The war of nerves between U.S. Republicans and Democrats heated up this week with the approach of a March 1 deadline for federal spending cuts. Canadians are learning to live with the recurring ruckus from our neighbours' domestic dispute. It would be merely annoying if we were not counting on the dysfunctional family next door to be our main customer, our main supplier and the main guarantor of our peace and security.
Back in the days when men fought duels, they had to know how to shoot accurately enough to inflict injury, so as to preserve their honour without killing the other duellist, which could lead to a criminal charge. The corresponding skill in Washington now, for both the Democratic administration and the Republican majority in the House of Representatives, is to force the country to the very brink of financial disaster without actually hurting anyone. The good news is, they're getting pretty good at it. The bad news is, they're probably going to keep doing it.
In negotiation about the so-called "fiscal cliff" at the start of January, U.S. President Barack Obama and his administration wanted to raise tax rates on incomes exceeding $200,000 for individuals and $250,000 for couples. Republicans had promised not to raise rates for anyone. At the 11th hour, just before drastic spending cuts and tax increases would take effect, they settled for raising rates on incomes exceeding $400,000 for individuals and $450,000 for couples. So they split the difference. The crisis was deferred to March 1.
Now they are back for the next round. Some of the deferred spending cuts would take effect on Friday by a procedure called sequestration, where the Treasury Department is ordered to withhold from operating departments some of the funds already authorized by Congress. Both parties agree the sequestration they previously agreed to should not be carried out, but they won't agree to cancel it until the other side agrees to new terms. The administration wants elimination of certain tax provisions (known as loopholes by those who disapprove of them) that mainly benefit the wealthy and also wants some gradual spending cuts. Republicans want to keep the loopholes and just cut spending.
Both sides are bellowing and beating their chests in the manner of mountain gorillas while sniffing the political winds and figuring out where to split the difference. Both sides will be hurt politically if, say, aid to victims of tropical storm Sandy is seriously impeded by the exercise. They have shown they know how to back down in time to keep the system functioning. In the fiscal-cliff exercise, they actually did cut aid to Sandy's victims but quickly restored it when a fuss was raised.
The neighbours, including Canadians, have to put up with the bellowing and chest-thumping in the meantime, including apocalyptic warnings of a double-dip recession induced by government spending cuts. Canadians make their living primarily by selling electric power, lumber, minerals, auto parts and other products to U.S. buyers and we spend most of the proceeds buying products from U.S. suppliers. Talk of a U.S. recession therefore sends shudders down Canadian spines. But in fact, the U.S. housing market is recovering nicely from the bubble that burst in 2008 and there are signs U.S. consumers are a little more confident of their economic prospects.
It's hard to ignore the squabble next door as we see crockery coming through the windows and hear the bellowed accusations, but we have to keep it in context.
They always do back off just before they burn the house down or harm the children. Besides, there is no police department or social-work service we could call to intervene. It might be more comforting to know the greatest military power on Earth was governed by principles of wisdom, compassion, justice and truth, but that is not the world we are given. The safest assumption for Canadians is that the U.S. will keep repeating these ritual battles with no serious ill effects until one party or the other wins control of both Congress and the White House.
See also Bob Woodward, Doyle McManus at wfp.to/sequester1 and wfp.to/sequester2