BY ANY measure, the departing 112th Congress is the most polarised in modern US history. Yet Republican and Democratic leaders are doing a surprisingly good job of seeming as though they might turn away from the fiscal cliff. Last week’s Oval Office meeting brought signs that Mitch McConnell, the Republican Senate leader, is prepared to get along with President Barack Obama. Even the die-hards see a downside in being blamed for a self-inflicted recession.

There are two reasons to remain vigilant as Washington inches towards a possible compromise.

First, the US recovery remains tepid. Any action to avoid the cliff will involve some spending cuts and some tax increases — although far lower than the $500bn that would result from the present policy course. Any tax increase would be confined to the top 2%, which would not be sharply contractionary. However, it is vital that Congress extends the temporary payroll cut and unemployment insurance, which also expire at the end of year. Both have a big effect on demand.

Second, Obama believes he now has a mandate to restore the Clinton-era tax rates on the highest brackets — families that earn more than $250,000. Whether he does so by raising the headline rate or limiting deductions is likely to be part of a last-minute compromise.

The goal is chiefly political. But in terms of policy it leaves a lot to be desired. If the Democrats are serious about ensuring that the US’s wealthiest bear a reasonable share of austerity, they should focus on capital gains as well as income taxes. Most of the country’s seriously rich live off capital gains, which are levied at less than half the top rate of income tax. That is why Mitt Romney never paid more than 14% in taxes over the past decade.

Equalising the rates is unlikely to be part of any deal to avert the fiscal cliff before January.

But the parties would most likely include a deadline to hammer out a medium-term fiscal package before the end of next year.

This would probably cover entitlement programmes, especially Medicare, which need to be curbed to solve the long-term deficit. Yet these are also the safety nets for the most vulnerable.

Equity and efficiency require any deal to include capital gains. It would be a supreme irony if any coming austerity demanded sacrifices of everyone except the very rich.

London, November 23