For eurozone leaders watching the bluster in the "fiscal cliff" negotiations in the weeks since Obama re-took the White House, there has been no room for schadenfreude, since they too will be hit if America plunges into recession. But it must be hard to avoid the same baffling question: "why don't they just get a grip?"
The fiscal cliff is a $600bn (£369bn) package of tax rises and spending cuts that is due to come into effect in January unless new legislation is passed. The cross-party Congressional Budget Office has calculated that if the "cliff" is implemented in full, it will knock more than 2% off GDP in 2013, turning what would have been a solid recovery into recession. And since the US remains the world's largest economy, a slump on that scale – and resulting collapse in business and consumer confidence – could spark a worldwide downturn.
So severe are the consequences of failure that it seems impossible to imagine that the Democrats and Republicans, locked together in fraught negotiations, can possibly allow the US to tumble over.
Yet that's much too complacent a view, for a reason that is too often missing from the economics textbooks: politics. While Obama won the presidency convincingly, the Republicans still control the House of Representatives, and the famous "checks and balances" enshrined in the US constitution mean Obama and his team cannot simply publish their budget proposals and rely on a built-in majority to carry them in Congress. Instead, policy is made through a messy process of bargaining. It's as though the deeply tribal George Osborne and Ed Balls had to draw up a budget between them. No, we wouldn't like to be a fly on the wall then either.
So while the consequences of plunging over the edge may be too awful to contemplate, that is no reason to assume US politicians will cut a deal.
Last week the Republican speaker of the House, John Boehner, failed to persuade his own party to pass "Plan B" legislation in case cross-party talks fail, because some couldn't bring themselves to breach a promise never to raise taxes – even though the rises would only kick in for people earning more than $1m. It's hardly surprising that Obama has halted negotiations and gone to Hawaii for Christmas.
For those of us watching from this side of the Atlantic, it is important to remember that any kind of deal is still likely to involve deep spending cuts and some tax rises, skewed towards the top of the income scale. That might not quite constitute a "cliff", but it could be a sharp fiscal tightening, marking the end of the radical fiscal stimulus of the first Obama presidency and putting the brakes on the US economy.
So while the UK remains mired in its own non-recovery, the eurozone is still in crisis and the Bric economies are struggling with problems of their own, it doesn't look like a happy new year for the world economy, even if peace and goodwill break out on Capitol Hill.
McFarlane shows them how it's done at Aviva
'Tis the season for handing out virtual gongs and the FTSE 100 chairman of the year should be John McFarlane of Aviva. He was slated to be non-executive chair from July, but those plans were ripped up with the ousting of chief executive Andrew Moss in May. McFarlane stepped in as a full-time executive and has achieved more in eight months than the lacklustre Moss managed in five years.
McFarlane was still busy on Friday, agreeing to sell Aviva's American business to life insurance group Athene Holding for $1.8bn (£1.1bn). Hisnew chief executive, Mark Wilson, who starts in the new year, will thus arrive to find his in-tray slightly emptier. McFarlane can then switch to the role that was originally envisaged for him.
Nevertheless, his blistering spell in the hot seat should make Aviva's shareholders ask why on earth they tolerated the drift and excuses of the Moss era for so long.
McFarlane himself pointed out in July that it's a strange state of affairs when you have taken £1.3bn in below-the-line restructuring charges in five years but are still perceived to be bureaucratic and inefficient. His prescription was to find another £400m of savings – the ranks of middle management have been purged quickly.
The other part of the McFarlane plan was to exit businesses where Aviva has little hope of earning a decent return on capital. The writedown on the sale of the US business is horrible – the deal was struck at less than half book value – but Aviva's investors will rightly hold their noses and reflect on the benefit to the balance sheet. Combined with other deals in recent weeks, the group now has a surplus capital position that looks vaguely comfortable.
The best part of McFarlane's contribution is that he's not demanding to be paid extra for wearing the chief executive's hat on a temporary basis. He'll still collect his fees as chairman – £500,000 or so a year – so he won't go hungry. But compared with Moss, he's been a bargain.
Still proud of packaged accounts, Alison?
Alison Brittain, head of retail banking at Lloyds Banking Group, assured the Observer earlier this month that packaged current accounts were not being mis-sold by the bailed-out bank.
These accounts, which charge fees of £15 a month for add-ons such as travel insurance, have already been subject to an industry-wide review by the Financial Services Authority, which has required banks to be sure that they are not selling insurance on which customers cannot claim.
Remember payment protection insurance, added on to millions of loans in what later proved the costliest mis-selling scandal in history? Brittain claimed that PPI was a product that her 3,000 branch managers had rarely if ever bought, while some 90% of them held one of these so-called added-value accounts.
"I've got one," she boasted.
Presumably the bank's decision to pull the products from sale last weekhas left Brittain very red-faced. She clearly needs to subject the bank's sales practices to a more rigorous test than a straw poll among the staff – and fast.