U.S. Debt Supercommittee Ready to Announce Failure

A debt-reduction committee with special powers that was supposed to dissolve congressional gridlock in Washington is instead on the brink of failure, setting the stage for $1.2 trillion in automatic spending cuts. U.S. Senator Jon Kyl of Arizona, a Republican on the 12- member panel, said on CNBC today that the supercommittee’s Republican and Democratic co-chairmen, Representative Jeb Hensarling of Texas and Senator Patty Murray of Washington, would make a formal announcement “toward the end of the day.” They are expected to say that the panel can’t reach agreement on determining deficit reductions of at least $1.2 trillion. European stocks dropped for a third day today and U.S. futures retreated in anticipation of the congressional impasse. Treasuries advanced, pushing yields toward a six-week low, as speculation about the panel’s failure to reach an agreement spurred demand for the safest assets. If the committee doesn’t come up with an agreement, $1.2 trillion in across-the-board spending cuts to domestic and defense programs are set to take effect starting in January 2013. The lack of a deal would deprive President Barack Obama of a vehicle extending a payroll tax cut and insurance benefits for unemployed Americans, which expire at the end of the year. It would also push into an election year the difficult work of reaching a bipartisan deal to head off the automatic cuts that Defense SecretaryLeon Panetta has called “devastating” for the Pentagon. Many lawmakers cast doubt on whether anything will happen before the 2012 election if the committee doesn’t come up with a deal.

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