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They may have dodged a default but have they doomed us to downgrade?

August 03, 2011 – Even with my well-deserved cynicism I had dared to hope that when the inevitable twelfth hour deal was reached it would have at least one small surprise, just enough to make the rating services at least hesitate.

The headline on the White House fact sheet released sunday night proudly proclaims “Bipartisan Debt Deal: A Win For The Economy And Budget Discipline.” Then the first bullet on the agreement kicked the can all the way into 2013.

“By ensuring that no one will be able to use the threat of the nation’s first default now, or in only a few months, for political gain,” you see, The Deal “removes the cloud of uncertainty over our economy at this critical time.” I feel better already.

The Deal “locks in a down payment on significant deficit reduction,” like agreeing to make a down payment on a new Porsche then driving off without agreeing to pay the balance. But wait, they established “a bipartisan process to seek a balanced approach to larger deficit reduction through entitlement and tax reform.” Not only that, they’re bringing in the cops - “an enforcement mechanism that gives all sides an incentive to reach bipartisan compromise on historic deficit reduction, while protecting Social Security, Medicare beneficiaries and low- income programs.”

Best of all, “the middle class, seniors and those who are most vulnerable,” apparently meaning all us average Americans, are prevented “from shouldering the burden of deficit reduction.”

There’s The Deal. They keep the threat of default out of their campaign rhetoric and to compensate they get a “bipartisan process” to provide endless grist for their political mills. They have to cough up a fraction of what needs to be paid on the deficit for show, but they get to argue about the rest to their hearts content.

Still, they made darned sure that they do come to agreement by 2013. If they don’t, then “The Deal would automatically add nearly $500 billion in defense cuts on top of cuts already made, and, at the same time, it would cut critical programs like infrastructure or education.” So, if they can’t come to an agreement then they will be forced right back to where they were before The Deal.

As of this writing The Deal was only that, but I expect there are very few who will stand in its way. It is, after all, the best they could do and The Deal will most likely become law. That’s really pathetic, and I cannot imagine the rating services seeing it otherwise.

Daily Updates Archive

Jonathan Monroe

Senior Staff Writer - Gold-Bullion.org

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