Wednesday, November 05, 2008

Wow it was a huge win!

Thrilled to have been proved wrong about the US election being close. And also hugely relieved.

It really hit home that Obama had won when he started giving his speech, and I had the odd sensation of hearing phrases that we are familiar with in the Labour party these last twelve years - "rich and poor, gay, straight, disabled and not disabled" and "we cannot have a thriving Wall Street while Main Street suffers" (the kind of thing Cruddas says, only substitute City and High Street for Wall Street and Main Street) - coming out of an American President's mouth. One of us is in the White House!. How exciting is that?

Pleased too that he mentioned that the task of dismantling the Reagan-Thatcher settlement will take more than one term. The audience looked so desperately hopeful, at one point it was almost like a session in church with them answering him at set points. The expectations on him are almost too much for a mere mortal to bear. I really hope he pulls it off.

What does this mean for Britain? Well if Obama succeeds in tilting the USA leftwards, it makes it easier for the Labour govt. For instance if he raises taxes on the wealthiest, it will be easier to swat away those who claim that the British tax system is resulting in people fleeing the country. If he restores inheritance tax, it makes it easier for us to explain that the Tories are being just plain greedy to want the inheritance tax threshold raised to £2 million. If he goes ahead and puts in place policies to tackle global warming, it will be easier for us to bat away those in industry and in the Tory party who are complaining about the climate change levy. If he succeeds in producing a socialised healthcare system, we can finally say to the right-wing critics, see, even the USA has capitulated. Just as FDR's election in 1932 preceded a leftward tilt in Britain in the 1940's, Obama's win signals the end of the Reagan-Thatcher settlement and a move leftwards in the developed world.

This is a moment for the centre-left to feel very cheerful indeed.

P.S. Just checked the tax situation. Obama has stated that he thinks a person on an income of $250k is rich (this is about £158k). He intends to raise the top federal tax rates to to 36% and 39.6% (from the current 33% and 35%). Remember that Americans pay state income tax in addition to federal income tax. The American state that mirrors Britain's economy most is New York State. There, the state income tax if your income range is between $100,001 and $500,000, is 7.375%. If your income range is $500,001 and over, your tax rate is 7.7%. People living in New York City pay city income tax too of between 2.9% and 3.6%.

That means that the top marginal rate of tax for high earners in New York City (London's great rival) will go up from the current 46.3% to 50.9% under Obama. Compare that to the 41% levied in the UK. It gives cover for the Labour govt to raise N.I. by a mere 1% over the upper earnings limit (to take the marginal rate to 42%), should they wish. Especially as the Irish have introduced an income levy of 1% (and 2% for earnings over €100000) to take top rate to 43%. Alistair Darling has ruled out tax increases for now. But what has happened in the USA gives us room for manoeuvre if we need it.

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