A US Congress "supercommittee" announced on Monday it had failed to reach a deal to rein in galloping deficits, done in by angry partisan battles over the best way to revive the sluggish economy.
WASHINGTON – A US Congress "supercommittee" announced on Monday it had failed to reach a deal to rein in galloping deficits, done in by angry partisan battles over the best way to revive the sluggish economy.
"We are deeply disappointed that we have been unable to come to a bipartisan deficit reduction agreement," co-chairs Democratic Senator Patty Murray and Republican Representative Jeb Hensarling said in a joint statement.
The move confirmed widespread expectations that the 12-member committee would fail in its mission to cut US deficits by US$1.2 trillion over 10 years amid political feuds over tax hikes on the rich and cuts to social spending.
The deadlock could be another body blow to global financial markets already rattled by Europe's debt crisis and weighed down by the sour US economy's struggle to recover from the 2007-2008 global meltdown.
And it was sure to fuel US voter anger at partisan gridlock in Washington one year before November 2012 elections in which President Barack Obama hopes to win a second term by painting congressional Republicans as partisan obstructionists.
Under the August law that beget the panel, the impasse triggers draconian automatic cuts to domestic and military spending come January 2013, unless lawmakers repeal that requirement or find an alternative deficit-cutting plan.
Obama blamed the impasse on Republicans who "will not budge" from opposing a "balanced" approach that pairs cuts in social spending with a tax hike on the wealthy, and warned he would veto any attempt to repeal the automatic cuts.
"There will be no easy off-ramps on this one. We need to keep the pressure up to compromise, not turn off the pressure," the president said in the White House briefing room shortly after the announcement.
"The question right now is whether we can reduce the deficit in a way that helps the economy grow – that operates with a scalpel, not with a hatchet."
Obama held out hope that lawmakers could reach a new deal and tried to reassure the markets by saying that despite a ballooning national debt of more than $15 trillion, there was no imminent threat of a US default.
Lawmakers "can still come together, around a balanced plan," he said.
The Dow Jones Industrial Average closed down 2.1 per cent before the announcement. Tokyo and Hong Kong stocks were down in early trade on the news.
But Standard & Poor's maintained its AA+ credit rating for the United States, while warning that if lawmakers bust previously agreed-upon spending caps, "downward pressure on the ratings could build."
Panel members facing a midnight on Monday deadline to send a plan to congressional accountants had met behind closed doors in a last-ditch attempt to salvage the effort but made no headway.
The collapse triggered an avalanche of angry partisan finger-pointing.
Republican Senate Minority Leader Mitch McConnell said the talks had foundered on Democrats' "puzzling insistence on taxing job creators in the middle of a jobs crisis."
Democratic Senate Majority Leader Harry Reid charged Republicans had heeded "the extreme voices in their party instead of the voices of reason" and sought "even more giveaways to millionaires at the expense of the middle class".
The talks faltered chiefly on Republican refusals to raise taxes on the rich in return for Democratic concessions on making cuts to cherished social safety net programs, so-called "entitlements" with fast-increasing price tags.
Republicans argued that such tax hikes would smother job-creating investments at a time when the brittle US economy is wrestling with stubbornly high 9 per cent unemployment.
Republican Senator Olympia Snowe condemned the deadlock as "yet another regrettable milestone in Congress's steady march toward abject ineffectiveness."
Democrats were poised to wage a year-end fight to extend jobless benefits and a cut in a payroll tax, measures designed to ease worker pain and spur the sluggish economy with consumer spending.
"With millions of Americans out of work, we must stay focused on creating jobs," said Reid, who warned that failure to renew both measures "could plunge us back into a recession."
And Republicans were pushing to repeal the automatic defence spending cuts, citing Defence Secretary Leon Panetta's warning that they will leave the military slower, weaker, and smaller than at any time since World War II.