U.S. lawmakers abandoned their high-profile effort to rein in the country's ballooning debt 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.
"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," the panel's co-chairs, Republican Representative Jeb Hensarling and Democratic Senator Patty Murray, said in a statement.
Lawmakers will be less willing to compromise as they shift their attention to the November 2012 presidential and congressional elections.
President Barack Obama has kept his distance from the talks, choosing instead to emphasize a job-creation package that has been blocked by Republicans.
He said 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 told reporters at the White House.
The panel waited until after U.S. markets closed at 4 p.m. to formally declare the effort dead, but shares on Wall Street already hit a one-month low due to fears of out-of-control government debt in Europe and the United States.
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.
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.
Credit-rating agencies could downgrade U.S. debt if that were to happen, an event that could rattle markets that have already been shaken by the euro zone's debt woes.
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 slow if they are not extended.
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