By Greg Hunter’s USAWatchdog.com
Today, the President signed into law a $2.4 trillion debt ceiling increase contained in a so-called deficit reduction bill. This was done under the threat of defaulting on the debt of America, if a deal was not reached by August 2nd. The deadline was completely bogus because the government had ample funds coming in every month to service Treasury debt. Other things would have not been paid, but there would have been no default on sovereign debt, and that is a fact. Let me tell you what the markets think about the debt reduction part of the bill. The Dow was off by more than 265 points, or a little more than 2%. Gold, on the other hand, was up an eye popping $40 to reach a new all-time nominal high around $1,660 per oz.
The front page photo on USA Today was of Representative Gabrielle Giffords, who was shot in the head by a lunatic at the first of the year. She cast her first vote since the tragedy in the House version of the deficit reduction bill. I am truly happy Ms. Giffords is getting better. It was a great moment for her, but the real story that affects most Americans is the truth about what the actual reductions will be in the deficit. USA Today buried that story today on page 4A of the newspaper. The headline read “Deficit agreement’s savings could prove elusive.” This was actually a very good story, and I do not know why it was not front page news! The USA Today story said, “WASHINGTON — To get the lion’s share of their proposed $2.4 trillion in deficit reduction over the coming decade, President Obama and congressional leaders are relying on a process that has failed twice in the past. Under the compromise plan, a bipartisan congressional panel would seek $1.5 trillion in spending cuts or tax increases later this year. If it failed, or if Congress or the president nixed its recommendations, $1.2 trillion in spending cuts would be implemented automatically.
It’s called a “trigger,” and it has been used in the past, but with mixed results at best. In the 1980s and ’90s, triggers passed by Congress under Presidents Reagan, George H.W. Bush and Clinton eventually were evaded. Veterans of past budget deals say the same thing could happen this time.
The problem: In Republicans’ quest to guard against tax increases and Democrats’ desire to avoid harsh cuts in Medicare, Medicaid and Social Security, most of the automatic cuts triggered by congressional inaction would be in defense and other domestic programs. That may prove too much for future members of Congress to bear.” (Click here to read the complete USA Today story.)
The deficit reductions, at least in this bill, are bogus at best. Not a single penny will be cut until after 2012. Congress is in a dream world and is not taking the suffocating debt the country faces seriously.