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The cross-party committee tasked with finding ways to cut the US deficit by $1.2trn failed to reach agreement by its deadline of last night.

If Fitch Ratings sticks to the guns with which it fired off a warning shot in August - when it said it would reassess the US rating in light of the work done by the so-called Super Committee - then the country could see either a revised rating outlook, possibly to negative, meaning there is a greater than 50/50 chance of a downgrade in the coming 24 months.

The other mainstream rating agencies, Standard & Poor’s and Moody’s, had already confirmed that they would not make any immediate downgrade should the Super Committee (the Joint Select Committee on Deficit Reduction) fail to reach an agreement on how to reduce US debt.

The co-chairs of the committee, representative Jeb Hensarling and senator Patty Murray, said in a joint statement: “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.”

What happens next?

The $1.2trn is less than 10% of the US national debt that now stands at $15trn. The immediate impact of the lack of an agreement is that automatic spending cuts will now be triggered from 2013 along with the possibility of a battle between now and then of what shape this plan will take. Obama’s democrats will veto any change to reverse the cuts that will be spread out over the next ten years.