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There are two Washington DCs. There is the DC of the White House and Congress, of politicians locked in ideological battle over the debt crisis. And there is the DC that is seldom heard or seen, the neighbourhoods that are among the poorest in America, where the debt row is seen as irrelevant.

The divide in DC is both racial and economic. Almost all the politicians live in the north-west of Washington, the wealthy, predominantly white part of expensive houses and pricey restaurants, home to the national monuments and museums visited daily by thousands of tourists.

Fifteen minutes away by car on the other side of the Potomac river is Anacostia, a 92% African-American neighbourhood that few tourists visit. Its Ward Eight is one of the poorest areas in the US, with the highest unemployment rate in the country.

Residents interviewed last week said they regarded the showdown in Congress as failing to address their concerns: the hunt for largely nonexistent jobs and their daily battles with poverty.

But, while the debt crisis might seem irrelevant to them, the truth is it is likely to affect their daily lives in a far more devastating way than it will any of the politicians who will line up to cast their votes in Congress on Sunday night.

The compromise deal emerging could cut trillions from the federal budget over the next decade, and that will mean fewer jobs and the probability that welfare benefits will be slashed. Life for the residents of Ward Eight and millions of Americans like them will almost certainly become even harder.

“If Congress cuts spending, there is nothing I can do about it. I am a mother of two kids barely getting by. After I pay the bills, there is nothing there,” said Mercedes Woodberry, a 23-year-old single mother of twins, four-year Shamar and his sister, Shamera. “I try to stay positive.”

Bloomberg news agency reported earlier this year that Ward Eight, with 25.2% unemployed, has the highest jobless rate in the US. Residents say the real rate is double that or more – the number of youths hanging around porches and street corners during the day supports the theory.

It is a world where some homes are in permanent darkness at night because electricity bills cannot be paid, where fathers take little or no responsibility for their children, where single mothers agonise over how they are going to find the money for school uniforms, where drug dealers rule the night and the murder rate is high. The proportion of those on or below the poverty level, according to the Washington-based Urban Institute, is 35%.

Woodberry, who lives on 28th Street, in the heart of Ward Eight, had two months’ work last year in a coffee shop but nothing since. She wants a job that would fit in with school hours but has been unable to find anything. She does not have to pay rent because she is not earning, but has bills for electricity, gas, life insurance, and a mobile phone.

Her total income each month is $486 in food stamps and $428 in public assistance.

“I have a son who has a big appetite. The children start school on August 22. I have to get school uniforms but I haven’t got them yet. Will I be able to get them? I don’t know,” Woodberry said.

The debt crisis comes at a time when the wealth gap in the US is widening, with more people falling below the poverty line. Latest census figures show one in seven Americans – 43 million – living below the poverty line.

A former senator and Republican veteran, Alan Simpson, an old-fashioned moderate who last year co-chaired a failed bipartisan commission on balancing the debt, warned, in an interview last week with CNN, that it would be the people at the bottom in America that would suffer.

It is the little guys who get burned, Simpson said. “The little guy is going to be cremated.”

The standoff in Congress over the last week has already harmed a US economy struggling to come out of recession and makes the prospect of new jobs in the near term harder. If there was to be a last-minute obstacle to a deal in Congress, America’s poor are almost certain to be among the casualties too. Barack Obama warned that millions of welfare cheques might not be sent out in order for America to keep up its debt payments.

Assuming the deal goes through, the Republicans and Democrats will begin a discussion on the detail of where the trillions in cuts will come from. The Democrats want to try to protect the poorest while the Republicans want big cuts in welfare. Benefits are on the agenda: it is just a matter of how much they will be cut.

Living near Woodberry in Ward Eight, on Alabama Avenue, Eric Fredericks said he leaves home every morning to distribute his CV to prospective employers. A construction worker, married with two children, he has not had a job since November last year. His wife Cheryl is in a wheelchair and receives a disability cheque.

He is not entitled to unemployment benefit, worth about $200-300 a week, because his previous job, digging for an electricity company, did not last the necessary six months.

“I need to put food on the table,” he said. “Companies say ‘write your name down and we will call you’ but nothing happens. I have no income other than $200 a month in food stamps.”

Aged 53, he lived in Maryland before moving to Anacostia two years ago. “Maryland was a lot better than where we are now. Now we have 2,000 kids ripping and running the streets, doing drugs, hanging out all night,” he said. There have been tentative hints of gentrification in Anacostia, but not enough yet to make a difference. Old houses have been knocked down and new ones built, but Fredericks said: “The bad people just moved back in.”

Obama, during the 2008 White House election campaign, identified the break-up of families and the number of children raised without a father as one of the biggest problems confronting African-American neighbourhoods such as Ward Eight.

The lack of a job strains Fredericks’s marriage. “She fusses every day. We argue. She has got to take care of the kids and I am not bringing anything in. I understand why she is mad at me,” Fredericks said.

Part of the reason for high unemployment in Ward Eight is that many residents are ex-convicts, which makes finding a job more difficult. Fredericks spent 11 years in Lorton jail, Virginia, convicted on robbery and drug charges, but said he had put that behind him. Since his release aged 31, he has regularly held construction jobs.

“Whatever happens, I am not going to go out into the streets and rob anyone. I am not going to sell drugs. I just want to work,” he said. It is the longest he has been without work since leaving prison.

Although unemployment is not being talked about in Congress, it is almost certain to dominate the 2012 White House race; the issue that could decide whether Obama is re-elected.

Polls show African-Americans remain overwhelmingly supportive of Obama and Fredericks is no exception. He does not blame the president for the lack of jobs. “He is doing all he can do. He is cleaning up Bush’s mess. The Republicans are not giving him a chance,” Fredericks said.

From Anacostia’s streets there are clear views across the river to Congress. The problem is that Congress does not appear to see Anacostia.

http://www.guardian.co.uk/world/2011/jul/31/us-debt-crisis-washington-poverty

Martin Rowson on Barack Obama and John Boehner’s slow-moving attempt to find a compromise

http://www.guardian.co.uk/commentisfree/cartoon/2011/aug/01/us-debt-ceiling-negotiations-cartoon

Britain’s leading employers’ organisation on Monday cuts its forecast for economic growth this year in response to the severe squeeze on consumer incomes and a sharp drop in business confidence.

In a fresh blow to the government, the CBI said it now expected national output to increase by 1.3% in 2011 compared to the 1.7% it had been predicting three months ago. The growth downgrade follows last week’s news that gross domestic product (GDP) increased by just 0.2% in the second quarter of 2011 and by 0.7% in the year to June.

City analysts believe the sluggish nature of the UK’s recovery will force the chancellor, George Osborne, to follow the CBI’s lead and cut his own growth estimate from 1.7% over the coming months.

The CBI said the outlook had darkened in recent months as a result of higher inflation and the debt crises affecting Britain’s two biggest export markets – the United States and the eurozone.

In its quarterly economic forecast, the employers’ body said that the UK would rely heavily on exports to keep the economy moving during 2011. Household consumption is expected to fall by 1.0% as a result of rising prices, higher taxes and only modest increases in wages, and businesses are expected to delay investment projects until 2012.

The CBI said that many of its member companies were cash rich but that investor confidence had been eroded by the impasse in Washington and the failure of the eurozone to prevent the debt crisis from spreading.

“The economic outlook has become even more challenging but we still expect the economy to continue to grow modestly this year and next, John Cridland, the CBI’s director general, said.

After GDP fell by more than 6% over six consecutive quarters in 2008 and 2009, growth picked up in early 2010 and by the end of 2010 the CBI was predicting that output would expand by 2% in 2011.

Since then, however, the economy has received a number of setbacks, including the jump in oil prices which has added to the cost of imports and hit discretionary spending by making petrol and domestic energy more expensive. Cridland said the latest bad news had come from Europe and United States.

“The global economy has slowed in the face of several shocks including the Japanese tsunami and soaring commodity prices,” he said. “These factors have combined with political uncertainties around the eurozone sovereign debt crisis, the wrangling in Congress over the US debt ceiling and the policy tightening in China, to erode confidence and soften activity.

Cridland took some comfort from the fact that there had not been a double-dip recession: “It may be a lacklustre recovery, but with solid net trade contributions and the positive impact of business investment, the UK will remain on a growth track.”

The CBI predicted that growth would pick up to 0.8% in the third quarter and expand “at a consistently modest rate of around 0.5% to 0.6%” until the end of 2012.

“Inflation is expected to be higher in the autumn and into next year than previously forecast, mainly as a result of increases in utility prices due to take effect later this year. But as the impact of the VAT rise falls away, inflation is set to moderate during 2012 and fall back closer to the Bank of England’s 2.0% rate towards the end of next year,” it said.

With the economy weak and inflation falling, the employers’ organisation now expects the Bank of England base rate to remain on hold at 0.5% until the first three months of 2012. Borrowing costs are then expected to rise, hitting 1.5% by the year’s end.

http://www.guardian.co.uk/business/2011/aug/01/cbi-cuts-forecast-economic-growth

The drinks industry has secured heavy representation on a key government advisory working group on alcohol, putting it in a strong position to influence the coalition’s forthcoming alcohol strategy.

Minutes of the Government and Partners Alcohol Working Group, which meets bi-monthly and is chaired by the Home Office director of drugs and alcohol, show that drinks industry membership has massively increased during the last year.

Under the Labour government, there were a couple of industry representatives, but the coalition has swelled their numbers to the point where they make up almost half the membership of the committee, excluding the civil servants who represent government departments, such as health and the Treasury. Minutes of meetings before and after the election were obtained by the BBC’s Panorama programme, which on Monday night will show the damage excessive drinking is wreaking on young people and asks why the government has not acted to raise alcohol prices.

When the committee met in March 2009 – then called the Alcohol Strategy Delivery Group – eight of the members were non-civil servants and two of them were from the drinks industry – one from Bacardi and the other from retailers Morrisons. Five others came from a health background and the sixth represented local government.

But the membership changed under the coalition government. In December 2010, there were 10 members from the drinks industry and seven others. In March this year, there were 10 members from the drinks industry, eight of whom were present, and six others – three of whom were in the room.

The minutes of that meeting show that the committee is to have a role in the government’s alcohol strategy. They record that it listened to a presentation from the Department of Health on what it might contain and was asked for views.

The revelation of the industry’s central role on a government advisory body follows concern over its representation on the groups that negotiated the public health responsibility deal. In March, six health groups, including the British Medical Association and the Royal College of Physicians, walked out of the deal on alcohol, saying that they were not allowed to discuss the measures that would have most effect in curbing dangerous drinking, such as price rises.

The panel’s health representatives said at the time that the government had listened to industry and refused to allow issues that could make a difference, such as price and promotion to children, to be discussed.

They subsequently wrote to health secretary Andrew Lansley, rejecting the deal, which they said would prioritise the views of industry and aim to “foster a culture of responsible drinking” rather than tackle illness and death.

They also criticised a key aspect of the deal – the making of pledges by supermarkets, pubs and drinks manufacturers to reduce harmful drinking, such as labelling bottles and cans with the number of alcohol units. According to the health groups, there was no way of measuring the success of the pledges.

Don Shenker, chief executive of Alcohol Concern, is a member of the Government and Partners Alcohol Working Group. “There is nothing wrong with governments choosing to listen to different stakeholders, but when representatives of the drinks industry are invited to form health policy, one has to question the value of this, particularly when the pursuit of making money from alcohol sales is at odds with government intentions to reduce alcohol harm,” he said.

“This government needs to decide if it wishes to truly get to grips with the significant levels of alcohol harms in the UK, or stick with the status quo of allowing the drinks industry to call the shots. It can’t have it both ways,” Shenker continued.

The government, however, believes more progress can be made if the industry is at the table.

“We are committed to challenging the assumption that the only way to change people’s behaviour is through adding to rules and regulations. Everyone, whether the NHS and public services or alcohol retailers, producers and pubs, has a role to play in reducing the harmful use of alcohol,” said the Department of Health.

“The Government and Partners Alcohol Working Group consists of representatives from government departments with an interest in alcohol. It includes health academics, representatives of the drinks trade and organisations with an interest in the harm caused to society and individuals by alcohol.

“Our Public Health Responsibility Deal is working with the industry on voluntary agreements to get speedier results. We have already seen encouraging signs with Asda pledging to stop displaying alcohol at the front of the stores and Heineken promising to reduce the alcohol content of one of its brands.”

Panorama’s documentary on alcohol harm is being shown on Monday night on BBC1 at 8.30pm.

http://www.guardian.co.uk/society/2011/aug/01/alcohol-abuse-drinks-representatives

Workers in the private sector are being discouraged from saving for their retirement by fees and small print that would “puzzle Einstein”, an independent investigation has warned.

A commission set up by the National Association of Pension Funds found workers were deterred by “charges, risks and complexity” of the pensions system. Lord McFall of Alcluith, the former Treasury Select Committee chair who led the Workplace Retirement Income Commission, said: “People need to get more bang for their buck, or they’re not going to bother with a pension.” The commission said fee structures were too “opaque” and that many people were being short-changed by their choice of annuity.

Workers in defined contribution pensions were being left to carry all the risk of funding their retirement and were often “at the mercy” of stock markets, added the report. Some 14 million are not saving into a workplace pension, moreover McFall said those who did were not saving enough and faced “scraping by in poverty on the state pension”.

http://www.guardian.co.uk/money/2011/aug/01/occupational-pensions-fees-charges-risks