Millennium Post

US avoids fiscal cliff, world breathes easy

The triumph of the Barack Obama government over the US Congress in the so called ‘fiscal cliff’ debate can be counted as historic not because it will significantly influence the US tax system but is expected to bolster the global economy in a roundabout way. This is because the Republican-dominated Congress has come out decisively in favour of taxing the American rich and not the middle class, hence stopping short of triggering another bout of meltdown. That the Obama government could convince the Republican-dominated Congress to go against the narrow interests of the American rich and think of the global impact of the fiscal cliff goes to show Obama’s clout in the Congress and his stature as a politician.

The stakes were high on the proposed bill which was one of the highlights of Obama’s campaign when he returned to power this year. As the Congress passed the ‘fiscal cliff’ deal thereby stopping the escalation of fear about tax hike among majority of Americans, Obama informed that he would soon sign the bill into a law. The impact of the fiscal cliff, a term coined to signify the difficulty of the decision is best described in Obama’s own words.

This is what he had said before the bill was debated: ‘Let me repeat. We cannot pay bills that we’ve already incurred. If Congress refuses to give the United States government the ability to pay these bills on time, the consequences for the entire global economy would be catastrophic, far worse than the impact of a fiscal cliff.’ The Republican-controlled US House of Representatives voted 257-167 late Tuesday night on the ‘fiscal-cliff’ bill that was passed by the Senate in the wee hours of Tuesday.

The  US media have called the process of the debate fiscal cliff as ‘extraordinary and excruciating’ comparing the highs and lows no less dramatic than a Broadway spectacle but the fact remains that Obama has pulled off a feat which looked virtually impossible even till the last moment. His concerns were that if majority of Americans are sent the way of tax hike, the US economy will go into ripples with inevitable effect on the global economy.  But the fear was the Republican Party, which has always safeguarded the interest of the American rich, may behave in as navel gazing a way as it has always done and prevent any move to tax the rich. A consensus in favour of taxing the rich and thereby the avoidance of the actual cliff hanging over the US economy, is indeed welcome.
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