Debt deal may fail as Washington blasted for dropping ball
Expect growing outrage and rattled financial markets Monday should the so-called "supercommittee" of Washington lawmakers formally announce there's no deal over how to cut the federal deficit after three months of bipartisan wrangling.
Several Democrats and Republicans took to the morning talk shows Sunday to warn of impending failure, while putting the blame squarely in the other's camp for why $1.2 trillion in budget cuts could not be agreed upon.
"There is a real threat that not only will there be a downgrade, but that the market on Monday will look again at Washington and say, 'You guys can't get the job done,'" committee member Sen. John Kerry (D-Mass.) said on NBC's "Meet the Press." "Just the political confusion and gridlock is enough to say to the world, 'America can't get its act together.'"
Democrats blamed the impasse on the GOP not wanting the Bush-era tax cuts on the wealthy to expire at the end of the year, while Republicans are demanding the Dems work on cutting expensive entitlement programs, such as Social Security.
"It is a huge blown opportunity, and as a nation, we are on borrowed time," Rep. Jeb Hensarling (R-Texas), co-chairman of the supercommittee, said on "Fox News Sunday" of the failed negotiations.
While Wednesday is the final deadline for a debt deal agreement, the bipartisan committee would need to come up with a plan by Monday to give the Congressional Budget Office enough time to analyze it.
Any plan voted out of the supercommittee would need Congress' full approval by Dec. 23.
"Neither of these parties can stray away from their dogma and their doctrine to do what's best for the country," said Robert Brusca, chief economist at FAO Economics in Manhattan, adding that he expects a "bad reaction" in the markets should the supercommittee officially throw in the towel.
President Barack Obama has kept out of direct negotiations after the committee first formed in September, following a last-minute agreement to raise the nation's debt ceiling in August.
A White House spokeswoman said Sunday that "tough choices" must be made and "avoiding accountability and kicking the can down the road is how Washington got into this deficit problem in the first place."
Congress can expect any public outrage to intensify, said Jamie Chandler, political science professor at Hunter College.
"There's already a very low approval rating of Congress, and I think people are getting really frustrated with the fact that Congress seems to be the source of inaction," he said.
(With Tim Herrera)
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What’s the supercommittee’s job?
Made up of 12 Democratic and Republican lawmakers, the group must locate $1.2 trillion in federal budget cuts over the next 10 years.
Why should Americans care?
A long-term plan is needed to ensure the U.S. can keep paying its bills while growing the economy. In the short term, the continuation of jobless benefits and payroll tax cuts could expire if the committee doesn’t take action – and some economists say canceling those now would hamper economic growth.
What if the committee doesn’t meet its Wednesday deadline?
There is a default plan that would automatically trigger $1.2 trillion in spending cuts beginning in 2013. But those cuts must be divided evenly between defense and nondefense spending, and it merely sets up another partisan showdown.
What effect will this have on the U.S. economy?
Economist Mark Zandi said Sunday he doesn’t expect another downgrade of the nation’s credit rating, which last happened in August. But inaction by Washington would certainly shake investors.