US Debt Supercommittee Ready to Concede Defeat Over Budget Agreement

November 20, 2011United Statesby EW News Desk Team

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The US deficit-cutting congressional super committee, formed in the aftermath of the August debt ceiling debates, is expected to announce today that it has failed to reach an agreement over a deficit-cutting plan that would have saved taxpayers at least $1.2 trillion over the coming decade.

On Sunday, panel members from both the Republican and Democratic parties appeared on separate talk shows to express their doubt over a possible compromise, blaming each other for a political gridlock stemming from different ideologies over taxes and spending.

Nobody wants to give up hope. But reality is, to some extent, starting to overtake hope," said Representative Jeb Hensarling, the panel's Republican co-chairman, on Fox News Sunday.

“Unfortunately, what we haven’t seen in these talks from the other side is any Democrats willing to put a proposal on the table that actually solves the problems,” he added.

Democrats, on the other hand, blamed Republicans for their apparent unwillingness to walk away from a no-new-taxes pact they signed at the request of a conservative, anti-tax group, arguing that a new deal could not be achieved without a combination of spending cuts and new tax revenues.

“As long as we have some Republican lawmakers who feel more enthralled with a pledge they took to a Republican lobbyist than they do to a pledge to the country to solve the problems, this is going to be hard to do,” said Democratic Senator Patty Murray, the co-chairwoman of the 12-member committee, on CNN’s State of the Union.

President Barack Obama, who is running for re-election next year, has avoided any direct involvement in the talks since making his recommendations in September. But on Sunday afternoon, White House spokeswoman Amy Brundage urged the panel to make the "tough choices" needed to complete its task of finding $1.2 trillion in budget savings.

Avoiding accountability and kicking the can down the road is how Washington got into this deficit problem in the first place,” said Brundage in a statement quoted by the New York Times. “So Congress needs to do its job here and make the kind of tough choices to live within its means that American families make every day.”

The 12-member committee, made up of 6 Democrats and 6 Republicans, must effectively settle on a deal by the end of Monday in order to get it approved by this Wednesday, which is the legal deadline set for any deal being made.

If the super committee fails to reach an agreement, automatic across-the-board spending cuts of $1.2 trillion will kick in over 10 years, starting in 2013. This action, called a "sequester," would generate $169 billion in savings from lower interest costs on the national debt. However, many domestic programs, particularly in defense, would be adversely affected by these cuts.

According to Defense Secretary Leon Panetta, the required cuts of up to $454 billion to the Pentagon would be "devastating" and leave a "hollow force”.

Yet the biggest blow to the US might come from a loss of confidence in Washington, as investors and voters become increasingly disillusioned at the apparent ineptitude of US politicians to resolve the nation’s problems due to the differences in party lines.

Last month, Bank of America Merrill Lynch economists warned that the US would lose its top AAA credit rating status from another major credit rating agency unless the super committee came up with a credible long-term plan to address the nation’s deficit problems.

Related: Second US Credit Ratings Downgrade Imminent, Warns BofA Merrill

"The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan" to cut the deficit, wrote Merrill's North American economist Ethan Harris. "Hence, we expect at least one credit downgrade in late November or early December when the super committee crashes.”

The ‘not-so-super’ deficit commission is very unlikely to come up with a credible deficit-reduction plan…The committee is more divided than the overall Congress,” he wrote.