Finance

Finance

Grand US deficit-cutting effort ends with whimper

21 November 2011 09:48 (UTC +04:00)

Baku â€“ APA-Economics. Washington’s most ambitious effort in years to come to grips with its mounting debt is set to end with a whimper on Monday as negotiators plan to announce they have failed to reach a deal, Reuters reported.

The Republican and Democratic leaders of a 12-member congressional "super committee" are set to declare defeat in a joint statement to be released after three months of talks failed to bridge deep divides over taxes and spending.

After a year of bruising budget battles, it is another sign that U.S. lawmakers are too entrenched to compromise on the tax increases and benefit cuts that budget experts say are needed to set the country’s finances on a stable path.

The panel’s failure will cement notions of a dysfunctional Washington among voters and investors already disenchanted with the brinkmanship that brought the country to the edge of a first-ever debt default in August.

Blessed with extraordinary powers, the committee was supposed to forge the sort of deficit-reducing deal that had eluded Obama and House Speaker John Boehner, the top Republican in Congress, over the summer.

The panel was tasked with finding at least $1.2 trillion in budget savings over 10 years, enough to demonstrate that Washington could tame a debt load that last week hit $15 trillion -- equal to the size of the U.S. economy.

The threat of the automatic cuts, falling equally on military and domestic programs, was supposed to ensure that a deal would be reached.

Committee members met for dinners and several even took bike rides together in an effort to build the trust that would enable them to make decisions that could anger powerful industries and interest groups before the 2012 elections.

They had a clear blueprint for agreement. Other budget-cutting panels, including one set up by Obama, had concluded that lawmakers need to wring out the loophole-laden tax code and rein in health benefits that are set to balloon over coming decades as the population ages.

In the end, Republicans were unwilling to sign off on tax increases while Democrats balked at a dramatic benefits overhaul.