Analyst view: "Super committee" admits failure

NEW YORK Mon Nov 21, 2011 5:10pm EST

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NEW YORK (Reuters) - A U.S. congressional "super committee" on Monday failed to reach a deal on reducing federal government deficits, the co-chairs of the panel said.

KEY POINTS: * "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," Democratic Senator Patty Murray and Republican Representative Jeb Hensarling said in a joint statement. * The Republican and Democratic leaders of the 12-member congressional failed to find common ground on a package of at least $1.2 trillion in deficit reduction over 10 years. * Failure to reach a deal on deficit reduction would trigger $1.2 trillion in cuts over the next decade, beginning in 2013.

COMMENTS:

PAUL ASHWORTH, CHIEF U.S. ECONOMIST AT CAPITAL ECONOMICS IN TORONTO:

"There was never any risk of a government shutdown or a debt default and the failure is unlikely to lead to an immediate credit rating downgrade, particularly not as it will trigger $1.2 trillion in additional reductions to planned spending over the next decade. Most tellingly, Treasury yields have actually fallen today, which suggests that bond investors are still far more worried about the fiscal crisis in the euro-zone.

"Nevertheless, the failure does illustrate yet again the inability of Congress to take the tough decisions to put the federal finances on a sustainable path over the medium term. Stock markets appeared to take a dim view of the continuing uncertainty, with today's 2-percent-plus decline in the S&P 500 at least partly due to the committee's failure.

"The one immediate negative consequence of the committee breakdown is that it now looks even more likely that Congress will fail to agree an extension of the payroll tax cut, which is due to expire at the end of this year."

KEVIN KRUSZENSKI, DIRECTOR OF EQUITY TRADING AT KEYBANC CAPITAL MARKETS IN CLEVELAND:

"The news was pretty much out yesterday. No one was expecting anything. If the deal was reached, that would be been something out of the consensus.

"There were some negativity in the market today due to reports on Sunday about the stalemate. Will this continue to have an impact tomorrow? Well, it does add to the overall malaise but I don't see this being something unexpected."

GENNADIY GOLDBERG, FIXED INCOME ANALYST, 4CAST, INC., NEW YORK:

"It's really no big surprise-they've been kind of setting up for failure all weekend and even before. Pretty much as soon as the committee was announced we knew they weren't the powerful people. Right now it's just a question of whether they will actually take the automatic spending cuts or whether they will try to get out of them. It would take a lot of audacity to get out of the spending cuts because it would trigger another review by the ratings agencies and Congress doesn't want to have that on their hands.

"Deficit cuts are deficit cuts. For bonds, at least-Moody's came out and said it didn't really care of the cuts were automatic or voluntary. For the bond market I would imagine it's pretty much the same thing."

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