In a statement released after the bell, the so-called budget deficit Supercommittee officially announced it failed to produce $1.2 trillion in budget cuts over the next decade. Their failure, anticipated by many, led to a substantial market plunge on Monday and will supposedly trigger the automatic sequester proposition, which is designed to enact $1.2 trillion in cuts, evenly split between defense and domestic spending.
The official statement was distributed by the co-chairs of the Joint Select Committee on Deficit Reduction, as the Supercommittee is formally called, shortly before 5:00 PM in New York. Signed by Representative Jeb Hensarling and Senator Patty Murray, the statement makes reference to both parties� �belief that the nation�s fiscal crisis must be addressed and that [Washington] cannot leave it for the next generation to solve.�
Credit rating agency Standard & Poor�s, which had downgraded the U.S. sovereign rating after the last round of political discussions regarding the budget, released a statement saying the current AA+ rating was unaffected by the failure of the Supercommittee, according to Trade the News. �Expect the caps on discretionary spending as laid out in the Budget Control Act of 2011 to remain in force,� read the statemenet by S&P, �if these limits are eased, downward pressure on ratings could build.�
U.S. stocks plummeted on Monday. While the official statement was released after market hours, news that the bi-partisan group would fail to reach an agreement had surfaced over the weekend. The Dow led the decline, down 2.1% or 249 points to 11,547. The Nasdaq fell 1.9% to 2,523 points while the S&P 500 also slid 1.9% to 1,193. Oil prices tumbled, as did gold, while yeilds on 10-year Treasuries fell to 1.96%.
Below is the full statement by the Supercommittee.
WASHINGTON� Today, the Co-Chairs of the Joint Select Committee on Deficit Reduction, Representative Jeb Hensarling (R-TX) and Senator Patty Murray, released the following statement.
�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.
�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. We remain hopeful that Congress can build on this committee�s work and can find a way to tackle this issue in a way that works for the American people and our economy.
�We are deeply disappointed that we have been unable to come to a bipartisan deficit reduction agreement, but as we approach the uniquely American holiday of Thanksgiving, we want to express our appreciation to every member of this committee, each of whom came into the process committed to achieving a solution that has eluded many groups before us. Most importantly, we want to thank the American people for sharing thoughts and ideas and for providing support and good will as we worked to accomplish this difficult task.
�We would also like to thank our committee staff, in particular Staff Director Mark Prater and Deputy Staff Director Sarah Kuehl, as well as each committee member�s staff for the tremendous work they contributed to this effort. We would also like to express our sincere gratitude to Dr. Douglas Elmendorf and Mr. Thomas Barthold and their teams at the Congressional Budget Office and Joint Committee on Taxation, respectively, for the technical support they provided to the committee and its members.�
It came as no surprise that the Supercommittee was unable to reach an agreement. The Supercommittee itself was set up in the context of heated rhetoric and stubbornness from both parties back in August. The debate led to a credit downgrade of the U.S. at the hands of Standard & Poor�s for the first time ever. The budget deficit debate will now become part of the presidential campaign discussion going into 2012, where President Barack Obama seeks reelection against a Republican party invigorated by the Tea Party.
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