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Bursa, Romania

New Year, New Deal: Next Deal?

By Cristian Pîrvulescu

Even if he clearly won the elections, over the next two years Obama will find himself in a hostile cohabitation with a Republican-dominated House of Representatives, just like in 2011 and 2012.

Translated By George-Cristian Samoilă

7 January 2013

Edited by Lydia Dallett


Romania - Bursa - Original Article (Romanian)

The new year began on a high note in the U.S. In Europe, too, the economic situation does not seem as uncertain as one year ago. However, on both sides of the Atlantic, economic and social stability depend on the maturity and openness of politicians. In the United States, Barack Obama's reelection as president has set the market fundamentalists on the defensive. Maybe because of this, when it was least expected, the House of Representatives – dominated by Republicans hostile to Obama – approved on the very first day of the new year a budget agreement that prevented the terrifying “fiscal cliff.” Even if the suspense lasted until the end of the vote, toward midnight, the House of Representatives adopted the budget agreement in the same manner in which it was finalized, in extremis, one day prior and immediately voted into the Senate. Could this be a sign that Barack Obama's second term will be marked by a next deal?

The highly discussed "fiscal cliff" would have automatically been applied at the start of the new fiscal year, when the transition period for modifying fiscal legislation that was favorable to the great wealth from the Bush era would expire. This would have brought on higher taxes to all social categories and drastic cuts in budget spending. Finally, on the last night of the year, after prolonged negotiations, American Vice-President Joe Biden and Republican Senate Minority Leader Mitch McConnell reached a compromise concerning higher taxes for homes with an annual income greater than $450,000. Taxes would go from 35 percent to 39.6 percent, an important concession from the Republicans who usually are opposed to any tax increase. Sure, the income taken into consideration for taxation went up from $250,000, the amount proposed by Obama during the election campaign in autumn of last year, to $450,000. However, the Rooseveltian principle of a higher contribution to the budget by the rich has triumphed.

In comparison, in Romania the so-called aggressive taxation proposed by the USL (Social Liberal Union) during the elections late last year does not raise taxes for higher incomes at all (currently at 16 percent), but instead proposes a decrease of taxes for lower incomes.

However, even if the agreement passed Congress and was approved by President Obama, the confrontation between Democrats and Republicans on the topic of fiscal and social policies is far from over. The Obama administration has two months to convene with Republicans over budget cuts. And here the Republicans will try to intervene against the administration's social policies. On the other hand, the conflict between the Obama administration and the House of Representatives might take on the form of a confrontation on the subject of raising the debt ceiling, which was already reached on Dec. 31. In this case, the raising of the debt ceiling is attributed to the House. When it happened in the past, in the summer of 2011, the conflict between the administration and Congress led to a downgrade of the U.S.’s rating from Standard and Poor's. Even if he clearly won the elections, over the next two years Obama will find himself in a hostile cohabitation with a Republican-dominated House of Representatives, just like in 2011 and 2012.

However, the conditions for a Rooseveltian New Deal are fulfilled. After "Obamacare" was declared constitutional by the Supreme Court last summer and validated through elections by the majority of voters, the political resources of the tea party movement, which ever since 2010 has set the ideological line of the Republican Party, are limited. It remains to be seen if again, as in his former term, Obama will be facing a Europe held prisoner by neoliberal ideology and obsessed only with austerity.



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