U.S. Debt Panel Fails to Agree on Cuts

A special debt-reduction committee in the U.S. Congress failed to reach agreement, extending partisan gridlock into the 2012 election year and setting the stage for $1.2 trillion in automatic spending cuts.

“After months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee’s deadline,” panel co-chairmen Representative Jeb Hensarling of Texas and Senator Patty Murray of Washington said in an e-mailed statement.

The two said they “remain hopeful that Congress can build on this committee’s work and can find a way to tackle this issue in a way that works for the American people and our economy.”

Standard & Poor’s said it would keep the U.S. government’s credit rating at AA+ after the supercommittee’s announcement. S&P, which stripped the U.S. of its top AAA grade on Aug. 5, said it decided that the failure didn’t merit another downgrade.

The official announcement of failure by supercommittee came after members spent the day shuttling between meetings to try to reach a last-ditch accord on at least $1.2 trillion in cuts. The supercommittee was supposed to end an impasse in Washington after talks over the past year aimed at reducing the deficit collapsed amid partisan wrangling.

Both parties have blamed each other for the stalemate, with Democrats saying Republicans wouldn’t relent on taxes and Republicans accusing Democrats of rejecting an offer to raise revenue along with spending cuts.
Treasuries Gain

Treasuries rallied while riskier assets declined as the congressional supercommittee’s deadlock spurred demand for safer assets.

The Standard & Poor’s 500 Index lost 1.9 percent to close at a six-week low of 1,192.98 at 4 p.m. in New York. The MSCI All-Country World Index sank 2.3 percent in its first six-day slump since August. Yields on 10-year Treasury notes fell four basis points to 1.97 percent.

“While I am disappointed, the House will forge ahead with the commitments we have made to reducing government spending and removing barriers standing in the way of private-sector job creation,” said House Speaker John Boehner in a statement. “Doing otherwise is not an option.”

Senate Republican Leader Mitch McConnell said in a statement that Democrats rejected two “good-faith” Republican proposals.

“We’ll continue our efforts to reduce the size of Washington, reform and protect the entitlement system for future generations, and create a better environment for job growth,” he said.
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