As Sunday night approaches, it is all but certain that the congressional supercommittee tasked to find savings of $1.2 trillion by November 23 has failed. Central to the failure is the inability of the Democrats and Republicans to reach agreement on how to attain the deficit reduction goal.
The notable element of the negotiations has been how acute the failure is, and with that, Congress’s dysfunction. On Sunday=, there were no last-minute meetings, no shuttle diplomacy; instead the blame game had already began.
In a sense, failure was predetermined. The Republicans insist on no additional taxes, the Democrats insist on higher taxes for the wealthy. Neither shall the twain meet, it seems.
For President Obama, the failure is not significant – his current trip to the Far East illustrated his lack of confidence in an agreement being reached. For the markets, expectations of concerted action from Congress was close to nil to begin with, so no great impact on stocks is expected.
Failure of the supercommittee will trigger automatic cuts of $1.2 trillion, beginning in 2013 – conveniently after the next elections. Half the cuts will come from the defense budget and the other half from domestic programs.
The New York Times writes;
Many outside Washington, including on Wall Street, had low expectations for the committee, and some analysts predicted that the breakdown might not have a major effect on financial markets. But the developments added to the air of uncertainty — with some members of Congress vowing to repeal the automatic cuts with new legislation — at a time when the world economy is coping with Europe’s debt problems and a sluggish recovery from the 2008 financial crisis.
The other main issues are whether the President will be steamrollered into approving the Bush tax cuts for another year and whether a hostile Republican party will extend unemployment benefits and reduced payroll taxes until the recovery gets into a higher gear.
The questions that are pertinent today therefore are: (a) Who will the public blame most? – hence the early start of the ‘blame game’ on Capitol Hill (b) will sovereign debt ratings be affected? (not yet…), and (c) who won this last partisan battle?
We will report more on all three questions as we go forward this week.
More From blreditor
- Rooting for the Supercommittee to Fail
- Congressional Supercommittee Stalemated: Surprise, Surprise
- Dow Sinks Over 300 points as Debt Talks Fail
blreditor Recommends
- How to Finally Pay Off Your Debt in (PeerFormPeerLending)
- How to Save More on Insurance (The Credit Courier)