US politicians agreed a deal on the economy last week amid panic that failure to do so would lead to economic disaster.
Many commentators claimed the deal would force the rich to pay more tax while protecting the poor from yet more spending cuts. In fact it protects most rich people—while taking more from ordinary Americans.
The deal will impose mild tax rises on the super-rich—families earning more than $450,000 a year (£280,000) and individuals earning more than $400,000.
This is far higher than the $250,000 and $200,000 figures that president Barack Obama had initially promised. It affects only the richest 2 percent of people in the US.
Tax cuts for the rich introduced by George Bush in 2001, which were meant to have expired by now, largely remain in place.
Meanwhile workers will have less to spend than before since the deal ends Obama’s cut in “payroll tax”—similar to Britain’s national insurance scheme. Workers will now pay 6.2 percent in payroll taxes, as opposed to 4.2 percent, no matter what they earn.
Changes to income tax are weighted in favour of the rich too. In 2002 the poorest workers paid 10 percent income tax—the same rate they will pay in 2013. Yet the richest will pay less—35 percent in 2013, down from 40 percent in 2002.
Unemployment benefits have been extended for one year. This has been portrayed as a boost for those out of work. But other aspects of unemployment benefit are under sustained assault.
In 2011 someone out of work in the US could receive 99 weeks of unemployment benefits. Now that’s been cut to 73 weeks. Some states have imposed further barriers to accessing the benefit, such as drug tests.
Most analysts predict that unemployment in the US will remain steady or rise. Some 40 percent of those out of work in the US have been unemployed for more than six months.
Nor is the deal likely to “save the US economy”. The bond traders on Wall Street are still threatening to downgrade the country’s credit rating.
Nearly 50 million Americans live in poverty according to the US census bureau. That official figure soared by 700,000 between 2010 and 2011. And the true figure will be much higher.
A staggering $1.2 trillion in spending cuts over a decade will kick in from March unless another deal is done.
But North America remains the richest place on earth. The wealth of the world’s richest 100 people now stands at $1.9 trillion. It rose by $241 billion in 2012 compared to the previous year, according to the Billionaires Index.
So the money is there to create jobs, fund decent benefits and pensions, and provide education and healthcare for everyone. But no politician in the US is prepared to take on the rich.