22 Nov 2011

US debt talks on verge of failure

9:05 am on 22 November 2011

Talks in Washington aimed at cutting the federal government's borrowing are on the verge of failure.

A congressional "super-committee" had been charged with finding $US1.2 trillion in savings to avoid automatic deep spending cuts.

But the talks between Democrats and Republicans are widely reported to have collapsed. The BBC reports formal confirmation is expected on Monday.

Meanwhile, the US national debt is now more than $US15 trillion.

The deficit-reduction committee was set up in August, the result of a last-minute deal between the two sides in Congress to raise the federal debt ceiling.

The 12 members were instructed to find at least $US1.2 trillion in savings by 23 November.

That deadline is effectively Monday, as any plans agreed by the committee would need to be submitted for analysis by the Congressional Budget Office 48 hours before the formal deadline.

Without an agreement, they face the prospect of being held responsible for automatic cuts totalling some $US1 trillion to defence and domestic spending in 2013.

Much of the burden - almost $US500 billion - is expected to fall on defence and national security budgets.

Disagreements have centred on whether tax increases should form part of the budget reduction measures, with Democrats in favour of such rises but Republicans opposed.

Republicans are also seeking cuts in benefits and healthcare schemes including Medicare and Medicaid.

The heads of the committee are now expected to issue a statement on Monday, probably after markets in the United States have closed, saying they are unable to reach a deal.

But several committee members appeared on political talk shows on Sunday and confirmed that the panel's work had all but ended.