Monday afternoon the Congressional deficit-cutting “supercommittee” capitulated, failing to reach a compromise or deal on how to explicitly deal with the country’s growing deficit.  Markets fell significantly on the news, and though parameters to automatically cut $1.2 trillion from the federal deficit remain in place, Congress’ continued failure to address this fundamental problem continues to frustrate and hamper the economic recovery.  While ratings services Moody’s and Standard & Poor’s reiterated that the committee’s failure would not result in another downgrade for U.S. debt, the continued inability of Congress to reconcile the country’s debt only adds to the general uncertainty that is dragging recovery efforts.  As the Federal Reserve considers the possibility of yet another round of quantitative easing, as was illustrated by the questionable success of QE2, they alone cannot inspire a recovery within the markets.  Global markets seem to be reaching a point where their ability to forecast economic outlook is the primary determinant in their investment and consumption decisions, as opposed to the long-term interest rates which the Federal Reserve continues to target.  What is certain is that moving forward, the United States faces serious questions regarding their ability to pay off the debt which has been used extensively in recovery efforts, and Congress’ fierce and increasingly polarized partisanship continues to critically damage the U.S. economic recovery.

About these ads