Despite Debt Deal, Tough Times Ahead

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Thanks to a last-minute debt agreement, the U.S. government will not default on its loans. But very few leaders in Washington are happy with the bill.

The measure makes a meager $917 billion in spending cuts over the next 10 years, leaving it up to a  bipartisan "super-committee" of 12 lawmakers to make $1.2 trillion more by Thanksgiving.

President Obama, clearly unhappy with the emphasis on cuts, indicated he's still planning to push for higher taxes.

"Since you can't close the deficit with just spending cuts, we'll need a balanced approach where everything's on the table," the president said Tuesday.

That kind of talk and the relatively small size of the spending cuts only made an already depressed stock market plunge further.

The Dow rose 30 points - after being down 166 - to break an eight-day losing streak on Wednesday. Nine days would have been the longest since February 1978. The S&P 500 index rose 6 points and broke a seven-day streak.

Markets have fallen recently because investors are becoming increasingly worried about the U.S. economy.

The last time it fell nine days straight was in February 1978.

It was the longest losing streak since the 2008 financial crisis, made worse by almost daily bad economic news.

"The same day that we got the debt ceiling taken care of, we had major economic numbers come out which showed that the U.S. economy was weakening," said Donald Krueger, senior analyst at Motley Fool Asset Management.  

Worried investors fled to gold, sending the price of the yellow metal to another record high of around $1,670 an ounce.

Adding to the woes, the Commerce Department announced that spending dropped in June for the first time in almost two years. 
    
The slow in spending is hurting auto sales -- especially Ford and General Motors.  Both companies say their total vehicle sales for this year may be at the low end of their forecasts.
    
In addition, investors are worried that Friday's jobs report will bring more bad news.

Meanwhile, amid all economic gloom there is one bit of good news. Moody's Investors Service says the U.S. will keep its AAA bond rating for now. 

But it's putting a negative outlook on the rating, meaning a downgrade is possible in the future.

Moody's and other credit agencies want to see clear fiscal discipline from Washington, and the proposed spending cuts may well not be enough.
    
Both sides in Congress agree the way out is to get the economy moving again, which would send more tax money to Washington and would bring back well-paying jobs

"Enough talk about the debt. We have to talk about jobs," House Minority Leader Nancy Pelosi, D-Calif., said.

"Well, obviously, the biggest concern the American people have is jobs and the economy," Senate Minority Leader Mitch McConnell, R-Ky., said.
  
However, both sides differ radically on how to get the country out of its financial mess.

The Democrats hint they may push for another government stimulus program, with higher taxes helping to pay for it.
 
Republicans say they'll fight any attempt to hike taxes because only lower taxes and less government spending will help create jobs.

Meanwhile, Politico.com reports that lobbyists in Washington are wasting no time warning their clients they'll have to push hard on the congressional super-committee to keep pet programs, benefits. or tax loopholes off the chopping block.  

Cuts of more than $1 trillion means almost everyone involved with Washington is likely to lose at least a little something.

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Paul  Strand

Paul Strand

CBN News Washington Sr. Correspondent

As senior correspondent in CBN's Washington, D.C., bureau, Paul Strand has covered a variety of political and social issues, with an emphasis on defense, justice, and Congress.  Follow Paul on Twitter @PaulStrandCBN and "like" him at Facebook.com/PaulStrandCBN.