Last week FT Alphaville listed some of the items that would affect how much fiscal drag the US economy would confront in the next couple of years.
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The special panel of lawmakers charged with slashing America’s budget deficits was on the verge of failing, inflicting further damage to confidence in the ability of Congress to correct the country’s long-term fiscal problems, the FT reports. After more than two months of negotiations, the so-called “supercommittee” appeared unlikely to reach its minimum target of agreeing on at least $1,200bn in savings for the US government over the next decade, amid fierce disagreements on taxes and spending between Democrats and Republicans. Talks were continuing, and some of the 12 members of the panel continued to express hope that the negotiations could be salvaged at the 11th-hour. But most were pessimistic, with politicians from both sides of the political aisle trading recriminations and blame for the latest episode of congressional paralysis on fiscal policy. The lawmakers need to strike a deal by Monday night in order for it to be analysed by the Congressional Budget Office before being presented for a vote on Wednesday. But aides have been discussing ways to wind down the panel in the most dignified way possible in the event of failure, with Bloomberg reporting a source saying that the failure of the committee will be announced today. The automatic spending cuts that a failure will trigger will come into force in January and hit domestic and defense programmes.
The bipartisan congressional committee mandated to find new budget savings remains split on party lines over the issue that has long dogged US politics – how to find new tax revenues to close a gaping fiscal shortfall, reports the FT. The so-called “super committee” is due to report by November 23 on finding budget savings of at least $1,200bn over ten years but needs to strike a deal before then to ready legislation for a full vote of Congress by the year’s end. Even as they look in horror across the Atlantic at Europe’s failure to settle the Eurozone’s debt crisis, the 12-member committee has not been able to find common ground on the taxes, an issue that has divided Democrats and Republicans for a generation. With its flexibility shrinking as the deadline nears, congressional leaders might be forced to step in and try to broker an agreement.