Blame game begins with US budget talks on the brink

Gridlock on Capitol Hill claimed a new victim yesterday as the bipartisan "super-committee" formed amid hoopla last summer to agree ways to reduce the US budget deficit threw up its hands and declared itself unable to reach a compromise.

The end of the 12-member committee's endeavours was certain to usher in another period of bitterness in Washington. It came at the same time as the European debt crisis continued to grow and helped to drive

another sharp plunge in share prices on the world's markets. In New York the Dow Jones yesterday fell 125 points taking the index into negative territory for the year.

"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," a statement issued last night said.

The panel's failure will theoretcially now trigger mandatory across-the-board cuts in federal programmes including in military spending with effect from the start of 2013. Already some Republicans in Congress who are anxious especially to protect the Pentagon are talking of ways to block that happening.

Poison from the breakdown will quickly seep into the landscape of the 2012 election. In the last few days more energy was expended pointing fingers of blame than to trying to avert this newest disaster. One accomplishment all can celebrate: the 9 per cent approval rating for Congress is set to fall still further.

The super-committee, composed of senators and House members from both parties, was set up as part of the deal struck by President Barack Obama and Congress on raising the US debt ceiling. It is likely that in the minds of ordinary voters Mr Obama will be seen as equally culpable for the latest foul-up.

The committee needed to find ways to cut $1.2trillion from federal spending over 10 years. But battle lines were drawn early, with Democrats insisting on a balance between raising fresh revenue, including new taxes, and cutting popular spending programmes, like such as healthcare for the poor. Tax increases, however, remain an ideological no-go area for Republicans. A key stumbling block remains the Bush-era tax cuts for the rich that Democrats would have expire at the end of next year.

President Obama lamented the latest debt debacle and blamed the Republicans. "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," he told reporters.

The fresh fall in share prices partly was attributed both to the continuing European crisis and the political stand-off in Washington which served as a reminder that there is a debt sword hanging over the US economy, too. Fears will be renewed that the big ratings agencies will revisit a possible downgrade of US debt because of the political logjam.