A story that has flown mainly under the radar as market attention has focused primarily on the European sovereign debt situation is the progress, or lack thereof, of the Super Committee.

width=400The super committee is the collection of 12 members of Congress, six from each party and from each house of Congress, which is working to hammer out around $1.5 trillion of deficit reduction, either through spending cuts or tax increases or a mix of both.

Up until this week we haven't really seen much in the way of progress but with the November 23rd deadline looming we're starting to see a pickup in activity. however because any proposals need to be scored by the Congressional Budget Office, we actually have even less time than that to get a deal together.

From Time: The first sign of progress arrived last week when both sides presented competing plans. Democrats wanted $1 trillion in new tax revenues coupled with $1 trillion in cuts; Republicans countered with $500 billion in new revenues and $750 billion in cuts. Failure to produce an agreement would trigger automatic cuts of $1.2 trillion from entitlements and the Pentagon. Given the market's dire reaction to the August debt ceiling deal that created the committee and the widening debt crisis in Europe, few on Capitol Hill relish the idea of failure.

Obama Urges Committee to Bite the Bullet

The President meanwhile has called on the Committee to bite the bullet and come up with a solution and put emphasis on making sure the committee avoids trying to move the goalposts by changing the automatic cuts that would be triggered if the committee was to fail.

width=352From ABC News: My hope is that over the next several days, the congressional leadership on the supercommittee go ahead and bite the bullet and do what needs to be done because the math won't change, Obama told reporters at a press conference. There's no magic formula. There are no magic beans that you can toss in the ground and suddenly a bunch of money grows on trees. We've got to just go ahead and do the responsible thing.

With just ten days to go, the president urged lawmakers not to try and change the automatic cuts triggered if the committee fails to lower the deficit by at least $1.2 trillion.

The whole idea of the sequester was to make sure that both sides felt obligated to move off rigid positions and do what was required to help the country. Since that time, they've had a lot of conversations but it feels as if people continue to try to stick with their rigid positions rather than solve the problem, Obama said. It just feels as if people keep on wanting to jigger the math so that they get a different outcome. Well the equation, no matter how you do it, is going to be the same. If you want a balanced approach ... then prudent cuts have to be matched up with revenue.

What Does Failure Mean to the US Credit Rating ? Well, It Depends

This committee was set up following that inability of the that's Republicans to come together to push through enough spending cuts to get the US debt profile in line with its AAA rating. As a result of that deficits and debt ceiling debate S&P already lowered the US credit rating from AAA to AA+. if this committee was to fail again it could trigger a similar response as the automatic cuts include tons of funding for the military which can be easily undone via congressional action. Will also be easier to sell to a public the need for more military spending as it concerns the safety of the country.

width=296From Washington Post: Much of the supercommittee's early urgency came from Standard & Poor's downgrade of the United States' credit rating. Since then, it has become clear that the major rating agencies don't much care what the committee does or doesn't do. At this point there is little reason to believe that either S&P or Moody's would downgrade solely based on a failure to agree, Goldman Sachs said in a recent analysis. Both rating agencies have indicated that while a stalemate in the supercommittee would be negative, they expect $1.2 trillion in planned deficit reduction to materialize through automatic cuts if not through the supercommittee, so their fiscal outlook should remain unchanged. The one exception is if the supercommittee fails and the trigger is pulled. In that case, they might act.

The US economy, and by extension financial markets, therefore again caught in the middle here. As one Fed officials said today if the committee was able to come together on a deal that would boost business and consumer confidence and help the economy while failure would do the opposite and create some immediate cuts to growth that could drag on the economy.

From WashingtonPost: Finally, the trigger could have an immediate, negative impact on GDP early in 2013, as the cuts take effect immediately. Since there is no gradual phasing in of these cuts, the impact on annualized GDP growth rates early that year could be large, Feroli says. Reduction in [the first quarter of 2013] annualized GDP growth would be about 1.5 to 2 percentage points.

It's the possibility of failure and then undoing the automatic triggers which hold the most worrisome consequences for financial markets. On the other hand if the debt reduction committee can go above and beyond the cuts called for that would certainly be a positive surprise, but looking at recent history we should be holding our breaths for that possibility.

As you get close to the deadline will make sure to keep you abreast of all the details here on FXTimes.

Nick Nasad is the Chief Market Analyst at FXTimes - provider of Forex News, AnalysisEducationVideosCharts, and other trading resources.