>> susie: a super-size sell-off on wall street after the supercommittee announces a super failure to agree on a debt deal. but the president says the fight is not over. >> one way or another, we will be trimming the deficit by a total of at least $2.2 trillion over the next 10 years. that's going to happen. >> tom: the failure to reach a deal triggers automatic spending cuts that kick in down the road. so what happens to even more pressing issues, such as the coming expiration of the payroll tax cut? it's "nightly business report" for monday, november 21. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening everyone. no deal from the super committee. late today, the co-chairs of the 12-member congressional panel announced that the committee has not been able to agree on a deal to cut the u.s. deficit by $1.2 trillion. the committee members wrote that despite "significant differences" they end the process quote "united," adding that "the nation's fiscal crisis must be resolved and we cannot leave it for the next generation to solve."

tom, democrats and republicans are now talking about "missed opportunities" and the finger- pointing behind the collapse has begun as well. >> tom: susie, the news was not a surprise to investors. markets anticipated the announcement right from the open of trading today. the major market averages fell sharply. and stayed down. by the close, they were off their worst levels but still down 2% or more. the dow tumbled 248 points, the nasdaq was down about 50 and the s&p index lost 22. >> susie: president obama weighed in on the budget impasse a short while ago. >> i will veto any effort to get rid of those automatic spending cuts domestic and defense spending. there will be no easy offramps on this one. we need to keep the pressure up to compromise. not turn off the pressure. >> tom: while the failure of the supercommittee to reach an agreement on deficit reductions

means automatic budget cuts in 2013, both republicans and democrats have to turn their focus to tax and spending bills with even sooner deadlines. darren gersh has the details. >> reporter: the next big deadline for congress falls smack in the middle of the busiest shopping week of the year. now that the supercommittee has failed to deliver a super deal, much unfinished business will have to be worked out before a short-term extension of government funding runs out on december 16. >> i can't imagine that we won't go to the very last minute and it will be a perils of pauline, cliff-hanger ending there's just too much at stake. >> reporter: those stakes include increasing medicare payments to doctors, and extending unemployment benefits and the payroll tax cut into next year. all are top priorities for democrats and the white house. >> if congress fails to act to extend the current payroll tax, a typical family making $50,000 a year would see their taxes rise by $1,000 at the beginning of next year at a time when

families are struggling to make ends meet. >> reporter: but republicans aren't keen to increase spending. the outcome could be a year of short-term patches and non-stop political warfare. >> we're probably looking at least another 11 months of extreme uncertainty. >> reporter: worried by the prospect of deep cuts in military spending, republicans have been talking for weeks about softening the $1.2 trillion in automatic spending cuts triggered by the super committee's failure. >> markets are not necessarily going to like the idea that the amount of automatic spending cuts get reduced. if there is one thing that my wall street clients tell me is that they don't care if it's $1.2 trillion because the super committee decided to reduce it, or because the cuts happen, as long as they get one or the other. they will react negatively if both of those go away. >> darren is with us from our bureau in washington. we'll talk about those 2013 cuts in a moment watch. about the odds of that payroll tax cut getting okay mood 2012, in could impact

most work americans. >> reporter: are you an optimist, tom. >> tom: at heart i am. >> reporter: i would say if you are an optimist it is probably 50/50. the key question is if republicans who krrnd about coming up with the cuts to pay fors this are going to feel that they can go into the election opposing a payroll tax cut. i think that's the key issue. and it's unclear right now whether or not they're going to go along with it. >> tom: the 2012 election cycle looms over all of this. what about avoiding the threat of a possible government shutdown? >> reporter: you know, i think they're probably going to avoid that. they already came up against the shutdown back you know last spring. and they decided not to do it so i would say the odds there are 70% that they won't do it. now they might come up with another one of these things where they say we won't figure out by the 16th but we'll figure out on the 31st

of december. >> tom: you talk about punting this down, pushing it down on the calendar s it possible that even with the payroll tax and with the possibility of a government spending bill through the next fiscal year that could get push mood the calendar year of 2012? >> we've entered into this pattern where and there's a reason for it but the pattern is basically every time congress comes up against the hard deadline, they, they try to come up with an extension. it reminded me of some of my college papers. they keep asking for a way to keep pushing it back. there's a reason for that is because they have fundamental differences over important issues. the size of government, the role of taxation, the roll of entitlement, who should pay for. what but still they keep pushing the issues back. >> tom: the idea of the supercommittee was to have that hard and fast deadline, force decision, face the automatic spending cuts. the credit rating agency moodies called fat aisle-- failure tonight informative but not decisive saying it doesn't lead toy a ratings downgrade by itself. are the 2013 cuts guaranteed.

you heard the president earlier t doesn't sound like it. >> first of all i have to say i love that phrase, informative. but i think that given the current political dynamic, there's just no way that they could totally do away with the sequester absent some kind of deal which the president said today, agreement to cut spending. so i think that they won't be able to get rid of the sequester until after the election. now the sequester is designed so it takes effect january of 2013. after the election, it is possible that with a new congress coming in and a new president, they could either strike a deal or immediately upon coming in, the new congress and if there is a new president or president obama could decide, you know, these things really are onerous. we have the election. we know that we sort of sorted out some of our issues. let's either limit the impact of the sequester while we come up with a new

kind of arrangement. i could see that happening. >> tom: darren gersh tonight from our washington bureau, thanks,. >> thanks, tom. >> susie: the supercommittee's failure coupled with more bad european news gave u.s. stocks a horrendous start to this holiday week. investors dumped equities in markets around the world. the dow earlier in the day was and, as suzanne pratt reports the big swings in stocks are likely to continue. >> reporter: worries about the supercommittee super-sized the sell-off on wall street today. but, it began overnight in europe on fresh concerns about the region's debt crisis. moody's issued a dire warning about french bonds. and a new prime minister in spain was already under pressure to unveil a plan to rescue that country's economy. as a result, stock markets in france, germany and the u.k. all lost about 3% today. here in the u.s., the volatility that has whipsawed stocks for weeks continued while volume on this holiday week was paltry. big board trader jonathan corpina says investors are

simply fed up with the constant stream of negative headlines. >> it seems like there is no plan in place for europe, it seems like they're forming new governments, continually talking about restructuring of the euro. that takes time, that takes a whole process. investors they want action and they want it now. >> reporter: despite a wild ride in the last 11 months, after today's selling the dow is essentially flat for the year. experts say investors are right to worry about their portfolios, particularly now that u.s. politicians are creating even more uncertainty. >> the market is more frustrated with the negotiation process. and, if we can't even figure out how to cut 10% or 15% of the projected deficit, how are we going to attack that much bigger number, a much higher percentage? there was a lot of debate today about how much of the selling in u.s. stocks was due to the supercommittee or to europe. but, experts say playing the blame game doesn't help.

after all, stocks cannot do well when there's a serious crisis of confidence. suzanne pratt, "nightly business report," new york. >> susie: our next guest says the super-committee stalemate means another year of paralysis. joining us now, kenneth rogoff, professor of economics at harvard university and co-author of "this time is different: eight centuries of financial folly." hi, ken, nice to you have back. >> thank you. >> susie: all right, so a lot going on with the whole supercommittee announcement of no deal. was's your read on this situation and what does it mean potentially forth u.s. economy? >> well, it certainly shows the continuing paralysis in policy. yeah, it was expected. but it was worse than expected. i mean there might have been something at the last minute. there is really nothing on the horizon that seems like it could happen before the election e september perhaps some short term patches, perhaps the payroll tax,

perhaps not. and there's a risk. there's a risk with the u.s. economy very weak that will actually have substantial tightening next year if congress isn't able to extend the payroll tax and some of these other short term fiscal stimulus. >> susie: what about those payroll taxes? a lot of people were counting on the supercommittee to come to some kind of an agreement to extend them. what happens now. and what will that mean to the economy? i've heard a number of economists saying it could shave off a percent off of economic growth next year. what do you think? >> i think that's absolutely right. i mean if they don't extend it, it's hard to imagine they wouldn't in this circumstances with the economy so soft. but they've been so unpredictable, the politics are so dysfunctional. i think the u.s. economy, not doing well, still crawling out of the recession but we are crawling out. and we don't need to get kicked in the face again while we're doing it. >> susie: well, the other worry is that we talk about

all the political wrangling. people are concerned that are we going have a throwback to what happened last summer, that the credit rating agencies will downgrade u.s. credit. what are the chances of something like that happening? >> i don't think that's the big risk. i mean we really have to go bananas to have that happen. they take a big risk when they do that because the u.s. regulates them. the fact is, the foreign investors are still willing to give us money for next to nothing. the ten-year treasury bill rate went below 2%. who would have thought that. so there isn't any urgency on that front. that's part of the problem that without the urgency from interest rates with the europeans and other places having bigger problems than we are, there isn't the external pressure that will come some day. >> susie: let's talk about europe. we saw even this new conservative government in spain did very little to reassure the markets. is this contagion really growing. are the problems and the solutions becoming less clear what to do?

>> well, it's getting more nerve-racking by the day because they don't have a lot of time. this is spinning out of control. the premium, the extra interest that spain has to pay, italy has to pay, and even starting now france has to pay is really remarkable. every day we seem to hit a new euroarya high. on the interest premium they're paying over germany. so it is a very unstable situation and it seems like there is a game of chicken going on between the european central bank which doesn't want to get stuck buying all the bad debt, and the politicians in europe who can't figure out what to do about it. so i would say it's a manageable problem. but every day that goes by, the risk grow that they're just going have it implode the euro, even break up at some point. >> let's talk about it. we have less than a minute to talk about how does this all play out. you said there could be profound changes in the whole european union euro zone structure.

tell us what you think. >> i think there has to be profound changes. the idea that you can have one country, one currency and multiple independent countries with their own taxation, their own spending, that's really being thrown by the way side. it worked for a while. now it's not. and they have to do a much closer marriage. they've been living together. they need to marry. but then i don't know who going to stay and who is going to gallon. are they going to keep greece, portugal, ireland. the big questions will italy stay. and investors of course are even doubting france. this is a lot of uncertainty. and i think it's a big shadow over everything right now. >> susie: exactly, hanging over american business and the markets. ken, thank you so much for congress the program. >> absolutely. >> susie: really appreciate it. >> thank you. >> susie: we've been speaking with kenneth rogoff, professor of economics at harvard university. >> tom: still ahead, "tonight's word on the street"? "europe." gregg greenberg at thestreet.com on what european stocks some mutual fund managers are buying.

>> tom: lots of selling pressure in stocks and precious metals it was bobted buying. let's get you updated in tonight's market to kuchlts >> tom: the presumed failure of the super committee hit investor confidence, coupled with the european concern, sent the major stock indices down to their lowest prices in a month. let's put today's almost 2% drop of the s&p 500 in perspective. 30 sessions. the index broke below the range it has been in since mid- october, falling below $1,200. after the close, the focus was hewlett-packard's earnings results. these are the first results with meg whitman as c.e.o., even though she wasn't the boss for the entire quarter. the company reported earnings four cents better than anticipated before items, but they were down from a year ago. its technology services business grew while computer and printer

revenues were down. also, the firm's earnings outlook for the first quarter was well below estimates. before the numbers, h-p-q shares got caught in the market selling, falling more than 4% during the regular session. back in august, shares fell into the $20s after issues an earnings warning. after the close, the stock regained about 2.5%. down another 2%. before the h.p. results, financial stocks led the sector losers today, falling 2.5%. the industrial and tech sectors each fell about 2%. all 10 of the major stock sectors were down at least one percent. a multi-billion-dollar biotech deal was announced today as drug companies continue looking for drug development firms to boost their product lineup. the target? pharmasset for $11 billion or $137 per share. pharmasset was recently trading in the $70 dollar range. nice premium there. the company does not have a big product on the market, but is

developing new hepatitis c treatments. gilead sciences is the buyer. it's the world's biggest maker of h.i.v. drugs. the deal sent shares of pharmasset sailing, up almost 85%, closing less than $3 from the buyout price. gilead sciences stock dropped 9%. it will finance the deal with a combination of stock and debt. another merger on this monday, this one in insurance. trans-atlantic holdings is the target, agreeing to a $3.4 billion buyout. it values trans-atlantic at $59 to $79 per share. alleghany is the buyer. alleghany's stock fell almost 7%. precious metals were not spared the sell-off today. gold and silver each fell more than 2% as investor sentiment sours with european debt problems still the focus. silver down 4%. for silver, chinese demand fell significant last month, adding to the selling pressure today. the selling of stocks and precious metals helped bond prices, pushing down yields. the interest rate on the 10-year

government note fell back below 2% as prices were up. so, despite the inability of congress to agree on how to cut the deficit, investors still have an appetite to own american i.o.u.s. and that's tonight's "market focus." >> tom: even with the overseas debt crisis and volatile markets, some mutual funds are putting money to work across the atlantic.

that brings us to tonight's "word on the street," "europe." gregg greenberg is a reporter at thestreet.com. gregg greenberg with us. how are these fund managers approaching european stocks given all the concerns about the economy? >> well, here's the thing. if you read any investment book or you listen war-- warren buffett himself they say you want to guy when there is blood in the streetses. and there is far, the streets in europe are quite bloody right now so there are opportunities to be had. but on the other hand you don't want to catch a falling knife which is other wall street maxim. you don't want to add to that carnage. so you have to be careful. you have to look for stocks that have a very good oversea sales, particularly to emerging markets. and you want to have stocks that can withstand the austerity in europe. >> you have been talking to fund managers. they've identified a trio. one is the german conglomerate siemens, si, ticker symbol here in the united states it has dropped off from 140 dollars per share in the summertime to

below 100. what are the expectations? >> well, siemens is a german ge and germany is not the problem. it's peripheral europe that is the problem. so siemens is going to be helped by a weaker euro and they're going to be also helped by a weak interest rate. the europeans are keeping interest rates low. that's going to help siemens and that's what audrey kaplan who runs the fed rated intercontinental fund company, fund said to me. so she is a big fan of that stock and it makes sense. >> also a fan of sto, statoil, the norwegian energy giant. we saw oil hit $100 a week or so ago this stock is below $25. again how much tied to the global economy? >> well, if you ask any bond fund manager out there, all they want is scandinavian bonds. and sadly there is not enough scandinavian bons to go around. so you have to settle for the stocks. and statoil say norwegian stock and oil has been moving up. it's a resource-rich country and this is a resource they

do very well. >> tom: real quick give us the idea about rio, rio tinto, rio, a u.k.-based minor but really does operations globally, doesn't it? >> yeah, they're based in the u.k. the it's here bhp or rio if are you going buy a big minor. rio has operations around the world. the they are using up o whole lot of resource, metals, even precious ones like gold. so you if you looking for a miner and a stock in europe, try rio. >> plain commodities in emerge markets through europe. you have positions yourself, greg. >> no i do not. >> you can read gregg's article at the, and find a link on our web site as well. word on the street gregg greenberg. >> susie: let's check now what we're watching for tomorrow. we'll get the latest update to third-quarter u.s. growth numbers and earnings from campbell soup and several retailers, including chico's, d.s.w., fred's and signet jewelers. also tomorrow, with the failure of the supercommittee, doctors are again facing a double-digit pay cut from medicare.

we look at what that means to your health care. former a.i.g. chairman hank greenberg today sued the u.s. treasury and the federal reserve bank of new york for $25 billion. the suit comes three years after the government rescued the struggling insurance company with a takeover and bailout. greenberg argues the government action was unconstitutional because the fifth amendment says private property can not be taken for "public use without just compensation." >> tom: the more the trustee overseeing the winddown of m.f. global digs through the books, the worse it looks for the firm's customers. the trustee now says more than $1.2 billion in customer funds could be missing. the original shortfall was half that. regulators are investigating whether client money was used to cover bad bets by the company. the broker-dealer firm run by former new jersey governor and goldman sachs c.e.o. jon corzine filed for bankruptcy on halloween.

>> susie: back now to our top story, the failure of congress' supercommittee. douglas holtz-eakin looks at the lessons learned from the supercommittee's efforts. he's president of the american action forum and former director of the congressional budget office. >> the collapse and failure of congress' so called supercommittee has everyone looking for lessons.

here are three. lesson number one? white house leadership matters. if you look back at history, every time congress tries to enact large bipartisan legislation, it requires presidential involvement to push it over the finish line. perhaps in retrospect, president obama's distance from this effort doomed it from the outset. we'll need everyone on board going forward. lesson number two is that bad politics still trumps bad policy. the supercommittee's job reform of taxes, fixing our entitlement programs, is the kind of thing it should do. america needs a better tax code. and it needs to make its social safety net durable- survive to the next generation, not bancrupt the federal government. united states doesn't need to see national defense cuts, or deep cuts in infrastructure or basic research and education. it is the bad politics of the supercommittee which will not get tax and entitlement done, that are going to lead us to the bad policy of the sequester, with cuts in exactly those areas we don't need. and lesson number three is that it's time for tax reform. the bush tax cuts have been the most politically divisive issue

for a decade, and rumors are that the supercommittee gridlocked over, yet again, the bush tax cuts. it's time for presidential leadership that gives us a new tax code, that settles who will pay what taxes and for how long. put this issue aside and get onto the important issue of dealing with america's debt. those are my three lessons. i'm doug holtz-eakin. >> susie: you can keep up with n.b.r. any time. we're online at n.b.r. on pbs.org. there you'll find all the market data from the program. you can also follow us on twitter, @bizrpt, or my personal feed, @sgharibnbr. and we're on facebook at bizrpt. >> tom: and finally tonight, a that's "nightly business report" for monday, november 21. i'm tom hudson. good night everyone, and good night to you too, susie. >> susie: good night tom. i'm susie gharib. good night everyone. we hope to see all of you again tomorrow night.

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