U.S. CONGRESS - The special deficit-reduction super committee appears likely to admit failure on Monday, unable or unwilling to compromise on a mix of spending cuts and tax increases required to meet its assignment of saving taxpayers at least $1.2 trillion over the coming decade. The panel is sputtering to a close after two months of talks in which the members were never able to get close to bridging a fundamental divide over how much to raise taxes to address a budget deficit that forced the government to borrow 36 cents of every dollar it spent last year. Members of the bipartisan panel, formed during the summer crisis over raising the government's borrowing limit, spent their time on Sunday in testy performances on television talk shows, blaming each other for the impasse. 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 Medicare and Medicaid. "If you look at the Democrats' position it was 'We have to raise taxes. We have to pass this jobs bill, which is another almost half-trillion dollars. And we're not excited about entitlement reform,' " countered Republican Jon Kyl of Arizona on NBC's "Meet the Press." Under the committee's rules, any plan would have to be unveiled Monday, but it appeared that Murray and co-chair Rep. Jeb Hensarling of Texas would instead issue a statement declaring the panel's work at a close, aides said. Failure by the panel would trigger about $1 trillion over nine years in automatic across-the-board spending cuts to a wide range of domestic programs and the Pentagon budget, starting in 2013, according to the Congressional Budget Office. This action, called a "sequester," would also generate $169 billion in savings from lower interest costs on the national debt.
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Monday, November 21, 2011
U.S. CONGRESS - The special deficit-reduction super committee appears likely to admit failure on Monday, unable or unwilling to compromise on a mix of spending cuts and tax increases required to meet its assignment of saving taxpayers at least $1.2 trillion over the coming decade. The panel is sputtering to a close after two months of talks in which the members were never able to get close to bridging a fundamental divide over how much to raise taxes to address a budget deficit that forced the government to borrow 36 cents of every dollar it spent last year. Members of the bipartisan panel, formed during the summer crisis over raising the government's borrowing limit, spent their time on Sunday in testy performances on television talk shows, blaming each other for the impasse. 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 Medicare and Medicaid. "If you look at the Democrats' position it was 'We have to raise taxes. We have to pass this jobs bill, which is another almost half-trillion dollars. And we're not excited about entitlement reform,' " countered Republican Jon Kyl of Arizona on NBC's "Meet the Press." Under the committee's rules, any plan would have to be unveiled Monday, but it appeared that Murray and co-chair Rep. Jeb Hensarling of Texas would instead issue a statement declaring the panel's work at a close, aides said. Failure by the panel would trigger about $1 trillion over nine years in automatic across-the-board spending cuts to a wide range of domestic programs and the Pentagon budget, starting in 2013, according to the Congressional Budget Office. This action, called a "sequester," would also generate $169 billion in savings from lower interest costs on the national debt.
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Economists warned on Friday that failure by the "super committee" could have dire consequences for the US and lead to another downgrade of its credit rating. But in the final hours of negotiations, committee members from both sides said they were still at loggerheads on issues that have troubled the two sides since the committee was set up.
John Kerry, a Democrat committee member, said on NBC's Meet the Press: "There is a real threat that not only will there be a downgrade but that the markets will look at Washington again … and say, 'you guys can't get the job done'. Just the political confusion and deadlock is enough to say 'America can't get its act together'."
Democrats said Republicans were refusing to budge on Bush-era cuts that provide tax breaks for wealthier Americans and expire in 2012. Democrats want to see the cuts at least scaled back, while Republicans want to extend them.
Last week David Semmens, US economist at Standard Chartered, said if the committee failed to act, the consequences would be "long-lasting". Standard & Poor's decision to downgrade US debt in August followed the row in Washington over raising the debt ceiling, a dispute that almost led to a government shutdown.
"Failure [of the committee] will further highlight the political deadlock in Washington. It's very important the super committee sends a strong message to the markets that the US is getting its house in order," Semmens said
He says the debt crisis is "likely to dampen economic growth in the near-term", with GDP growth in H2 expected to be "moderate", Reuters news agency reports.
David Cameron has told the CBI conference: the UK is well behind where it needs to be on growth.
He said getting debt under control is "proving harder than anyone envisaged". The biggest immediate boost to UK growth would be the resolution of the eurozone crisis, he said.
"Paralysis in the euro zone is causing alarm in the markets and having a chilling effect on economies in many countries - including our own.
"When the nightly news is about riding interest rates in Europe and uncertainly about the future it is not surprising that this affects business and consumer confidence."
However he warned that Britain cannot "blame our ills only on the debt crisis". He said: "Britain is outside the euro zone is responsible for our debts and deficit."
He said: "We are recovering from a debt crisis, not a traditional recession, so people who argue for additional fiscal stimulus, that's not just the wrong answer: it's dangerously wrong."
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