US politics is about to get interesting – and not in a good way

US Outlook

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The Independent Online

British politics might be a mess but, small mercies, at least it isn’t American politics.

The 114th Congress – they number them in a similar way to how WrestleMania is numbered, which seems like a reasonable comparison – started on Tuesday following a leisurely Christmas vacation, one of many that American lawmakers grant themselves.

With a new Republican majority in both houses, this one is set to be a doozy, with potentially very serious implications for the American economy and for American business. Forget the rows over the proposed Keystone XL Pipeline to transport Canadian crude south to the Gulf of Mexico refiners; it’s of symbolic importance only and the President is going to veto its construction anyway, assuming seven Democrat senators don’t jump ship and vote for it. Possible but unlikely.

One of the much more important fights looming is over the future of the Congressional Budget Office, specifically its head honcho. The CBO is a slightly obscure non-partisan government department that produces statistics which are highly influential in policy creation. Its economic forecasts and analysis essentially tell politicians how their decisions should work out.

The current head of the CBO is a chap called Douglas Elmendorf, a wonk’s wonk if there ever was one. Republicans don’t like his shtick because he refuses to incorporate “dynamic scoring” into the CBO’s statistics. Dynamic scoring is a supply-siders dream – it helps prove that tax cuts pay for themselves by including increased economic activity in forecasting. There isn’t a tax cut that Republicans don’t think pays for itself.

If Republicans get their way and replace Mr Elmendorf with someone of their own choosing, the implications are significant. Cutting taxes, particularly for those who can afford to pay the most, is the supply side dream. Honestly, it’ll trickle down eventually. If you’ve got someone running the CBO who is willing to juggle statistics to the point where they are proven to pay for themselves every time, it’s all the more likely you’ll get them passed.

The big problem is that pure supply-side economics are fine in theory but pretty dreadful in reality. For proof, look no further than Kansas. An aggressive tax-cutting strategy implemented by Governor Sam Brownback – a man who even some Republicans consider too bonkers to back – has crippled the Sunflower State. At its current rate of cash burn, Kansas might force the federal government to rethink its states-can’t-declare-bankruptcy policy.

So the chances of Mr Elmendorf keeping his job are pretty much zero. Great for corporate titans, but for the rest of us, not so much.

Speaking of what’s good for corporate titans, the Trans-Pacific Partnership is likely to get the green light from Congress this year. In parallel to the similar transatlantic T-Tip trade mega pact, TTP is a little-known and even less understood trade agreement, this time focused on Asia and Japan. It affects something like 40 per cent of the global economy. So not that important then.

Just like T-Tip, TTP in part it makes it easier for corporations to sue countries where regulations have affected profitability. Think tobacco companies suing nations where smoking restrictions reduce sales, an insanity that is already happening in Uruguay where Philip Morris is taking the government to court. We can expect much more where that came from.

Robert Reich, Bill Clinton’s Labour Secretary and one of the more sane voices in American economics, has come out swinging against the TPP, but his efforts may be futile. It’s one of the few potential pieces of economic legislation that will get bipartisan support despite its potentially far-reaching implications for global consumers. Almost all of them negative.

The TPP is another piece of legislation that looks like it was written by lobbyists on behalf of their paymasters. Well, we live in a corporatocracy so I guess we will have to get used to it.

New Republican Senate majority leader Mitch McConnell actually got Congress off to an hilarious start. Not known for his comic skills, Mr McConnell proudly claimed responsibility for the strong American economic performance over  the past couple of years. That despite having been the man mainly responsible  for opposing everything the White House has tried to do to kick-start the economy since 2008.

Regardless of what may happen in Congress over the next few months, at least it’s going to be more interesting than the gridlock of the past couple of years. President Obama has proven to be the ultimate “rope-a-dope” fighter. The more his opponents swing at him, the more they miss, so my money is still on the White House to win by technical KO.

American Apparel enters a less colourful phase

Fashion retailer American Apparel finally got rid of “colourful” founder Dov Charney just before Christmas, some six months after the board first attempted to oust him. He’s faced a litany of lurid misconduct allegations. A hostile work environment doesn’t come close to describing the situation if some of the allegations are true.

Anyway, undeterred, last week the company – now run by a female chief executive, Paula Schneider – officially locked the barn door long after the horse had bolted by in effect banning relationships in the workplace.

This sort of arrangement is becoming increasingly common in the US, particularly in retail, where employees in relationships will often be asked to work in separate locations. It’s a pretty sensible arrangement for a host of practical reasons – it means that if things go wrong then the place of work becomes something of a respite for the parties involved and single stores aren’t overly affected by a split or illness.

However, many chains don’t have that option and companies trying to regulate the emotional lives of their staff leaves me a little uncomfortable. The fashion retail industry in particular is a young person’s world, and trying to regulate relationships is going to be a tough nut to crack.

That said, a stricter policy from the get-go would have far better served American Apparel, its investors and even Dov Charney himself. Maybe a more clear-cut policy is the only way forward.