President Obama's fiscal cliff 'victory' only defers US woes

Jan 2, 2013

The White House wants credit for the deal, but Obama and the US aren't out of the woods

Getty Images

IN THE end, the Republican Party blinked. But while the White House is claiming the last-minute deal that stopped America plunging over the 'fiscal cliff' is a victory for President Obama, few commentators see it that way.

The contentious deal passed by the House of Representatives late on Tuesday, averts the double threat of income tax increases worth $536 billion and $109 billion of spending cuts that threatened to push the US back into recession. It also includes a tax hike for Americans earning more than $400,000 a year, a threshold higher than Obama wanted, but one fiercely opposed by many Republicans.

US commentators have criticised the deal on two fronts: first, as an economic stop-gap that fails to address the fundamental problems of the US economy and, second, as a political "misstep" that raises uncomfortable questions about Obama's negotiating skills and leadership.

The Wall Street Journal says the deal leaves a "host of issues unresolved" and guarantees the two sides of American politics will continue to clash over budgetry issues. The paper notes it simply "defers" spending problems such as the ballooning cost of health care, and "doesn't come close" to introducing the $4 trillion deficit-reduction deal experts say is needed to make a real dent in US debt.

Writing in the Washington Post, Zachary A. Goldfarb says the deal leaves the US economy "vulnerable to immediate and more distant threats". It does nothing to "defuse the prospect of a catastrophic debt default" in two months' time, or address the fact that 12 million Americans are out of work.

The deal may even cause unemployment to rise, says Goldfarb, because it fails to prevent scheduled rises in payroll tax that will "take money out of the hands of many Americans" and slow economic activity further.

The New York Post's Charles Gasparino says the deal completely fails to address what the US really needs – "meaningful legislation to address the core problems of slow economic growth, out-of-control entitlement spending and runaway debt". He condemns Obama for introducing the largest tax hike in 20 years, but failing to curb "runaway entitlements".

The President might expect more sympathy from the New York Times, but it points out that many Liberals are criticising him for not imposing higher tax rates on wealthy Americans. The paper's Paul Krugman labels Obama the "Conceder In Chief", accusing him of trading away higher tax rates on the wealthy for a few "spending items" such as "extended unemployment benefits for a year".

The main conclusion to be drawn from the protracted negotiations between the White House and Republicans, says Krugman, is that Obama tends to crumble. "Whenever the president says that there's an issue on which he absolutely, positively won't give ground, you can count on him, you know, giving way - and soon, too. The idea that you should only make promises and threats you intend to make good on doesn't seem to be one that this particular president can grasp."

The Wall Street Journal's Colleen McCain Nelson says the fact that deliberations about debt ceilings and spending cuts will now drag on into 2013 will diminish the "time and goodwill" Obama needs to pursue the rest of his policy agenda.

Sign up for our daily newsletter