Absent a super committee, now who'll lean on Congress to cut US deficit?

One explanation for the muted reaction is that the US debt woes have been vastly eclipsed by the prospect of a debt meltdown in Europe, struggling to avert fiscal collapse in Greece and Italy, among other nations. Moreover, Wall Street reacts to expectations, and Wall Street expected the 12-member panel to fail.

"Ironically, Europe's troubles give us a little more time," says Robert Greenstein, president of the Center on Budget and Policy Priorities in Washington.

"Problems with the euro make the dollar and US Treasurys look better relatively than they did before," he adds. "Whatever issues and concerns people have, it's still the best place to put your money."

That reprise from world markets may not last – a point acknowledged by lawmakers on both sides of the aisle. But for now, fiscal crises elsewhere bought Congress and the White House some time to assess what went wrong and take another run at the problem.

With the failure of the super committee, responsibility for deficit reduction now falls back to the full Congress. But Republicans and Democrats remain as divided over a way forward as they were heading into the panel's deliberations.

Two views of the problem and solution

Republicans say the nation's fiscal crisis is rooted in a federal spending binge, period. The solution, they say, is to spend less and cut taxes.

Democrats blame the crisis on the impacts of the Bush-era tax cuts, especially tax breaks for the wealthy, and two wars paid for on credit.

Moreover, the wreckage of the super committee deliberations produced blame narratives that fit well with campaign strategies for 2012. Democrats are already producing ads that say Republicans were willing to sacrifice the fiscal health of the nation to subsidize the lifestyles of the rich. Republicans say Democrats refused any concessions on Social Security, Medicare, and Medicaid, thereby ensuring that these programs will go broke.

"Doing nothing will lead to the outcome both sides fear – massive tax increases and the shredding of the social safety net," says Sen. Tom Coburn (R) of Oklahoma. "If we don't make these decisions ourselves, the international financial community will dictate the solutions to us, which is exactly what we are seeing in Europe today."

Absent market sanctions, however, there's little incentive for Congress to break through politically useful party lines until after the 2012 elections. But two big deadlines – the expiration of the Bush tax cuts after Dec. 31, 2012, and the automatic spending cuts set to take hold in Jan. 3, 2013 – may create the impetus for action.

If Congress does nothing, a series of tax cuts enacted in 2001 and 2003 will expire, and tax rates will revert to 2000 levels. Along with the $1.2 trillion in automatic spending cuts mandated by the failure of the super committee, congressional inaction would mean some $4 trillion in deficit reduction. A popular Social Security payroll tax cut and aid for long-term unemployed workers – part of a deal to extend the Bush tax cuts after Republicans won back the House in 2010 – are also set to expire at year's end.

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