WASHINGTON – The bipartisan leadership of a special congressional committee – assigned the task of slashing more than $1 trillion dollars from the U.S. deficit – announced Monday that the panel had failed, unable to bridge bitter ideological differences separating Republicans and Democrats in the run-up to presidential and legislative elections next year.
After the announcement, President Barack Obama said he would veto any effort to get rid of automatic spending cuts that would take effect in 2013 if Congress cannot find other ways to trim government deficits.
Those spending cuts include significant reductions to the Pentagon that Defence Secretary Leon Panetta has said would be devastating to the military.
Obama said the threat said the threat of those reductions should remain in place to maintain pressure on Congress find a compromise.
Democratic Sen. Patty Murray and Republican Rep. Jeb Hensarling said that despite “intense deliberations” the members of the panel have been unable “to bridge the committee’s significant differences.”
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Republicans refused to cross their ideological line against increasing taxes. Democrats refused to allow cuts in popular programs that serve the elderly and poor without a compensating growth of government income, especially from the wealthiest Americans.
The close of business Monday marked deadline for constructing a plan to slash $1.2 trillion from federal red ink. The committee was to have had a polished plan ready on Wednesday, with the two-day interval to be used by the nonpartisan Congressional Budget Office to assess the savings projected in any deal.
The deal between President Barack Obama and Congress that set up the so-called supercommittee sought to prevent failure by dictating about $1 trillion in automatic cuts in spending for defence and a range of other government agencies should a deal not be struck. Those automatic reductions will begin in 2013, after the next election.
Americans already hold Congress in record low esteem, 9 per cent approval, and the supercommittee failure was certain to send that number even lower. But it also could hurt Obama, who has increased the total U.S. debt considerably – to more that $15 trillion – with emergency spending he said was necessary to keep the American economy out of a depression. He pumped billions into the economy after it nearly collapsed in the final months of George W. Bush presidency.
The committee announced it was disbanding on a day when the stock market had already tumbled more than 2 per cent. Investors sold shares over worries about a further downgrade of the U.S. credit rating and subsequent jump in interest rates. One agency that rates American government debt, Standard & Poors, marked U.S. bonds down from triple A to AA+ last summer during the congressional fight over raising the U.S. borrowing limit – normally done as a matter of course. That fight spawned the supercommittee as part of a bitterly fought compromise.
Several panel members attended a last-ditch but futile meeting Monday. But the White House was still calling for committee to act.
“Congress could still act and has plenty of time to act. And we call on Congress to fulfil its responsibility,” White House press secretary Jay Carney said.
But failure was in plain view as top Democrats and Republicans began publicly blaming each other for the deadlock as early as last weekend.
“There is one sticking divide. And that’s the issue of what I call shared sacrifice,” Murray said Sunday on CNN’s “State of the Union” program.
“The wealthiest Americans who earn over a million a year have to share too. And that line in the sand, we haven’t seen Republicans willing to cross yet,” she said.
Republicans said Democrats’ demands on taxes were simply too great and weren’t accompanied by large enough proposals to curb the explosive growth of so-called entitlement programs like the popular Social Security pension system and health care for the elderly and the poor.
The automatic trigger that would now go into effect in 2013 would force about $1 trillion over nine years in automatic across-the-board spending cuts to a wide range of domestic programs and the Pentagon budget, according to the Congressional Budget Office. That action, called a “sequester,” would also generate $169 billion in savings from lower interest costs on the national debt.