Merry non-denominational celebration of the winter solstice! Have a picture of congress, where a third of the US government lives, namely the House of Representatives and the Senate. I took this a couple of days ago, but alas I missed the small window where we actually had some snow. Oh well. Today I want to moan a little bit about how the US government manages to not function.
Time for a quick compare and contrast: in the UK, there are two houses of parliament, the Lords and the Commons and, while the Queen is technically head of state, all decisions are taken in the commons, with the Lords serving purely as a revision chamber. The Lords can slow down, but not block, legislation coming from the commons.
By contrast, the US government has three branches: the Presidency, Congress and the Judiciary, with each supposedly having equal power. Congress is split into two: the House of Representatives and the Senate. While the senate is more prestigious, having fewer members (two per state, with none for DC) who serve six-year terms, the House has equal legislative powers, with the number of members per state being proportional to that state's population and each Representative serving two-year terms. I think the House has 435 members, but I'm not sure and it's not important for this moan.
The constitution of the US means that Congress and the President both have powers that can be blocked by the other, so passing something like a budget requires unanimous agreement between the President, the House and the Senate. This is supposed to prevent any branch of government from getting above itself but, as can clearly be seen by the current "crisis", it can also cause government to grind to a complete halt when you have different parties controlling different branches of government.
I'm sure you're all aware of the fiscal cliff? Basically, the two parties, Democrats and Republicans, couldn't agree on a budget just over a year ago when they had to agree to raise the the debt ceiling (a legal limit on government borrowing). After much haggling and silliness, and after causing the US government's credit rating to be downgraded, both sides agreed a temporary budget settlement by writing in automatic spending cuts and tax rises (that no one wanted), which would apply if the parties couldn't reach an agreement by the end of 2012. This agreement was supposed to buy time to sort out negotiations, because it includes blanket cuts to all federal agencies as well as cuts to welfare spending (to upset Democrats) and to defence spending (to upset Republicans), providing a mutually-assured-destruction form of motivation to sort things out.
So, as we approach the end of 2012, it's safe to assume that both parties put aside their idealistic differences in support of the greater good of the country? Aye, right.
We did a tour of Congress yesterday as we had a couple of friends visiting from back home (woot!) and, 48 hours before everything supposedly goes to shit, there was a surprising lack of politicians around the Capitol, with neither house sitting. So what will happen immediately if no agreement is reached? Lots of things, perhaps the most striking being the immediate cessation of unemployment benefits (around $290 a week) for about 2 million USians. Not a nice way for the very poorest in this country to start the New Year, especially given the current lack of jobs. I guess certain USians believe that the poor are only poor because they haven't worked hard enough, so it's their own fault, so don't see this as a bad thing. Just ask Mitt Romney.
Another Bad Thing will be increases in the Alternative Minimum Tax (AMT), which I only learned about today when I was working out my tax return (even more fun than it sounds). Basically, in the late 1960s, Congress noticed that 155 very wealthy households in the US were not paying a single penny in income tax due to various loopholes and exemptions, so they created the AMT to ensure that they at least pay something. It's effectively another tax form where you do your taxes again, but it has less exemptions for things like business expenses. This seems like an unusually socialist policy for the US (i.e., a good idea).
The problem with this tax is that they didn't index-link the threshold income for paying AMT, so the number of people paying the tax would increase every year. What normally happens is that congress "patches" the threshold for the AMT every year and a patch hasn't been applied for 2012. As far as I understand it, if an agreement isn't reached soon, folks will be liable to pay 26% of anything they earn over $22,500 (in addition to other federal taxes). Given that the median household income in the US is about $48,000, you can imagine how that will hit quite a few people.
(As an aside, I noticed that, even with 2011 levels, the AMT seems to punish those who are married as a married person has an exemption threshold of $10,000 less than for a single person. As I have no child care or mortgage payments to deduct against the AMT, I would have to pay an extra $800 in tax this year just for being married to Dom, if I wasn't a dirty foreigner who has slightly different tax rules. However, we'd better pop a sprog before next year's tax return is due, or skip the country...)
I have read some interesting view points suggesting that the US should accept the same austerity as Europeans and actually deal with their deficit. Others suggest that going "over the cliff" may not be a bad thing at all. Most commentators, however, seem to agree that the sky will fall, rivers will run red and the global economy will crumble massively. Who knows? What seems obvious is that, whatever happens, it'll be poorest in society who pay the biggest price for political and financial uncertainty. In that respect, our cousins in the US are no different from us Europeans.
