as “a classic example of putting 98.5% of the American people ahead of the rest of the country”!
Paul Krugman, among others, argues that the tax and spend outcome is good, but that the compromising stance Obama adopted is bad news for the future (one US friend of mine described Obama as channelling ‘his inner Bambi’.) And Krugman didn’t think there would have been a short-term problem with going over the ‘fiscal cliff’ that everyone was talking about, suggesting that Obama could have not just taken it to the brink, but over it, as past Presidents have done. And the can has, to some extent, simply been kicked down the road, with the ‘debt ceiling’ replacing the ‘fiscal cliff’ as the next wholly artificial brink.
On the other hand, as well as defending benefits and spending, the deal means that Republicans in the House of Representatives and Senate have agreed to raise taxes on the rich – something they swore they wouldn’t. So they blinked too, and that might be more important in the long run, producing further tension between realists and fundamentalists in the Republican Party.
Public sector giant AFSCME were, like most US unions, upbeat about the deal. President Lee Saunders saying:
The bipartisan agreement passed by the Senate and House brings much-needed revenue by requiring the wealthiest to pay more in taxes, offers an economic lifeline to millions of long-term unemployed Americans and their families, and extends significant tax credits for working Americans. These are important, equitable steps to move our country forward, and now we can turn the page on this fiscal debate and concentrate on reviving the economy.