It's Official: The Not-So Super-Committee Fails To Reach Agreement

Although not a big surprise, the congressional deficit-reduction committee (aka the super-committee) announced Monday that they had failed in their efforts to find a bipartisan way to cut $1.2 trillion from the U.S. budget over the next ten years.

"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 panel’s co-chairs Democratic Senator Patty Murray (Washington) and Republican Senator Jeb Hensarling (Texas) said in a statement Monday.

The statement went on to say, "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."

Given that Washington’s bruising debate over the budget deficit prompted a downgrade of the U.S.’s credit rating on August 1st, many have wondered if more downgrades are ahead.

However, in a statement released Monday afternoon, Standard & Poor’s stated that although the political gridlock justified their initial downgrade of U.S. debt from AAA to AA+, the failure of the Joint Select Committee on Deficit Reduction is not expected to warrant additional downgrades.

S&P’s view that the apparently not-so super-committee’s failure won’t impact the U.S.’s credit rating is likely tied to the fact that failure to come up with a plan, the failure will trigger $1.2 trillion in automatic spending cuts beginning in 2013.

As has become standard operating procedure in Washington these days, Democrats and Republicans each blamed the other for the stalemate. It appears that both parties refused to yield. To sum up, the Republicans opposed any and all tax increases while the Democrats refused to cut federal spending on social security and/or healthcare benefits without an accompanying increase in taxes.

Political analysts contend that the failure of the super-committee was inevitable and that both sides can now point to the issue as something to be framed in the next election. In short, Republicans and Democrats alike want the voting public to weigh in on issue via the November 2012 elections.

However, this is likely not the last we will hear on the subject as Congress will soon take up the issues of payroll tax cuts and extending jobless benefits which are due to expire at the end of the year.

Recall that the budget deficit for fiscal year 2011 totaled $1.3 trillion, which was the third straight year in which the deficit exceeded $1 trillion.

What we find interesting about this debate is the fact that the $1.2 trillion of budget cuts in question were not really budget cuts at all, rather simply reductions in the rate of spending increases over the next decade.

President Obama distanced himself from the super-committee negotiation process, focusing instead on his job-creation bill that has been deemed dead-on-arrival. In his news conference Monday afternoon, the President blamed Republicans for the failure of the committee to agree on cuts and painted his opponents as being unwilling to compromise.

 

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