Super-Committee agrees

that they cannot agree..

The congressional supercommittee charged with coming up with $1.2 trillion in deficit reductions gave up the task this afternoon, saying it could not resolve ideological differences to find common ground.

The committee's statement came after stocks had another miserable session, with the Dow Jones industrials ($INDU -2.11%) falling as many as 342 points in the morning before recovering to finish down 249 points.

"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," Sen. Patty Murray, D-Wash., and Rep. Jeb Hensarling, R-Texas, said in a statement. The committee ended their deliberations firm in the belief that the "nation's fiscal crisis must be addressed."

The committee's failure sets up a year of uncertainty on taxes and spending that could further rattle investors.

Congress is likely to engage in another round of brinksmanship over the coming weeks as Democrats scramble to extend economy-boosting measures like a payroll tax cut and enhanced jobless benefits that are due to expire at the end of the year.

Republicans have vowed to shield the military from the automatic spending cuts and will also try to lock in low tax rates for the wealthy before they rise at the end of 2012.

Republicans were blaming Democrats on Sunday for stubbornness on cutting entitlement programs like Social Security and Medicare. Democrats have blamed Republicans for demanding that the Bush administration tax cuts be made permanent.

The committee's failure, however, will not trigger another downgrade from Standard & Poor's Corp. S&P downgraded U.S. debt on Aug. 5, setting off a market sell-off the next week.

Doing nothing at all, as Washington Post columnist E.J. Dionne noted last week, would actually result in $7.1 trillion in deficit reduction. The Bush tax cuts would expire at the end of next year. Estate-tax cuts would expire.

So would tax extenders, like allowing residents of Washington state, Texas and others to deduct sales taxes, which would also boost revenue. There will be a move to extend those tax breaks.

Congress can and likely will try to override triggers designed to impose $1.2 trillion in cuts if Congress won't act. The triggers would impose half the cuts on defense spending and the balance elsewhere in the federal budget. However, President Obama said late today that he would veto any attempt to change those formulas and exempt defense.

The supercommittee did manage before today's close to suggest that it might try one more time to find a deal. Stocks trimmed their losses substantially when Sen. Max Baucus, D-Mont., said, "There's always hope," as he joined a meeting of committee members in the office of Sen. John Kerry, D-Mass.

But the statement that came out at around 4:50 p.m. ET ended those hopes.