Breaking: Super Committee declares defeat; Update: No downgrade, says S&P; Update: Obama threatens veto if Congress rescinds automatic cuts

Here’s where we’re all supposed to raise a glass to government paralysis. Granted, that’s preferable to a trillion dollars in new taxes, but (a) thanks to the scheduled lapsing of the Bush tax cuts, paralysis in this case means we’re still on the hook for that trillion (and more!) and (b) we desperately, desperately, desperately need Congress to act on entitlement reform. Paralysis means the status quo and the status quo simply isn’t sustainable. So, hurray?

The statement from Hensarling and Murray:

“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.”

The silver lining here, supposedly, is that the GOP’s going to take back the Senate and the White House next year and then write its own deal on deficit reduction. In that case, explain to me how a Republican dream package gets past a Senate filibuster. We’ll pick up a few seats in November but we won’t have 60, and the remaining Democrats in the chamber will face enormous pressure from their base to block any form of tax reform that extends the Bush tax cuts for the rich. And they’ll have support for that too: In today’s new CNN poll, 67 percent said they wanted the Super Committee to increase taxes on businesses and higher-income Americans. A redder Congress means the GOP will have a stronger hand in negotiations, but there’s still going to be a showdown — and maybe gridlock — over taxes. Would the Dems really filibuster a GOP attempt to make the cuts permanent across the board, knowing that that would mean a tax hike on the middle class starting in 2013? Will they agree to real entitlement reform in exchange for raising the rates on the rich, in the unlikely event that some meaningful number of Republicans would agree to that? We’ll find out.

Stand by for updates. By the way, who are the morons on Wall Street who actually expected the Committee to succeed?

Update: Obama’s set to speak at 5:45. Tune in and watch him try to contain his glee that the do-nothing Congress did nothing, especially with respect to an issue that he can spend the next year demagoging for electoral gain. He’s actually generated a glimmer of bipartisanship in a moment of stark partisanship: Prominent Republicans, Democrats, and even independents are blaming him for contributing to the Committee’s failure.

Update: A reader e-mails to note that the GOP could nuke the Democrats’ filibuster by using reconciliation to extend the Bush tax cuts across the board. Maybe, but that would still require defeating Obama to negate his veto, capturing at least 51 Senate seats, and most importantly, keeping the caucus together for a party-line vote. Would Susan Collins, Olympia Snowe, and (if he’s still there) Scott Brown sign on for that? Can’t wait to see who the members of the inevitable Senate “gang” are that try to forge a compromise.

For a more optimistic take, read Avik Roy on why the automatic cuts triggered by the Committee’s failure might actually make it much easier for a Republican Senate to undertake entitlement reform. That’s assuming, of course, that the automatic cuts will go into effect — which seems unlikely — and that you’d have 51 Republican votes for that too. Anyone think the GOP caucus is prepared to totally own the inevitable overhaul of Medicare and Social Security — using an irregular Senate procedure, no less?

Oh, and another thing about the “draconian” automatic cuts: As a percentage of total federal spending, they’re a cosmic joke.

Update: The partisan divide extends beyond Congress, of course:

But the poll indicates a partisan divide, with Republicans opposed to tax increases by a 59% to 39% margin and Democrats against spending cuts by a 57% to 42% margin.

What about independent voters, who are crucial to the outcome of presidential and congressional elections?

“Nearly seven in ten independent voters don’t have a problem with raising taxes on the wealthy and corporations,” says CNN Polling Director Keating Holland. ‘But independents also back major domestic spending cuts – something that Republicans favor but Democrats oppose.”

Update: S&P says its outlook on U.S. debt is unchanged, but that might not matter. For one thing, they already downgraded the U.S. recently; let’s see if this failure is what gets Moody’s and Fitch to move too. For another thing, analysts have already said the key to a further downgrade would be if Congress rescinds the automatic cuts, not if the Super Committee deadlocks. Why that should be so, I have no idea. See the “cosmic joke” link above for perspective.

Update: I don’t know who The One thinks he’s kidding here:

In an appearance in the White House briefing room a little more than an hour after the committee officially conceded failure, the president said his answer to those who want to eliminate those cuts “is simple: No. I will veto any effort to get rid of those automatic spending cuts to domestic and defense spending. There will be no easy off-ramps on this one.”

He added, “We need to keep the pressure up to compromise, not the turn off the pressure.”

Go read this post if you missed it the first time. His own defense secretary has been withering in denouncing the automatic cuts as a disaster for American military preparedness. I get that Obama wants to play pretend deficit hawk in time for the election but it’s going to be a neat trick for him to campaign against his own Pentagon.