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No debt deal. Now what?

Nov. 22, 2011 at 12:02 PM   |   Comments

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WASHINGTON, Nov. 22 (UPI) -- The administration upped pressure on Congress, unveiling a calculator to show U.S. taxpayers how much money is at stake following the supercommittee's failure.

The Joint Select Committee on Deficit Reduction admitted Monday it could not reach a deal to trim at least $1.2 billion from the U.S. budget deficit in the next decade, resulting in a Dec. 31 end to the moratorium on the Social Security payroll tax cut and extended unemployment benefits.

The calculator is designed to show how much more workers will have to kick in if the moratorium expires.

"I'll cut to the chase: If Congress doesn't act soon, middle-class Americans will see their taxes go up starting on Jan. 1, taking almost $1,000 out of the pockets of a typical family next year," Vice President Joe Biden Biden said in a statement posted on the White House Web site announcing the calculator.

He also called on Americans to let Congress know sitting on their hands is not an option.

Economists have warned a tax increase Jan. 1, combined with an end to jobless benefits, could cut the economy's fragile growth nearly in half, the Los Angeles Times reported Tuesday.

Many members of Congress had hoped the Joint Select Committee on Deficit Reduction could include an extension of the payroll tax holiday in whatever deal it reached -- but those hopes sank Monday when the committee's co-chairpersons issued a statement conceding the panel's three-month effort to develop a budget-cutting plan had failed.

"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" on Wednesday, Sen. Patty Murray, D-Wash., and Rep. Jeb Hensarling, R-Texas, said in the statement.

The committee's inability to strike a deal for Congress to consider on an up-or-down vote will trigger draconian cuts across all government departments, including defense, effective in 2013. Some congressional members have called for reconfiguring the automatic cuts to protect the Defense Department but President Obama Monday said he would veto any bid to do so.

Predictably, each party pointed fingers at the other. Obama, in a statement, said the long-term deficit would still decline because the committee's failure automatically triggered spending cuts in domestic and defense programs. Obama also urged Congress to extend the payroll tax reduction.

"If we don't act, taxes will go up for every single American starting next year. And I'm not about to let that happen," Obama said. "Middle-class Americans can't afford to lose $1,000 next year because Congress won't act."

Proposals to provide the payroll tax break and extend jobless benefits in the past have been politically popular, but not now.

"I think a lot of people were hoping this would solve their problems and they could have a good Thanksgiving and a good Christmas," said Sen. Jeff Sessions, R-Ala., the ranking Republican on the Senate Budget Committee. "Not so."

The major stock indexes lost about 2 percent Monday and the U.S. credit rating could take another beating.

Republican presidential hopefuls released statements blaming Obama for the mess and repeated their opposition to the supercommittee in the first place, USA Today reported. Interest groups expressed relief for different reasons.

Grover Norquist, leader of the Americans for Tax Reform and the man many Democrats blame for the impasse because of his efforts to bind GOP lawmakers to no-new-taxes pledges, said no deal was "better than a tax hike or phony cuts."

AARP called the committee's failure "regrettable," but the organization's top lobbyist, David Certner, told USA Today nothing was better than a package that had deep cuts to retiree healthcare.

Congressional leaders now are considering next steps, the Times said. One possibility would be to attach the payroll tax break and the unemployment insurance extension to a year-end bill needed to keep the government running through 2012. However, House Speaker John A. Boehner of Ohio has found it increasingly difficult to get Republicans to vote to fund the government and likely would have to rely on Democratic votes to pass.

Defense officials and budget experts said they expect a prolonged fight over the specific items to be cut in the automatic triggers, The Wall Street Journal reported.

The military has one possible accounting method to lessen the potential impact: Wartime costs are funded largely through separate emergency appropriations and aren't directly affected by the forced cuts.

"I think it's highly likely that we'll see the department and Congress using this loophole to dampen the effects of the proposed budget cuts," Todd Harrison, a defense-spending expert at the non-partisan Center for Strategic and Budgetary Assessments, told the Journal. "Basically what it does is allow the department to get around the caps by moving things from the base budget to the war budget."

Across the United States, people expressed both annoyance and worry about the panel's inability to reach an accord, The New York Times reported.

Neil Elkins, 52, of Seattle, said that the failure was "endangering my confidence in our system of checks and balances."

In Los Angeles, Ernest Wong, 44, said simply, "This makes me scared."

© 2011 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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