Super Committee fails to reach deficit reduction deal

It’s official. The Super Committee failed. 

In a statement released late this afternoon, committee co-chairs Rep. Jeb Hensarling (R-Texas) and Sen. Patty Murray (D-Wash.) expressed disappointment with the committee’s failure to reduce the deficit by at least $1.2 trillion:

“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.

“Despite our inability to bridge the committee’s significant differences, we end this process united in our belief that the nation’s fiscal crisis must be addressed and that we cannot leave it for the next generation to solve.  We remain hopeful that Congress can build on this committee’s work and can find a way to tackle this issue in a way that works for the American people and our economy.

“We are deeply disappointed that we have been unable to come to a bipartisan deficit reduction agreement.”

Although technically the Super Committee has until Nov. 23 to present its final plan to Congress, in practice the proposal would have to be submitted today in order to be “scored” or assessed by the Congressional Budget Office in time for Wednesday’s deadline.

The stocks fell today as it became more apparent that the Super Committee could not fulfill its mandate. The Dow Jones industrial average ended the day down 248.85 points or a 2.11% drop; NASDAQ fell by 49.36 points or 1.92%; and S&P 500 declined by 22.67 points or 1.86%.

Unless Congress passes a $1.2 trillion deficit reduction package, the Super Committee’s failure will likely trigger an additional $1.2 to $1.5 trillion in across-the-board discretionary spending cuts known as “sequestration” in 2013. The cuts will be divided 50-50 between defense and non-defense discretionary spending. As part of the debt limit compromise in August, discretionary spending was reduced by $1 trillion in addition to the estimated $778 billion spending cap under the Budget Control Act. Sequestration will bring the total discretionary spending cuts to $2.978 trillion to $3.278 trillion.

“We believe that further reductions in discretionary spending would risk harming essential government functions,” said Dr. Alice Rivlin, who served on both the Simpson-Bowles Commission and the Domenici-Rivlin Task Force, during her testimony before the Super Committee on Nov. 2.

Cuts to defense discretionary spending would mean less funding for weapons upgrade, military training, health care, housing and food allowances for military personnel, and reducing the number of civilian employees for the Defense Department.

“If this sequester goes into effect and it doubles the number of cuts, then it’ll truly devastate our national defense, ” warned Defense Secretary Leon Panetta in his testimony before the House Armed Services Committee on Oct. 13.

Non-defense discretionary spending on education, job training, highway programs, housing and nutritional assistance for the poor would also see deep cuts.

“As we all know, these aren’t just numbers on a page. They affect real people in real ways. When food assistance for women and infants is cut, that means greater challenges for struggling families. When infrastructure investments are shelved, that means fewer jobs and more crumbling bridges and roads. And when research, education, and student loans are slashed, that means fewer opportunities for our businesses and the next generation of workers, which is really no savings at all since we end up paying for it in the future,” said Sen. Patty Murray (D-Wash.), co-chair of the Super Committee.

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