A real force to be reckoned with

The 11th-hour US compromise deal satisfied few people fully and saw a vital vote on a $60bn aid package for Sandy victims delayed, giving an outraged Governor Chris Christie a chance to take centre stage, writes Kyran Fitzgerald

We have been treated to a Christmas smorgasbord of mixed metaphors by US commentators, appalled at the inability of the legislators to reach an agreement on tax and spending matters designed to prevent a series of tax increases and spending cuts automatically kicking in, thereby plunging the country and by extension much of the world, back into recession.

Commentators and fretful financial market participants — fond of a bit of drama — warned that in the absence of agreement, we would “go over the cliff”, adding that the politicians were engaging in a “game of chicken”, conjuring up images of James-Dean style hotheads in fast cars hurtling towards each other.

At the last minute, both of the main protagonists swerved, but we still ended up with some bent fenders and the prospect of an equally damaging rerun in about six weeks’ time when a new threat — the breach of the US debt ceiling and by extension, a debt default — begins to loom, potentially sending manic depressive stock markets into another tailspin.

The last-minute crunch talks that led to the midnight hour deal represented another feather in the cap of Vice President Joe Biden — the jovial, occasionally gaffe-prone presidential “first sub” who put all his 40 years of experience at the heart of government to good use in crafting the compromise package together with the Republican Senate minority leader, Mitch McConnell.

The nation’s first citizen looked tetchy when announcing the deal — understandably so as the stretch in the talks had fouled up his Hawaiian Christmas break. As President Obama observed of the upcoming talks on necessary spending cuts, “Let’s hope that we can put a package together with a little less drama, a little less brinkmanship... let’s not scare the hell out of folks quite so much.”

There have been plenty of stings in the tail of a compromise package which satisfied few people fully.

Its passage through the House of Representatives threw up plenty in the way of drama, highlighting the huge tensions that now exist within the Republican majority in the House.

A majority of Republicans defied their leader, House speaker, John Boehner, to vote against the package — among the dissidents was Eric Cantor, the House majority leader, a hungry young politician gunning for Boehner.

All in all, this was a nightmare few days for Boehner. He decided to put off a vital vote on a $60bn aid package for the victims of Hurricane Sandy, thereby provoking one of the most impressive and hard hitting ripostes from an American political leader in living memory.

Chris Christie, the corpulent governor of New Jersey, is so well regarded that recent presidential candidate Mitt Romney asked him to deliver the warm-up speech at the Republican national convention last summer — Barack Obama fulfilled a similar role in 2004, helping to propel him to national prominence.

Christie tore into his party’s Congress leaders and representatives over their failure to vote through the long-awaited aid package.

The New Jersey governor pointed out that victims of Hurricane Sandy have now been waiting 66 days for Federal assistance despite the obvious devastation along the New York and New Jersey coasts and further inward.

Christie was backed by a fellow Republican, Long Island congressman, Peter King, a longtime friend of the Irish lobby in Washington DC. King went even further than Christie in calling on wealthy New Yorkers to “close their wallets” to the Republican party until it changes its tune.

Earlier, the opposition to the $60bn aid package was led by Darrell Issas, chairman of the House Oversight Committee, who claimed that the two New York Democrat senators pushing the aid package had “stuffed it with pork”.

Issas and other hardliners sought a halving in the size of the package. They appear to have overplayed their hand.

Christie’s furious reaction forced Boehner and the Republican leadership to backtrack. The aid package is being reintroduced.

But the spat has pointed up a big fracture in the Republican party involving a threatened defection of its more independent-minded leaders in the north east of the US.

Some now speculate that the influence of the diehard Tea Party faction may have peaked as the traditional moderate wing in the Republican party fights back.

Already, there are calls for a re-examination of the system of boundaries which favours incumbent congress members and by extension, right wingers able to out-organise their opponents in primary contests.

Meanwhile, the actual deal reached on Tuesday is gradually being unpicked by sceptical analysts. It involves some pain for America’s super wealthy, but also a lot of gain for insider lobbyists and a double dose of uncertainty for welfare recipients, aware that the Republican Right is regrouping to launch a concerted attack on welfare entitlements dating back to the big government heyday of the 1960s.

The Bush era income tax cuts have been made permanent for individuals earning less than $400,000 a year — and for households taking home less than $450,000 (President Obama had hoped to apply tax increases on those earning over $200,000).

The top tax rate on someone earning over $400k rises from 35% to 39.6% — this is hardly revolutionary yet it is a sign of the sheer scale of the wealth out there that this cautious move is slated to raise around $600bn in new revenues over the next decade.

Scores of business breaks were extended — many for 10 years — at a potential cost of $100bn. One example was a $70m programme for “motorsport entertainment complexes”. Another was a $15m package for asparagus producers hit by competition from Peru.

This calls to mind the infamous “earmarks” — where Congressmen and women secure “pork” in the form of financial aid for favoured local projects.

Senator John McCain, the 2008 Republican candidate, hit out at the “larding up of must-pass emergency legislation with giveaways to special interests” adding that it would fuel growing popular cynicism and make it even harder to tackle the $16 trillion national debt later on.

Two respected former US senators, Alan Simpson and Erskine Bowles, chaired a commission in 2010 designed to propose solutions to the debt.

In their view, the deal “missed a magic moment to reform the tax code.”

Attention will turn to ensuring that the US does not breach its debt ceiling — it is forbidden to do so by the federal Constitution.

The fear is that it could hit this barrier by the end of next month, provoking a downgrading in the country’s credit rating and sparking huge ructions in global financial markets, already made queasy by events in the eurozone.

For now, the proverbial can has been kicked down the road, albeit by means of legislative arm twisting rather than European-style leadership summit.

The failure to confront the deficit and debt, however, probably serves America’s trading partners well, as it should ensure that unemployment falls, and spending grows in what remains the world’s premier locomotive economy.

Obama has secured major backing for his alternative energy projects thereby boosting the momentum under way as a result of the shale gas revolution.

However, the Congress ideologues could yet sink their teeth into social insurance, Medicaid and Medicare, undoing some of the good work, as the debt ceiling deadline looms.

This would hit consumer confidence hard.

The longer-term impact on politics, national and international, of the recent weeks of lengthy talks may be the re-emergence of moderate US Republicans as a real force in the national debate.

The powerful intervention of the New Jersey governor raises the possibility of a challenge to the right-wing ideology which has exerted such a grip on the economic discourse across America. Moving into 2013, Governor Christie has emerged as an individual to watch.