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No deal for US 'super-committee' No deal for US 'super-committee'
(about 1 hour later)
The heads of a congressional committee tasked with reducing the deficit by $1.2tn (£762bn) have announced it has failed to come to an agreement. A congressional committee tasked with reducing the deficit by $1.2tn (£762bn) has failed to come to an agreement.
The panel of six Republicans and six Democrats confirmed after the New York Stock Exchange closed that their work had ended without a deal. The panel of six Republicans and six Democrats confirmed after the New York Stock Exchange closed that its work had ended without a deal.
The outcome means automatic cuts outlined in the bill that created the committee will go into effect in 2013. The outcome means automatic cuts outlined in the bill that created the committee should take effect from 2013.
The US national debt has just risen above $15tn.The US national debt has just risen above $15tn.
The panel was set up in August, the result of a last-minute deal between the two sides in Congress to raise the debt ceiling and avert a default on US debt payments.
Blame game
"After months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee's deadline," Democratic Senator Patty Murray and Republican Representative Jeb Hensarling said in Monday's joint statement."After months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee's deadline," Democratic Senator Patty Murray and Republican Representative Jeb Hensarling said in Monday's joint statement.
America is not about to default on its debts, but we've just seen default of a sort - by Congress, on its responsibilities. Americans are already aghast at their elected representatives' inability to agree on how to heal the nation's finances. The spectacle of the super-committee's failure will only cause them to slump deeper in their seats.
Now, supposedly, the so-called sequestration cuts kick in. They start in 2013, more than a trillion dollars worth, half of which will come from the military budget, the rest distributed across the federal government. These cuts are a sort of fiendish Plan B. They were designed to come into effect only if the super-committee failed. Nobody really wants them. Some in Congress are already muttering about undoing them. President Obama says he will force them through.
So look for fierce clashes over the future of those tax cuts enacted by President George W Bush. Look for ferocious lobbying by the defence industry. Look for howls of anger at cuts in federal education funding, and medical and welfare benefits for the elderly and poor. And much, much more. The deficit battle has been joined, and on this terrain will the presidential election be fought.
"We remain hopeful that Congress can build on this committee's work and can find a way to tackle this issue in a way that works for the American people and our economy," it added."We remain hopeful that Congress can build on this committee's work and can find a way to tackle this issue in a way that works for the American people and our economy," it added.
Without a deal, $1.2tn cuts will be applied to government spending over the next 10 years.
The cuts are to be split between defence and domestic budgets. A few programmes are to be protected, including Social Security and Medicaid.
Blame game
Democrats say the Republicans are solely to blame for the failure - because they ruled out tax rises for the wealthiest Americans.
Republicans say Democrats were never serious about making cuts to entitlement programmes for the elderly and the poor.
In a White House news conference later on Monday, President Barack Obama said it was Republicans' fault.In a White House news conference later on Monday, President Barack Obama said it was Republicans' fault.
"There's still too many Republicans in Congress that have refused to listen to the voices of reason and compromise," he said."There's still too many Republicans in Congress that have refused to listen to the voices of reason and compromise," he said.
Mr Obama said he would veto any attempt to reverse the automatic cuts, adding that there was nothing preventing Congress from coming up with a new plan to reduce the deficit by $1.2tn to avoid the cuts. President Obama said he would veto any attempt to reverse the automatic cuts to government spending.
US voters are already deeply disillusioned with Washington. In some polls, Congress's approval rating is at 9%. They are to be applied over the next 10 years, split between defence and domestic budgets. A few programmes are to be protected, including Social Security and Medicaid.
The BBC's Steve Kingstone in Washington says the political finger-pointing is likely to continue right through to next November's congressional and presidential elections. Republicans said Democrats had never been serious about making cuts to entitlement programmes for the elderly and the poor.
As the reductions triggered by Monday's announcement are not set to take effect until January 2013, correspondents say that would give lawmakers time to change or repeal the automatic cuts. Senator Pat Toomey said: "Unfortunately, our Democratic colleagues refused to agree to any meaningful deficit reduction without $1 trillion in job-crushing tax increases."
Republican senators John McCain of Arizona and Lindsey Graham of South Carolina are already working on legislation that would undo the automatic defence reduction, replacing it with cuts across the federal government, according to the Associated Press. But Democrats said the Republicans were solely to blame for the failure - because they ruled out tax rises for the wealthiest Americans.
Secretary of Defense Leon Panetta warned on Friday that reductions would lead to a "hollow force". Senate Majority Leader Harry Reid said Republicans had "never found the courage to ignore the tea party extremists" and "never came close to meeting us half way".
However, Mr Panetta said on Monday that he agreed with the president that Congress should not repeal the automatic cuts. US voters are already deeply disillusioned with Washington.
"Congress cannot simply turn off the sequester mechanism, but instead must pass deficit reduction at least equal to the $1.2 trillion it was charged to pass under the Budget Control Act," Mr Panetta told the Associated Press. The BBC's Steve Kingstone in Washington says the political finger-pointing is likely to continue through to next November's congressional and presidential elections.
The panel's failure to reach a deal had already been evident on Sunday as its members took to political talk shows to cast blame. As the reductions triggered by Monday's announcement are not set to take effect until January 2013, lawmakers have the time to change or repeal the automatic cuts.
A last-minute conference on Monday attended by some committee members could not salvage an agreement. Republican senators John McCain of Arizona and Lindsey Graham of South Carolina are already working on legislation that would undo the automatic defence reduction, replacing it with cuts across the federal government.
"Our Democratic friends were never able to do the entitlement reforms," Republican Senator Jon Kyl said on NBC TV. "They weren't going to do anything without raising taxes." After the weeks of negotiations, an eleventh-hour proposal that included some new taxes raised hopes, but could not muster enough support.
Democratic Senator Patty Murray, one of the committee's co-chairs, told CNN that the Republicans' position on taxes was the sticking point. Last week, Republican House Speaker John Boehner, who was not a member of the committee, proposed nearly $650bn in savings.
"The wealthiest Americans, who earn over a million a year have to share, too," she said. "And that line in the sand, we haven't seen Republicans willing to cross yet." The package included $543bn in spending cuts, $3bn of new revenue generated by closing a tax loophole for businesses to buy private jets, and $98bn saved from lower interest payments.
The deficit-reduction committee was set up in August, the result of a last-minute deal between the two sides in Congress to raise the debt ceiling and avert a default on US debt payments. Democrats rejected the offer, saying it focused too heavily on spending cuts.
Its members were instructed to create a proposal of at least $1.2tn in savings by 23 November. Democrats produced their own proposal worth $3tn, which included $1.3tn in revenue from tax rises and about $400bn in Medicare savings.
The deadline was effectively Monday, as any plans agreed by the committee would have needed to be submitted for analysis by the Congressional Budget Office 48 hours before the formal deadline.