WASHINGTON (Reuters) – Lawmakers abandoned their high-profile effort to rein in the country’s ballooning debt on Monday in a sign that Washington likely will not be able to resolve a dispute over taxes and spending until 2013.
Republican and Democratic members of a 12-member congressional “super committee” said they were unable to resolve their significant differences as they ran up against a deadline to deliver a plan that would cut U.S. deficits by at least $1.2 trillion over 10 years.
“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,” the panel’s co-chairs, Republican Representative Jeb Hensarling and Democratic Senator Patty Murray, said in a statement.
The announcement is unlikely to prompt credit-rating agencies to downgrade U.S. debt because automatic spending cuts are due to kick in now that the committee has failed.
The panel waited until after U.S. markets closed at 4 p.m. (2100 GMT) to formally declare the effort dead, but shares on Wall Street already hit a one-month low due to fears of out-of-control government debt in Europe and the United States.
The committee’s failure sets up a year of uncertainty on taxes and spending that could further rattle investors.
Congress is likely to engage in another round of brinkmanship over the coming weeks as Democrats scramble to extend economy-boosting measures like a payroll tax cut and enhanced jobless benefits that are due to expire at the end of the year.
Republicans have vowed to shield the military from the automatic spending cuts and will also try to lock in low tax rates for the wealthy before they rise at the end of 2012.
Republican Representative Buck McKeon, who chairs the House Armed Services Committee, could not wait until the super committee was officially declared dead before he announced he would introduce legislation to prevent the military cuts from taking effect.
He likely will not get a sympathetic hearing from Democrats, whose cherished healthcare and retirement benefit programs are largely spared from the cuts.
Any move to lessen their impact could prompt ratings agencies to downgrade U.S. debt.
Lawmakers will be less willing to compromise as they shift their attention to the November 2012 presidential and congressional elections.
President Barack Obama has kept his distance from the talks, choosing instead to emphasize a job-creation package that has been blocked by Republicans. Aides believe he will be able to use the super committee’s failure to paint Republicans as obstructionists during his 2012 re-election campaign.
(Additional reporting by Rachelle Younglai, Kim Dixon, Susan Cornwell, Alister Bull and Dave Clarke; Writing by Andy Sullivan; Editing by Peter Cooney)
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