US Congress fails to reach deficit reduction deal

By Anne K Walters Nov 22, 2011, 0:02 GMT

Washington - A US congressional committee that has been working for weeks to hammer out a deficit reduction deal announced Monday that it had failed to come to an agreement.

'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,' the co-chairs of the committee said in a statement.

The panel of six Democrats from President Barack Obama's party and six opposition Republicans has been in private negotiations for weeks ahead of a Wednesday deadline to deliver at least 1.5 trillion dollars in 10-year deficit cuts.

Worries about the lack of agreement had concerned investors for days, pushing the Dow Jones Industrial Average down more than 2 per cent Monday.

US President Barack Obama placed the failure solely at the feet of Republicans, who control the lower House of Representatives, blaming it on their unwillingness to consider tax hikes as part of the deficit cutting agreement.

'There are still too many Republicans in Congress who have refused to listen to the voices of reason and compromise that are coming from outside of Washington,' Obama told reporters after the super-committee failed to come to agreement.

Left-leaning Democrats were eager to raise taxes on high earners and corporations, while Republicans were insistent on reductions in domestic spending and changes to bring rapidly rising pension and health care programmes under control.

By failing to come to a compromise deal, 1.2 trillion dollars in automatic cuts that were designed to be equally unpalatable to both Democrats and Republicans will go into effect in 2013. The complicated mechanism was enacted in the August debt-limit compromise. Those cuts include major hits to defence spending that Defence Secretary Leon Panetta warned against and that had become a major political sticking point.

Obama vowed those cuts would be enacted and that he would veto any attempt by Congress to withdraw them.

However, he noted that despite the missed deadline, Congress can still work to come up with deficit reduction measures before the cuts are enacted in order to prevent them from taking place.

'Although Congress has not come to an agreement yet, nothing prevents them from coming up with an agreement in the days ahead,' Obama said. 'They can still come together around a balanced plan.'

Republican leaders had seen the discussion as a key test on the need to reduce the size of government.

'In the end, an agreement proved impossible not because Republicans were unwilling to compromise, but because Democrats would not accept any proposal that did not expand the size and scope of government or punish job creators,' he said.

Republican Representative Jeb Hensarling and Democratic Senator Patty Murray, who co-chaired the group of lawmakers from both parties and both chambers of Congress, described themselves as 'deeply disappointed' at the committee's failure.

'Despite our inability to bridge the committee's significant differences, we end this process united in our belief that the nation's fiscal crisis must be addressed and that we cannot leave it for the next generation to solve,' they said.