* Super committee co-chairs admit defeat
* Markets fall on sovereign debt worries
* Further showdowns on spending and taxes loom
* Kerry says interest groups share blame for failure
By Richard Cowan and Donna Smith
WASHINGTON, Nov 21 U.S. lawmakers abandoned
their high-profile effort to rein in the country's ballooning
debt on Monday in a sign that Washington likely will not be
able to resolve a dispute over taxes and spending until 2013.
The admission of defeat by Republicans and Democrats on a
12-member congressional "super committee" is likely to cement
perceptions among voters and investors that politicians are too
divided to tackle trillion-dollar budget deficits and a
national debt that now is roughly equal to the U.S. economy.
"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,"
Republican Representative Jeb Hensarling and Democratic Senator
Patty Murray said in a joint statement.
But lawmakers will be less willing to compromise as they
shift their attention to the November 2012 presidential and
The finger-pointing began within minutes of the
President Barack Obama said at the White House that
Republicans had scuttled the talks by refusing to consider tax
hikes on the wealthy.
"They simply will not budge from that negotiating position
and so far that refusal has been the main stumbling block that
has prevented Congress from reaching an agreement to further
reduce the deficit," Obama said at the White House.
Republicans blamed Obama for a lack of leadership and said
his Democrats had been unwilling to consider a fundamental
overhaul of government-run healthcare programs that could swamp
the economy in coming decades as the population ages.
The panel waited until after U.S. markets closed at 4 p.m.
(2100 GMT) to formally declare the effort dead, but shares on
Wall Street had already hit a one-month low due to fears of
out-of-control government debt in Europe and the United States.
Japan's Nikkei index opened lower on Tuesday, hitting its
lowest level in eight months.
The committee's failure to agree on $1.2 trillion in
deficit reduction sets up a year of uncertainty on taxes and
spending that could further rattle investors already shaken
over euro zone debt woes.
Congress is now set to deliver those budget savings through
automatic cuts to defense and domestic programs, but some
Republicans have vowed to prevent them from hitting the
military. Obama said he would veto any effort to do so.
He will have to contend with a concerted lobbying effort by
his own defense secretary to preserve the Pentagon's budget.
"If Congress fails to act over the next year, the
Department of Defense will face devastating, automatic,
across-the-board cuts that will tear a seam in the nation's
defense," Defense Secretary Leon Panetta warned.
Credit-rating agencies, already dismayed by Washington's
inability to produce a credible plan to tackle the country's
debt, could downgrade U.S. debt if the cuts are rolled back.
Standard & Poor's said the news validated its decision to
issue a first-ever U.S. credit downgrade in August. Moody's
Investors Service said that failure, by itself, would not lead
to a rating change.
Fitch said it would finish its assessment of the U.S.
rating by the end of the month. It said previously that failure
by the super committee to reach agreement would likely result
in a negative outlook.
Congress will have to deliver close to $4 trillion in
savings to ensure that the national debt, now at $15 trillion,
does not swamp the economy, budget experts say.
"The United States is on a perilous debt course, and
today's announcement does nothing to alter it," said Maya
MacGuineas, head of the Committee for a Responsible Federal
Budget think tank.
In the coming weeks, Democrats will scramble to extend
economy-boosting measures, such as a tax cut for workers and
enhanced jobless benefits, which are due to expire at the end
of the year. Analysts say the economy could suffer if they are
not extended, but Republicans are likely to insist on spending
cuts to offset their $168 billion cost.
Keeping up the pressure on Republicans, Obama will renew
his call for Congress to pass the payroll tax cuts during a
trip to New Hampshire on Tuesday.
Obama has kept his distance from the talks, choosing
instead to emphasize a job-creation package that has been
blocked by Republicans. Aides say the collapse of the super
committee will help him paint Republicans as obstructionist as
he campaigns for re-election.
Congressional leaders set up the super committee after a
fierce budget battle brought the government to the brink of
default in August. The panel bypassed the usual Capitol Hill
power centers in an effort to find common ground where other
efforts had come up short.
During the talks, Republicans showed a new willingness to
move from their staunch opposition to tax increases as they
pushed for an overhaul that would have closed tax breaks and
Democrats rejected the proposal after they determined it
would have led to a lower tax burden for the wealthy.
Outside the negotiating room, interest groups like the
conservative anti-tax Americans for Tax Reform and the seniors'
lobby AARP pushed hard to protect their turf.
Several groups said they were happy the panel had fallen
short. "Simply put, no deal is better for America than a bad
deal," said the Leadership Conference on Civil and Human
Rights, a liberal group.
Democratic Senator John Kerry, a member of the super
committee, said those outside of Congress were as much to blame
for defeat as those who hold elected office.
"There is an enormous ideological divide in politics today,
and today's outcome underscores the rigidity and unwillingness
of forces outside of Congress to allow for rational consensus,"
Kerry said in a statement.