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Deal or no deal, only losers in US fiscal battle

Once again, Americans and the world are asking: What’s going on in Washington? Party bickering has hindered agreement on a major fiscal deal before year’s end – not a good omen for Obama’s second term in office. So now it has happened. The United States is plunging over the much-feared fiscal cliff. It will probably be a soft landing, since Congress has several days grace to seal a compromise and avert heavy consequences for the economy.

Most insiders believe that this will happen. But that doesn’t erase the political damage that has already occurred. The US Congress has not only failed to reach agreement by a Monday midnight deadline that was set more than a year ago: In addition, the agreement that is called a “compromise” is only a meagre interim solution, hammered together at the last minute. New conflicts already loom on the horizon. It’s only been 18 months since the bitter political backbiting in Congress brought the country to the brink of default. At five minutes to midnight, literally, a deal was reached that averted catastrophe – but postponed the core problem, that of reducing the nation’s 16-trillion-dollar debt.

That deal set in place the fiscal cliff: Unless Congress could find a better solution, Bush-era tax cuts were to automatically expire on the last day of 2012. In addition, across-the-board budget cuts would take place with no regard to priorities, an approach that US President Barack Obama has compared to an “axe” rather than a “scalpel.”

Congress and the White House had more than 500 days to come up with a more nuanced, a more “balanced,” as Obama calls it, solution, one that ideally would be free of party ideology, and free of the strong antipathy that many Republicans feel against Democrat Obama. And now, once again, it looks like Washington will only avoid an economic disaster by a hair’s breadth – and again, this time, only by procrastinating on the huge problem of spending cuts.

“It is absolutely inexcusable that all of us find ourselves in this place at this time,” said Democratic Senator Joe Manchin. Ali Velshi, economic expert at broadcaster CNN, was more pointed, charging “malpractice by Congress” after it had already reached the all-time lowest rating by the American public.

One viewer commented on the microblogging website twitter: “If I performed like this in my job, I would be fired.” It’s already clear that Republicans will get the blame: Their insistence that the country’s wealthiest should be spared higher taxes while social programmes for the elderly and poor should be cut has been resoundly condemned in public polls.

And Obama needs only to point to the strong public approval he got in his re-election as backing for one of his major campaign themes: Bush-era tax cuts for the wealthiest Americans must expire, while middle-class earners should get a break. But that makes the recent weeks of non-stop haggling with Republicans, who control the House of Representatives, even more worrisome. It shows the challenges Obama faces in his second term.

The defeat of Republican candidate Mitt Romney and the loss of some clout in Congress, rather than making conservative Tea Party Republicans more willing to compromise, has only hardened their determination to block Democratic initiatives. “The fact is that Republicans – who will control at least one house of Congress for at least half of the president’s next term – do not now and may not ever see sufficient political benefit to offer the types of concessions Democrats are insisting on,” wrote an analyst at broadcaster ABC. “If elections could not change that, there is precious little left that can.”

The system is so dysfunctional, the writer added, that not even “bold individual leadership” can repair it. With such a gloomy start to the New Year, the next hurdle hovers on the horizon: a new round of tough wrangling over raising the debt limit – the same crisis that set up today’s fiscal cliff back in August, 2011. Obama has declared that immigration reform and investment in the country’s decaying infrastructure are his priorities for 2013. But the Republicans, with their outspoken Tea Party faction, will likely block those initiatives.

Gabriele Chwallek, "Deal or no deal, only losers in US fiscal battle," Business recorder. 0013-01-02.