A debt-reduction committee with special powers that was supposed to dissolve congressional gridlock in Washington is instead on the brink of failure, setting the stage for US$1.2 trillion in automatic spending cuts.
The 12-member bipartisan supercommittee was likely to announce yesterday that it could not reach agreement on deficit savings, according to a Democratic aide. The aide, who wasn’t authorized to discuss internal matters publicly and requested not to be identified, said in an e-mail that it was highly unlikely that the committee’s talks could be salvaged.
Yesterday was the deadline for the US Congressional Budget Office to receive information for scoring a proposal in advance of the supercommittee’s deadline for reaching a deal tomorrow.
Photo: AFP
Republican Senate Minority Leader Mitch McConnell has declared over the past few months that failure is “not an option” for the panel, created in August after rancorous debate over raising the nation’s borrowing limit that plunged congressional approval ratings to lows of between 9 percent and 14 percent.
Supercommittee members held out only a sliver of optimism that a deal is still possible.
“Nobody wants to give up hope,” Representative Jeb Hensarling said on Fox News on Sunday. “Reality is — to some extent — starting to overtake hope.”
If the committee doesn’t come up with an agreement, US$1.2 trillion in across-the-board spending cuts to domestic and defense programs are set to take effect starting in January 2013. The lack of a deal would deprive US President Barack Obama of a vehicle extending a payroll tax cut and insurance benefits for unemployed Americans, which expire at the end of the year.
It would also push into an election year the difficult work of reaching a bipartisan deal to head off the automatic cuts that US Secretary of Defense Leon Panetta has called “devastating” for the Pentagon. Many lawmakers cast doubt on whether anything will happen before the election next year if the committee doesn’t come up with a deal.
The supercommittee was designed to be the solution to more than a year’s worth of failed bipartisan efforts to strike a “grand bargain” to drive down the debt. Obama’s fiscal commission in December last year didn’t agree on a US$4 trillion package, pushing the work off to a group led by US Vice President Joe Biden and bipartisan members of Congress.
Investors have largely shrugged off Standard & Poor’s Aug. 5 downgrade of US debt from “AAA” to “AA+.” After the downgrade, the government’s borrowing costs fell to record lows as Treasuries rallied. The yield on the benchmark 10-year Treasury note fell from 2.56 percent on Aug. 5 to below 1.72 percent on Sept. 22. The yield on the 10-year note fell 3 basis points to 1.98 percent at 1:40pm in Tokyo yesterday.
Absent a last-minute breakthrough, the debate in Washington will now focus on the so-called trigger and the automatic cuts slated to start in 2013.
Congress has a history of undoing previous attempts to require debt reduction, and lawmakers on both sides of the aisle, including Republican Senator John McCain and Democratic Representative Maxine Waters are already trying to use legislative levers to stop the automatic cuts from taking effect.
Instead of dismantling the trigger, Congress is more likely to look for ways to reconfigure the blend of defense and domestic cuts.
‘They’re done in a way that would be very harmful to our nation’s defense,” Toomey said on Sunday. “It’s very important that we change the configuration, but that we not abandon the spending cuts.”
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