US debt reduction panel expected to concede failure
The latest bid to find a long-term solution to the US debt crisis looked doomed to fail Sunday as lawmakers remained at odds over money-saving measures including cutting social programmes and raising taxes on the rich.
REUTERS - The U.S. congressional deficit-reduction committee is likely on Monday to concede failure in its efforts to strike a deal, barring an unforeseen breakthrough to bridge deep partisan differences over taxes and spending, congressional aides said.
The announcement of failure would come on Monday, aides from the Republican and Democratic camps told Reuters on Sunday, shortly after several lawmakers on the bipartisan 12-member “super committee” cast strong doubts about a deal on the Sunday talk shows.
On NBC’s “Meet the Press” program, neither Republican Senator Jon Kyl nor Democratic Senator John Kerry gave any indication a deal was near. After months of working together on the panel, they each stuck to their parties’ entrenched positions and blamed the other side for the deadlock.
Their antagonism bolstered the belief that failure was the most likely outcome as the clock ticks toward the Wednesday midnight deadline for the panel to vote on a package of at least $1.2 trillion in deficit reduction over the next decade.
The failure for the committee of six Republicans and six Democrats, created in the wake of the bruising battle over the debt ceiling last summer, could cement American voters’ and global investors’ notions of a dysfunctional Washington.
Given unusual powers to tackle the U.S. government’s budget deficit and debt, which topped $15 trillion on Friday, the committee was seen by many as the best chance, in the near term, for the United States to get control of its deficits.
If the panel does not reach consensus, automatic spending cuts of $1.2 trillion over a decade are due to start in 2013.
The deadlock focuses on Republican opposition to tax increases, particularly on the wealthiest Americans, and Democratic refusal to cut into federal retirement and healthcare benefits without such tax increases.
While the markets’ expectation for a deal was low, with an election year ahead and the ugly debate on the debt ceiling not far behind, investors remained concerned about the inability of Congress to compromise. They fear deadlock may hurt White House efforts to extend a temporary payroll tax cut and jobless benefits for the long-term unemployed, further harming growth in the fragile economy.
‘That’s the law’
“I say to my Republican colleagues: we are here all day. We are ready to do $1.2 trillion, not less than it. That’s what we were told to do. That’s the law,” said Kerry, after accusing Kyl of not telling the truth about elements of the talks.
White House officials were conspicuously absent on the Sunday talk shows. President Barack Obama, just back from a nine-day Asia-Pacific tour, has kept his distance from the deficit committee as hopes for a deal continue to fade.
There was no sign that Obama was prepared to weigh in personally in a last-ditch push for an agreement.
Administration officials see little political fallout for Obama if the panel fails and believe there is still breathing room for a deal in coming months since automatic budget cuts would not kick in until early 2013.
Though many of the super committee members who appeared on Sunday talk shows spoke in past tense about the talks, the two co-chairs said they had not given up.
“I am ready to work with anybody who can say, that last divide, that they’re willing to cross that,” Democratic co-chair Senator Patty Murray said on CNN.
Murray said talks with Republicans were stuck on convincing them to agree to raise taxes on the wealthy to help bring down soaring budget deficits.
Hope versus reality
“Nobody wants to give up hope. Reality is, to some extent, starting to overtake hope,” Representative Jeb Hensarling, the panel’s Republican co-chairman, said on the program “Fox News Sunday.”
Murray said Republicans want to extend tax cuts that lowered individual rates—reductions that originated under former Republican President George W. Bush. Those tax cuts run out at the end of 2012.
Republicans have pushed for a permanent extension.
Democrats want the tax cuts for the rich to expire.
“In Washington, there are folks who will not cut a dollar unless we raise taxes,” said Kyl, sparking an exasperated reaction from Kerry who noted that Congress has cut about $1 trillion from the budget without any tax hikes.
Republicans want Democrats to agree to do more to find long-term savings in the growing costs of government retirement and healthcare programs.
If no deal is reached by a simple majority of the super committee, automatic spending cuts would start in 2013 -- two months after presidential and congressional elections.
Those cuts would be evenly divided between domestic and defense programs. Some Republican members of Congress already are talking about dismantling the automatic cuts to protect the Defense Department from deep reductions.
"To my ear, it sounds like a no deal," said Mark Zandi, chief economist at Moody's Analytics.