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United States Loses S&P AAA Credit Rating
oxide7 writes with this excerpt from the International Business Times: "The United States lost its top-notch AAA credit rating from Standard & Poor's on Friday in an unprecedented reversal of fortune for the world's largest economy. S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about the government's budget deficits and rising debt burden. The move is likely to raise borrowing costs eventually for the American government, companies and consumers."
Just the fact that we were even thinking about defaulting or raising the debt limit should have lowered our credit rating.
I mean for one, these debt limit things always tend to be a "to the wire" affair so nobody takes it that seriously. However the other thing was the executive branch made it clear they wouldn't default on bond payments. That they don't have enough money means they have to choose what not to pay. That could be things like social security payments, and instead pay bond holders which is what they said was likely to happen.
Makes sense too, not only does the US have an obligation to pay its debts and want to maintain its credit, but doing something like that would piss people off and cause them to put pressure on congress to reach a deal.
Really I don't think this downgrade should have happened. While there are quite likely to be other problems for the US (spending cuts, tax increases, slow economy) it does not at all look like default is in the cards. Since bond ratings are supposed to be a rating of how likely that is, the rating seems to be incorrect. My opinion is it is politicking. The S&P people in power wanted a different deal and this is their politicking of it.
After all, if the ratings agencies had done their jobs a few years ago, we wouldn't be in a lot of this mess.
The real reason was the US politicians were being insane/assholes/idiots about it. Not that the debt ceiling was raised, or had to be raised.
If you just "somehow find the money" to make the interest payments (as you did for how many dozen times), the banks wouldn't give a damn (even if it meant creating more US dollars out of thin air). Because the people working in those banks would just hope that the time you guys finally blow up, they might be safely retired in the Bahamas.
BUT the minute you have a very public discussion about whether you are going to bother to find the money or not, the banks will get worried. And rightfully so.
That's why many around the world were calling the US politicians all sorts of things: irresponsible, reckless, absurd etc.
They can't peacefully farm on the rich dirt by the volcano once the volcano makes crazy noises...
"Raising the national debt" is a play on words that doesn't actually reflect Obama's actions. "Raising" makes it sound like he spent an extra $3T. What happened was our income dropped substantially (and we spent extra on stimulus).
Both Democrats and Republicans agree that the solution to our current fiscal crisis is to boost GDP so that we can increase revenue back to previous levels. If we had 1999 revenues in 2009 we wouldn't be "raising the national debt" even with present spending levels.
Even including Obama since 1972 our spending as a % of GDP has been decreasing. If the stimulus worked [Insert Debate] then arguably even the "spending" Obama had saved even more in revenue. The Bailout has almost completely paid itself off and is expected to actually return a profit. Did the stimulus pay for itself? Maybe. But one thing we do know thanks to the CBO is that the 2003 Tax Cuts are responsible for a huge portion of our deficit. Obama tried to end those Tax Cuts--he was blocked by the Minority Republicans.
Obama has tried to reduce the deficit, he even proposed a larger spending cut than the GOP--but the GOP has lost their fucking minds trying to please a tiny fraction of the US population who is completely unwilling to raise taxes or close loop holes. They rejected trillions in spending cuts because there were also some revenue increases to go along.
This is the first time in history that we've cut taxes during a War. Not just one war, 2 wars. If we're supposed to look to business to learn how to operate an organization then we need to be realistic and acknowledge that "sometimes you have to raise prices to not go bankrupt". We continue to vote and poll that we like our government services. That's fine. There is nothing wrong with liking social security and medicare etc. But now we have to be adults and pay what it costs to run those organizations.
Are you sure it was Obama who indebted us?
Are you sure it wasn't Reagan's Star Wars?
Are you sure it wasn't Bush's decision to slash taxes when we were running a surplus for the first time in modern history and on course to pay down the deficit?
Or his decision to not only not impose a war tax to pay for his overseas adventures, but for the first time ever cut taxes during a war?
We are buried in debt that was created almost entirely by Republican administrations, due to Republican policies. Federal taxes are at their lowest point in living memory, federal revenue as a fraction of GDP is 20% below where it was in 1980, and we are facing a deficit that will never be closed unless that circumstance is changed. Taxes go up or our deficit continues to accumulate - your choice.
how is an economy which has never repaid and only ever printed money a safe investment?
The USA repays the borrowed money, with interest, all the time. But the volume of the offering grows. It's not a concern until the point where you start suspecting that the country won't be able to service its debt. In other words, your one-year T-bills mature but the government says "fsck you, come later."
That point was reached in several ways. First, the very discussion of default undermines the reliability of country's debt. But then the amount of outstanding debt also makes it possible that the country will either physically run out of money to pay interest and buy matured bonds back, or it prints so much paper money that the profit of those bonds becomes negative, or does something else equally displeasing. The US debt stops being a safe store of value. It wasn't for about a decade already, but events like that serve as excuses for policy makers of countries to reevaluate the allocation of their currency reserves without being crucified.
Also why is it that for the past 2 years people have been steadily divesting from the American economy (which can be seen in the fall of the USD vs all other currencies)
The USD loses to other currencies not because "people are divesting" but because its value drops, and that happens because the printing press works day and night. For most of 2011 the US government borrows money from Federal Reserve which makes it out of thin air. When dollars are created at the rate of a few billion per day, why anyone is surprised that they get diluted?
Besides, most of investments in the US economy are done not by rich foreigners but by mutual funds and the like. This money remains in the system. If you take the money out of the market there will be excess of stock without buyers, and that will result in a serious crash of the stock market. That hasn't been observed. The US economy flounders because the business climate is bad, taxes are high, future is uncertain, labor is very expensive, and whatever you do or don't do you get sued. Can you open a small business and sell goods to China? Chinese can do that and sell their goods to the USA.
Just in case anyone believes this, federal taxes in the US are at their lowest point in living memory, and the US's social safety net would be considered a sad joke almost anywhere else in the developed world (The fact that its for-profit healthcare system is allowed to hang the most expensive medical millstone in the world around the neck of every business here, and that Americans routinely go bankrupt because they have the temerity to get seriously ill and not be rich doesn't help).
CostOfWar.com: BOTH wars cost $1.1 trillion
According to the CBO, the cost of Obamacare alone: $2 trillion
First of all -- where are you getting that $2 trillion figure? Sounds like a talk radio number, honestly. Your argument is really very uncredible if you don't link to a reputable source. You're at your computer right now -- you don't have to do this stuff from memory.
"Essential" spending??? I have to ask honestly: are you out of your mind?
What is "essential" about the government increasing its budget by around 50% in the last 10 years? While at the same time, services have downgraded?
Get a grip on reality, my friend. Before it bites you in the ass.
We needed Obama to be a tough negotiator and instead he consistently gave the republicans everything they wanted. So yeah, thanks a lot Obama.
If you mod me down the terrorists will have won
It's amazing to me that until September 2008, S&P was giving AIG a AAA rating, even though AIG was taking the bad side of everyone's bets on the mortgage market, but now S&P downgrades U.S. debt over concerns about "budget deficits and rising debt burden." The U.S. government still has plenty of room to raise revenue to pay off Treasury Bills, and may even be Constitutionally obligated to do so.
It's just hard to believe that the U.S. Treasury is now considered a riskier borrower than AIG was in 2008. It's also ironic, since a good part of the U.S. debt burden was incurred bailing out AIG and the rest of the financial industry (which assumed AIG credit-default swaps would protect them, in part due to S&P's high rating of AIG).
Thank you Tea Party... and GOP ... this is 100% your fault.
YOU guys manufactured the fake crisis, and then insisted on no revenue. S & P specifically stated that it was because of the lack of new revenues that they did the downgrade.
We need to vote ALL the Tea Party morons out of office. And most Republicans. How Eric Cantor or Mitch McConnel live with themselves, I don't know. We know Boehner just drinks a lot.
Ugh. Stupid right-wing nut jobs.
While the credit rating thing is unprecedented and sort of iconic moment, the real test of the credit-worthiness of the USA will take place in the bond market.
Computers are useless. They can only give you answers - Pablo Picasso
The republicans are pretty damn obvious with their policies, cut back anything that benefits the poor and keep and increase benefits oops tax cuts for the rich. They don't even bother to try to disguise this as trickle down economics anymore.
Yet West Virigina, which you claim is filled with poor people, colors very red on the election maps I can find.
But hey, if I am a small shop-keeper why should I pay for medi-care or social security for other people. I AM NOT UN-EMPLOYED, I got my own business, I don't need a handout... why isn't there anyone in my store? People to afraid to spend because if they loose their job they need every penny they got? Oops, now my store has gone bust... I need social security to stay alive!
Really, the republicans in the recent debt talks insisited openly that a tax cut for people making more then 250.000 dollars introduced by econimic wonder boy Bush was extended. And every single republican making less then 50.000 was in favor through their vote for the republican party. Because when you are on minimum wage, guys making a quarter of a million are your first priority.
It must be the American dream. Someday I will be rich so I better make sure I vote in the tax cuts for my future self right now.
In most of the rest of the world people vote in social security should their future self need it.
At 25 I stopped drinking to save the liver of a 40 year old man. An American commits suicide at 25 to stop a man from dying at 40.
Washington will take care of Main Street when the people in Main Street stop making it very clear with their votes that the people in Richville are their main concern.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
At very least the Reps and Tea Party should split into two parties so people can choose which one they vote for. Of course that's not going to happen, the TP wants to piggyback on the strength of the Reps in the two party system.
Justice is the sheep getting arrested while an impartial judge declares the vote void.
Yeah, because he had so many other choices that it must be his pure evilness that he picked exactly this one after taking over a flaming train heading to a wall with the breaks being removed.
Seriously, if anything this reaffirms my suspicion that the Reps sent the McCain/Palin team into the prez race of 2008 to make sure they can't win and be blamed for the crashing and burning waiting to happen. It was by some margin the most ingenious planned defeat ever. Now the Democrats will be the ones being blamed for the recession that was obvious and to be expected by no later than 2007. If it looks like we'll be out of this mess by 2016, they'll send a winning team into the prez battle next year and emerge as the shining heroes that put the country back on track after the Democrats ran it into the ground. If it doesn't look like the US are out of the shit by 2016, they'll send two more duds into the battle.
And help us God if the Dems catch on and do the same.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
Time to start cutting Federal programs we can no longer afford.
Works for me. We can start by cutting the military budget in half. No need to be the world's policeman anymore.
I don't care if it's 90,000 hectares. That lake was not my doing.
Allow me to elaborate on that. Just in case any teabaggers are reading and not realizing what "cutting tax" really means. And please don't take that 'you' used below personally, English just lacks an impersonal pronoun.
Because for most Americans, cutting taxes means less money in their pockets. Not more.
Tax money is the government's income. It might surprise you, but the feds don't just eat those dollars. They spend it. On YOU, no less. Cutting incomes means for the government the same an income reduction means for you: They can't spend as much. Since they spend it on you, that means less money gets spent on you.
Now, of course, one might argue "hey, who cares? The money I don't have to give them I can spend myself!" True. Very true. And if you earn in the six digits (and not the lower ones), it actually means you gain a lot with every percent tax you pay less. Else, it means that you now have to buy something or pay for something the feds paid for earlier. Because, as it is in our world, TANSTAAFL. Someone has to foot the bill. And if the feds can't, you have to.
Again, who cares? So I pay for it with the money I save on taxes!
No, you do not. You can not. Unless of course you're one of the 6 digit earners. If you're not, you will not be able to afford it. For the simple reason that those that earn more, and hence pay more tax, paid that for you while taxes were high. Allow me to give you a simple example:
Let's assume a flat tax of 10%. Yes, I know progressive tax, but progressive tax complicates the example and it's already evident with a flat tax system. A progressive tax system only aggravates it and makes it more blatantly obvious, but the flat tax already shows it nicely.
Let's also assume that I earn 100k a year, you earn 10k a year. Yes, 10k. There's a lot of people who have to get by on that. At 10% Tax, I pay 10k a year and you pay 1k. Let's furthermore assume that school for a child costs 5k a year. Yes, in my example educating our kids takes up almost all tax. Bear with me, ok? So you have a child and so do I. In a 10% tax system, both can send our kids to school. For "free". Of course, it's not free because it's paid for with tax. But the government just had an income of 11k bucks, so paying 2x5k is quite possible for them.
Now let's slash taxes. From now on, we only pay 8% tax. Huzzah! You just saved 200 bucks in taxes! I saved 2000, but hey, who cares, you have 200 bucks more to spend now.
True. But unfortunately the government now only has 8800 bucks and thus paying for school is no longer possible. Cough up those 5k a year if you want your kid to continue enjoying an education.
It's a constructed example. Granted. But it should illustrate what "cutting tax" really means for the lower income brackets. It means having to spend more on what used to be "free" because the high income brackets paid for it with their taxes.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
A lot of Americans will not go to vote for President Obama on election day because they are disappointed in his performance and that he has not lived up to 100% of their hopes.
Please don't be like that. Please remember this and go out to vote.
As we have seen the Republicans and the TEA Party are working hard to take things away from you.
This credit downgrade will make you lose money in your 401K and increase the costs of credit........whether buying a home if you are one of the shrinking middle class that can still hope to do that.....or starting a business.
Govenor Scott Walker cut people's jobs so he could give a tax cut to the reach and the TEA Party showed up to counterprotest the Americans who were fighting for their jobs.
Republicans at the state level fought to redefine rape away and to deny coverage for abortions to women as a result of rape.
That is what these people are about. Trying to take things away from you either by conscious design or ignorance. They are turning the US into a 3rd world country.
Please go out and vote to keep them out in 2012 elections.
The US government spends, what? 40% (and growing) more than it takes in?
The US hasn't deserved a AAA rating for years. Hell there are trillions in junk MBS which S&P rated as AAA. All you have to do is look at the direction of the chart to see if it is sustainable. Screw the rating agencies.
Deleted
A lot do look up the ratings. Institutional investors (aka the 401k investors spending billions on your and my behalf) are required by law to only buy AAA rated investments. So now there will be a lot of them scrambling to find another investment to put their billions into so that they don't go to jail.
Ascii artist &
The rich should not pay more in the proportional sense. What gives you the right to profit by someone eases labor? Similarly the banks and the wealthy people who own them should not have been given bailouts they have no right to your labor. The PROBLEM with this country is this business of redistribution where everyone rich and poor a like feels entitled, and charity is done at gun point. The direction of the flow being determined by the political whim of the moment.
Oh and the fact that we go on these ridiculous military adventures for "humanitarian" reasons while we selectively ignore suffering elsewhere because they have oil, or it might irritate China, or Russia. What this nation needs is a heavy dose of 19th Century political thinking. 20th Century politics are FAIL, let us not wast the 21st with it.
Repeal the 17th Amendment TODAY! Also Please Read http://www.gnu.org/philosophy/right-to-read.html
I say, lets return to the fiscal policies of January 2001.... remove the bush tax cuts....End Medicare part D....end Medicare Advantage...... remove the oil subsidies..... end the wars over seas...
With those moves we will be back in black.
The gold standard served to keep a lid on the GDP to debt ratios though ... which is why Nixon got off it (the oil based trade deficit necessitated an ever increasing debt to GDP ratio to maintain economic growth in the non oil producing countries).
That said, I fail to see a reasonable alternative ... if the world is ready to give you oil for IOUs for decades at a time allowing you to maintain a much higher standard of living than otherwise possible, why not take the deal? You can always default on IOUs ... of course you do need to have contingencies plans for the inevitable default.
If we had started building trillions worth of nuclear and solar-thermal plants instead of fighting 2 completely fucking useless wars we could have weaned ourselves off our oil dependency ... now we're quite simply fucked, there is no solution. Just a great decline (not a depression, a depression suggests a dip ... while we are going to experience a great reset, with no accelerated growth at the end).
You do realize Obama was left with a clusterfuck from Bush and did massive spending because most of his economic advisers said that was the only way to head off a major depression don't you?