US braced for automatic cuts as supercommittee set to admit defeat

Republicans and Democrats blame each for other for failure on deal to reduce federal deficit by $1.2tn over 10 years

the Guardian,

Monday 21 November 2011 15.55 GMT

A congressional super-committee set up to reduce the federal deficit is planning to formally admit defeat on Monday, issuing a statement confirming that Republicans and Democrats have failed to agree a compromise.

Republican and Democratic members of Congress did the rounds of the early morning television shows, blaming one another for the deadlock.

This latest example of the inability of the two parties to work together could have repercussions for America's still-frail economy. There is speculation, too, that it could see another downgrading of the country's credit rating.

The failure to reach a deal will trigger automatic cuts in both the Pentagon's budget and domestic spending, including benefits, but neither will kick in until 2013, after the White House election. About $600bn would be lost from the Pentagon, and $600bn from domestic spending.

The defence secretary, Leon Panetta, warned last week that the impact of such cuts on the Pentagon would be devastating.

Democratic senator Patty Murray and Republican congressman Jeb Hersarling, the co-chairs of the committee, are expected to issue a joint statement conceding defeat.

Republican senator Jon Kyl, in a series of television interviews, said the statement would be issued later on Monday. He said the two sides would meet again on Monday, but acknowledged that the chances of a deal were remote.

"I wouldn't be optimistic; I don't want to bring you false hope here. The point is that we're still talking," Kyl said.

The committee's chances of success were limited from the outset. It was set up as a fudge; a way to get round the summer deadlock between the White House and Republicans in Congress over reducing the deficit.

The supercommittee was asked to reduce the deficit by a minimum of $1.2tn over the next 10 years. Democrats offered some cuts in benefits programmes demanded by the Republicans – but only in return for tax rises.

Republicans on the committee offered some tax rises, but faced resistance from the wider party, which remains totally opposed to any such increases.

The official deadline for a deal is midnight on Wednesday but the real deadline is midnight on Monday, because any agreement would first have to be scrutinised by the Congressional Budget Office.

Democrats said Republicans were refusing to budge on Bush-era cuts that provide tax breaks for wealthier Americans and that expire in 2012. Democrats want to see the cuts at least scaled back, while Republicans want to extend them.

Tension between the two sides increased last week after Grover Norquist, a powerful anti-tax lobbyist, said senior Republicans had pledged not to pass any deal that involved tax increases.

Republicans said Democrats were refusing to budge on cuts to "entitlement" social welfare programmes.