Blow for US debt pile as panel fails to make cuts

 
Kasmira Jefford
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PRESIDENT Barack Obama blamed political bickering for a congressional super committee’s failure to reach a deal to cut the federal deficit

But he vowed to see through the automatic budget cuts that kick in by 2013 as a result of the failure to meet yesterday’s deadline.

Seeking to reassure the markets, Obama said the US did not face an imminent threat of default as it did in August and “one way or another” the government would trim at least $2.2 trillion from the deficit in a decade.

“Although Congress has not come to an agreement yet, nothing prevents them from coming up with the agreement in days ahead. They can still come together, around a balanced plan,” he said.

Despite Obama’s reassurances, credit rating agency Fitch warned that the failure by the committee to reach a deal would likely result in a negative rating action. This would mean Fitch sees a more than a 50 per cent chance of a downgrade in the next two years.

The 12-member panel of Democrats and Republicans was formed in August as part of a last-minute deal struck by Obama and Congress to raise the US debt ceiling and avert a default.

The Republicans and Democrats have argued viciously over the prospect of tax cuts for the wealthy and reforms to the government-run healthcare programmes.

Last night, the committee said it was “deeply disappointed” to confirm “it will not be possible to make any bipartisan agreement”, sending the Nikkei tumbling to an eight-month intraday low this morning and likely to affect global markets today.

Obama said there were “still too many Republicans in Congress who have refused to listen to the voice of reason and compromise”.