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Debt Deal Reached
Global markets are on the rise in response to a deal between President Obama and congressional Republicans on the debt. The deal would cut more than $2 trillion from federal spending over a decade. However, most economists think this isn't enough and does not remove the threat that the nation's AAA credit rating could be downgraded.
As an engineer that uses math on a daily basis, the more I read about the rising debt the more confused I am. It seems that a strategy of Reagan's was to take in less money in taxes than the government spends and this strategy has been intact for far too long. So if you're trying to balance a budget, how in the hell do you justify spending way more money than you take in? Either you have to raise taxes or cut spending. It's pretty clear that Clinton was the only president to break from this norm since then and now we're shocked that our debt crises get worse and worse every term?
... so basic that when you're taught how to balance a checkbook in high school, they don't even teach it in Math class. It's a general life skill and our country is failing at life in general.
I don't spend more money than I take in. I see commercials for people like that who have credit card debt because they couldn't do some simple balancing and see that they were spending more than they made. Why on Earth are we still implementing tax cuts and deficit spending?! Have we given up any hope of ever getting out of the red as a country?
This is very basic math
My work here is dung.
Can someone explain to me why US Treasuries should be rated AAA in the first place?
Money is paid out to investors out of new investor's money, and the cycle continues. Last time I checked, this is also known as a Ponzi Scheme and it is inevitable that it eventually collapses.
These are the same people who rated junk mortgage bonds as a good investment, so I'm not surprised.
I dream of a nation where a man is not judged by his skin color but by an number assigned by a credit rating agency.
An agreement has been reached, but it hasn't been passed by either the house or senate yet. (It's almost certain to pass the senate, as that's where the compromise originated. The house, on the other hand...well, we'll see.)
Yet, in the back of my mind, there was a part of me wondering whether an agreement would ever be reached. The conspiracy theory in me kept saying that there were enough rich fat cats who were paying off key congressmen to sabotage the process and make sure that no agreement was ever reached. Why? Because billions of dollars had been invested in credit-default swaps against the United States debt.
The deal would cut more than $2 trillion from federal spending over a decade. However, most economists think this isn't enough and does not remove the threat that the nation's AAA credit rating could be downgraded.
Of course it's not going to do anything substantial. You really thought the Republicans were fighting this fight truly to solve and end the debt woes of this country rather than politicking for 2012? Especially when the terms of last 3 Republican presidents accounted for $9.5 trillion of the $14 trillion this country carries? This in no way makes excuses Obama pushing even more debt on pile, but the Republicans hardly have a case for being "fiscally conservative" when Reagan, Bush and Bush Jr piled on 67% of the current debt.
Yes, but when using your checkbook you take the value of the currency as a given. A state has (limited) control over the value of it's currency (by limiting or expanding the available sum of printed money), thereby it also has (again, limited) control over the value of it's own dept. Now you might say that playing with the value of the currency can have complex consequences, and that would be true. Still, macro economics work differently than micro economics.
I completely agree that the analogy is not perfect (never is). What I'm asking is why, if people like Cheney said that "Reagan proved deficits don't matter" then why are we seeing negative effects? Suddenly we're concerned about our AAA rating? Why should we care? Deficits don't matter, right? If you're saying that a checkbook deficit and national deficit are two completely different things then why are we seeing a threat of losing our credit rating and other money problems that are associated with drowning yourself in debt on a personal level?
My work here is dung.
The potential downgrade has little to do with the amount of debt owed - rather, it is a reflection of the rating agencies' assessment of how likely we are to repay our bonds. Originally, simply raising the debt ceiling would have been sufficient to satisfy the rating agencies. However, now that Republicans have made clear that raising the debt ceiling is an opportunity to extract concessions with the nation's credit rating on the line, some of the rating agencies wanted to see that Congress was capable of reaching agreements without blowing up the world economy.
I'm a lawyer, but not yours. I wouldn't represent someone who thinks taking legal advice from Slashdot is a good idea.