Inside Story Americas

What is behind the US fiscal cliff standoff?

We ask if it is a real crisis or just political theatrics, and if the American polity is able to govern the country.
Last Modified: 01 Jan 2013 14:34

The phrase 'fiscal cliff' invokes images of an economy spiralling to the bottom.

It was that image that was supposed to force politicians on Capitol Hill to work together to avoid the simultaneous expiration of tax cuts as well as the implementation of deep spending cuts.

"It's a sham. It's a political game played cynically by both sides to appeal to their bases  ...They could care less about what the economic effect of all of this are, it's a lot of posturing. If the American people are not much engaged with the details then that should have shown the politicians what they ought to do, the people are right, the politicians are, again, wrong."

- Richard Wolff, an economist

But negotiations came down to the wire with Democrats and Republicans both blaming each other for the potential consequences of not reaching an agreement.

It is just the latest in a string of standoffs in Washington DC.

When Barack Obama, the US president, spoke to the media earlier, he described the way he wanted the process to unfold:

"I have to say that ever since I took office to run the campaign and over the last couple of months, my preference would have been to solve all these problems in the context of a larger agreement, a bigger deal, a grand bargain … that solves our problems in a balanced and responsible way, that doesn't just deal with the taxes but deals with the spending in a balanced way so that we can put all this behind us and just focus on growing our economy. But with this Congress, that was obviously a little too much to hope for at this time."

Obama also emphasised the importance of sharing the financial sacrifices equally:

"By definition it (fiscal cliff) was completely manufactured. They sat down behind closed doors and manufactured it, brought it out and voted on it in broad daylight. The extent of the economic crisis remains to be seen if, for the course of the entire year, none of this was undone."

- Ryan Grim, the Huffington Post's Washington bureau chief

"If Republicans think that I will finish the job of deficit reduction through spending cuts alone, that sort of, after today, we're just going to try to shove spending cuts that will hurt seniors or hurt students or hurt middle-class families without asking also equivalent sacrifice from millionaires or companies with a lot of lobbyists etc.

"If they think that's going to be the formula for how we solve this thing, then they've got another thing coming. We've got to do this in a balanced and responsible way … and if we're going to be serious about deficit reduction and debt reduction, then it's going to have to be a matter of shared sacrifice."

Inside Story Americas asks: What does this say about the American political culture and its ability to govern?

Joining the discussion with presenter Kimberly Halkett are guests: Grover Norquist, the president of Americans for Tax Reform; Ryan Grim, the Huffington Post's Washington bureau chief; and Richard Wolff, an economist.

"[Deficit is not the problem], total government spending is the problem .… The argument that all government spending is somehow a service strikes me as nonsense. All military spending does not make it safer, some military spending is wasted, some makes us less safe … farm subsidies are not a service, they drive up the cost of food for poor people."

Grover Norquist, the president of Americans for Tax Reform


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