WASHINGTON | Mon Nov 21, 2011 12:11am EST
(Reuters) – A months-long effort to set U.S. finances on a sustainable course appeared likely to end in failure on Monday as lawmakers in Congress were unable to bridge a deep divide over taxes and benefits.
Republican and Democratic lawmakers cast doubt on any possibility of agreement in appearances on Sunday political talk shows. Without some unexpected breakthrough, aides said, a 12-member bipartisan “super committee” tasked with drawing up a deficit-cutting plan will admit defeat on Monday.
Some of the panel members pointed fingers on Sunday as the clock ticked toward an imminent deadline. The committee must vote on any deal by Wednesday, but Monday is the deadline to have legislation written and presented to the committee.
“Nobody wants to give up hope. Reality is, to some extent, starting to overtake hope,” Representative Jeb Hensarling, the panel’s Republican co-chairman, said on “Fox News Sunday.”
President Barack Obama, a Democrat seeking re-election in November 2012, has avoided direct involvement in the talks after making his recommendations in September. A White House spokeswoman urged the panel to make the “tough choices” to find at least $1.2 trillion in budget savings over 10 years.
On NBC’s “Meet the Press,” neither Republican Senator Jon Kyl nor Democratic Senator John Kerry gave any sign a deal was near as they reiterated their parties’ positions and blamed the other side for gridlock.
If the panel does not reach a consensus, automatic spending cuts of $1.2 trillion over 10 years are due to kick in starting in 2013.
Failure by the committee of six Republicans and six Democrats, created after the battle over the federal government’s debt ceiling last summer, could cement notions of a dysfunctional Washington among voters and investors.
“Congress is missing the opportunity to provide a credible plan to the markets,” said Paul Ballew, chief economist at Nationwide Insurance. “About the last thing we need is more uncertainty.”
U.S. stock index futures opened lower on Sunday as trading began in Asia, with Dow Jones and S&P 500 futures briefly dropping more than 1 percent. Europe’s deep debt crisis was also weighing on investors.
EYE ON 2012
Congress has rock-bottom approval ratings of around 10 percent after more than a year of budget fights that saw the government pushed to the brink of a shutdown and a cut in its AAA credit rating by Standard & Poor’s.
Given extraordinary powers to tackle the government’s budget deficit and debt, which topped $15 trillion on Friday, the committee was seen by many as the best chance in the near term for the United States to get control of its finances.
Some of the 12 panel members were chosen by their parties for deal-making skills and expertise on tax and benefits, while others were chosen for partisan loyalty.
The deadlock centers on two fundamental differences: Republican opposition to tax increases, particularly on the wealthiest Americans, and Democrats’ refusal to cut federal retirement and healthcare benefits without such tax hikes.
Investors fear gridlock may hurt White House efforts to extend a temporary payroll tax cut and jobless benefits for the long-term unemployed, further harming fragile economic growth.
White House officials were conspicuously absent from the Sunday talk shows. Administration officials see little political fallout for Obama if the panel fails and believe there is still breathing room for a deal in coming months since the automatic cuts would not take effect for another year.
Those cuts would be evenly divided between domestic and defense programs, but some Republicans want to change the ratio to minimize their effect on the military.
Obama has warned Congress he would veto any attempt to block automatic cuts, even though his own defense secretary says the armed forces cannot afford to work with less.
With an eye on the elections in 2012, many Democrats and Republicans have concluded that no deal is actually better than a bad deal. They could then enter their campaigns without having betrayed any of their core principles or angering crucial interest groups.
Some are already maneuvering for advantage. In a fundraising letter sent on Saturday, Democratic House leader Nancy Pelosi said Republicans were thwarting progress on job creation and urged supporters to donate to get more Democrats in office in the 2012 elections.