US budget hopes end in failure

The US “super-committee” that was supposed to solve the country’s massive deficit problem was being wound up today, having failed to bridge bitter differences between Republicans and Democrats.

Republicans refused to cross their ideological line against increasing taxes. Democrats refused to allow cuts in popular programs that serve the elderly and poor without a compensating growth of government income, especially from the wealthiest Americans.

The close of business on Monday marks deadline for constructing a plan to slash $1.2 trillion from federal budgets. The committee was to have had a polished plan ready on Wednesday, with the two-day interval to be used by the Congressional Budget Office to assess the savings projected in any deal.

The deal between President Barack Obama and Congress that set up the so-called super-committee sought to prevent failure by dictating about a trillion dollars in automatic cuts in spending for defence and a range of other government agencies should a deal not be struck.

Americans already hold Congress in record low esteem and the super-committee failure was certain to send that even lower. But it also could hurt Mr Obama, who has increased the total US debt considerably – to more than $15 trillion – with emergency spending he said was necessary to keep the American economy out of a depression. He pumped billions into the economy after it nearly collapsed in the final months of George W. Bush presidency.

As the committee prepared to announce it was disbanding without reaching a deal, the US stock market fell sharply. Investors are worried about a further downgrade of the US credit rating and subsequent jump in interest rates.

Republicans said Democrats’ demands on taxes were simply too great and were not accompanied by large enough proposals to curb the explosive growth of so-called entitlement programs like the popular Social Security pension system and health care for the elderly and the poor.

The automatic trigger that would now go into effect in 2013 would force about $1 trillion over nine years in automatic across-the-board spending cuts to a wide range of domestic programs and the Pentagon budget.