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S&P's $2 Trillion Math Mistake
Last friday Moody's S&P announced that they had downgraded the U.S.'s credit rating (leading to a pretty huge discussion on Slashdot I might add). Since then more interesting news has come out, suraj.sun writes "In a document provided to Treasury on Friday afternoon, Standard and Poor's (S&P) presented a judgment about the credit rating of the U.S. that was based on a $2 trillion mistake. After Treasury pointed out this error — a basic math error of significant consequence — S&P still chose to proceed with their flawed judgment by simply changing their principal rationale for their credit rating decision from an economic one to a political one. S&P incorrectly added that same $2.1 trillion in deficit reduction to an entirely different baseline where discretionary funding levels grow with nominal GDP over the next 10 years. Relative to this alternative baseline, the Budget Control Act will save more than $4 trillion over ten years — or over $2 trillion more than S&P calculated. S&P acknowledged this error — in private conversations with Treasury on Friday afternoon and then publicly early Saturday morning. In the interim, they chose to issue a downgrade of the U.S. credit rating."
We have huge discussions on Slashdot I might add
sysadmins and parents of newborns get the same amount of sleep.
More lies...the debt will INCREASE by almost 8 trillion over the next 10 years. And probably more than that I can guarantee you! The S&P should have downgraded us a loooonnnggggg time ago.
And sorry it is no ones fault but ours.
Our political situation is horrible, and shows no signs of becoming better. The Tea Party dominates the GOP, and the Democratic president folds faster than a house of cards whenever they do something stupid.
lol. Watching people flail around with excuses for why the credit rating shouldn't have been downgraded remind me of the people you see on those shows where they've maxed out dozens of credit cards yet still try to act like they aren't bankrupt and doing fine. Your country is insolvent. Get over it. Yes, you can no longer say "AMERICA FUCK YEAH!" since you don't have a AAA rating, but most countries in the world don't and most of them do just fine.
regardless of the math, S&P's reasoning is sound. let's not try to find scapegoats, please. the U.S. is hurtling at full speed towards a deficit meltdown, and quibbling over S&P's math doesn't change the fact that the country needs to come to terms with it ASAP.
Somebody correct me if I'm wrong, but at current spending levels, cutting $4T over 10 years still has us running a deficit. Considering that this deal was politically the best we could do, it's easy to agree with S&P's pessimistic view of our political budget woes.
"Ask not what your country can do for you." --John F. Kennedy
Moody's and S&P are two different rating agencies.
There was a time when people worried about who had the largest nuclear arsenal.
This kinda reminds me of that "1000 vs 10,000" nuclear weapons discussion. Everybody is dead after 1000 bombs go off. It isn't like 10,000 bombs are going to kill you that much more.
The point being the economy is still going down the tubes...
It was S&Ps rating system that the banks gamed with repackaged mortgages in the first place. Fuck um.
How long before the media points that out? Think they will?
Yeah, these are the same people that gave mortgage backed securities a AAA rating right up until it was blindingly obvious that they were wrong.
Their math was wrong, but they said too bad, we will cancel it anyways just because our debt is too high.
Fix your damn over spending! The rest of the world has too!
The total debt US has is way too high anyway, if a person had same sort of debt load they would be insolvent.
US is ofcourse not alone in the list of countries where the debt is too high, and still many of those other countires have high credit ratings too.
And yes credit rating companies are bad at basic math skills as expected by their previous ratings, but that does not mean that US should have any credit raiting above "Do not lend money at any cost"
S&P in their report had essentially 2 issues:
a) They had questions about the budget strategy over the medium term.
b) They believed that political risk in the United States had increased substantially.
Given that we had 50+ US congressmen arguing that a sovereign default was either no big deal or desirable I can't see how one can disagree with (b). Political risk has substantially increased.
(a) is more questionable. The US economy is very large and the US ultimately does own a printing press. But the United States because of political divisions is simply unwilling to engage in the actions required to end high unemployment nor willing to reduce the government to the size needed if we intend to maintain a much lower labor participation rate than we had been.
So I can see both sides for (a), but (b) is the big factor. I think the Obama administration in trying to attack S&P based on secret conversations is simply failing to address the depth of the real problem. Whether their story is true or not, S&P is not wrong to notify investors that treasuries have risks they did not have 5 years ago.
The credit rating of a sovereign's debt issued in its own currency is always based on political risk, never economic risk. The country can always create the money needed to pay the bills. In contrast, eurozone countries that don't have their own currency have a very real economic risk.
I'd like to see some aggregate comment stats on the front page next to each story:
Anon Cow posts/Total posts*100.
Troll Mods/Total Mods*100
Some comment threads aren't worth reading simply because there is too much noise or flames. (Even with filters and the like.)
This move had zero to do with economics, and everything to do with getting revenge on the teabaggers. Gonna block Obama? We're going to downgrade your credit rating, math be damned. These fuckwits have to be taught that their actions have consequences. Government is here to help, not harm. Taxes are good, not bad. Hopefully the FBI will move in soon and start busting teabaggers for terrorism - we can only hope.
Shutting down free speech with violence isn't fighting fascism. It IS fascism!
Taco,
If you can't tell Moody's from S&P, you probably shouldn't be commenting on the issue.
Moody's still rates the US as AAA, as does Fitch.
These were the same guys who gave a great credit rating to the sub-prime mortgage securities which ultimately killed this economy.
They also favor republican politics. John Chambers has attended a few GOP events in the past 8 years...
Hello, conspiracy???
Anyone notice more and more that Slashdot posts more and more pro-administration articles? Is the user-voting mechanism being overrun by propagandists?
http://krugman.blogs.nytimes.com/2011/08/07/i-heard-it-through-the-baseline/
http://www.treasury.gov/connect/blog/Pages/Just-the-Facts-SPs-2-Trillion-Mistake.aspx
The downgrade was going to happen with or without a math error. The financial sector did not like the game of chicken that Congress played with the economy and now is being punished. Of course, the rest of us suffer too, but what is a little collateral damage. All the fat-cats had their short sales scheduled last week.
Aren't they the same fucks that gave banksters such as AIG AAA+ ratings before the bailouts? Remember the banksters crying for help and threatening to crash the economy? What bullshit. I wouldn't be surprised if this was all orchestrated as part of the North American Union plan.
did they use people who work for Verizon call centers who can't even do basic math?
Taco,
If you can't tell Moody's from S&P, you probably shouldn't be commenting on the issue.
Moody's still rates the US as AAA, as does Fitch.
Nitpick: Moody's doesn't have a "AAA" rating. There top rating is "Aaa".
So what you're saying is, the difference between Moody's and S&P is that one is case-sensitive and one is not?
I would argue that the mere fact that the threat of a default was bargaining chip on the table makes a downgrade justified.
Either the last month was all empty rhetoric or it wasn't. The fact that the threat of forcing a default elicited significant concessions proves that it was considered a legitimate risk and therefore, a downgrade makes sense.
"S&P still chose to proceed with their flawed judgment"
The judgement is not flawed ... AT ALL. With the revised GDP numbers from previous years, America does not deserve an "AAA" rating. However, neither do most other countries with a "AAA" rating.
But seriously, just GET OVER the fact that America is not fundamentally economically sound.
Every one complaining about S&P sounds like a 4-year whining about having their favorite toy taken away. S&Ps downgrade didn't place the America into the current position they're in. Lack of fiscal management from 1980 onward, did.
Someone somewhere has to provide the US with a wake up call about its current track. I don't think anyone would fundamentally argue that. Should the downgrade have happened? Maybe. But the Politicians are deeply split, and as such a downgrade is a reflection on how the world looking in through the window sees things.
I think it needs to be borne in mind about the US that its just come out of a Gov that held all three arms of the executive. And it seems at least to me to have been highly ineffective given it had the opportunity to deliver things it wanted to. Now, its not got all three parts, and life is very much tougher.
The downgrade itself should not have been said to be economic if you present figures that far out. Is the world to place its faith and planning around bad mathmatics? Seriously? If the people looking in through the windows can't count, and yet they can cause trillions to be wiped out by the waves they start in their tsunami of reckless stupidity, maybe they should be brought to book.
Finally, one of the aspects of the wide angle lense thrown over the whole thing is the abuse of the Tea party. I'm not sure why. They are vocally speaking about a think I hear from many Americans I meet, that being that actually they personally feel the Government has indeed become too large, and is indeed actually not doing things how they see or think it should. And in this, a very democratic thing is happening. That voice is holding a place at the table and getting a say. It may be that had the old way stayed as was, that voice may not have been at the table at all. Now, me personally, I can take or leave the tea party. But I don't see any harm in someone at the table fighting for some curbs in the US, because as far as I can see, that deficit is cripplingly bad. And the wider question probably needs asking of your US representatives. 'Why is it the Tea Party are getting to raise this issue - when you should have been dealing with this years ago'. And thats the question that should be posed to anyone Tea party bashing.
It seems to me that its not really that the Tea party bunch are so bad. Its that the rest are near their equals in the stakes of being so poor.
I'm an Anglophile. I hope the US gets back on its feet soon. The world needs you.
We`re all equal
The Sunday morning news shows were already booked, and the buy-ins from senior management and the chief economists had been secured.
Next time, try to point out these $2 x 10**12 typos in a more timely fashion.
The countries that can gloat are: Australia, Austria, Canada, Denmark, Finland, France, Germany, Guernsey, Hong Kong, Isle of Man, Liechtenstein, Luxembourg, Netherlands, Norway, Singapore, Sweden, Switzerland, and the United Kingdom
Forgive us for gloating that we have a higher credit rating in the UK, its just about the first chance we've had to gloat about anything related to our economy since 2008. I know that this probably won't last long - they probably just haven't got round to downgrading us yet!
I dont get it.
One of the critical point is that S&P obviously believes that the deal made has unreasonable restrictions for future budget decisions, like the tax politics.
On the other hand i have never seen any political party so unwilling to accept (and clean up) the mess they made as the Republicans. Everybody knows the explosion of the deficit has nothing to do with Obama, it is the consequence of 2 wars at the same time started without specific goals, running over a decade, and insufficient results up to now.
So while the publically stated goals of the tea party may be understandable to me (everybody *sees* that things need to change), there is a significant difference between saying "we spend less" and "we just dont pay, even if we are obliged". The latter does not solve *any* problem (even if the right problem is stated), but destroys the trust of the insitution lending the money.
To say it in a analogy: If you have ordered something a restaurant, its not an option to say: "oh, i just dot pay this and dont eat it". Thats what they suggested. Obviouls there is significant difference to just not ordering something.
as well as all other rating companies and all those who lend them a ear.
Maybe Computers will never be as intelligent as Humans.
For sure they won't ever become so stupid. [VR-1988]
It hurts when it happens to YOU, doesn't it? Now imagine the effect decisions like this have when applied to other countries LIKE Portugal.
S&P facilities around the globe go dark, employees turn up missing, computer connections
So what? S&P is a private entitiy and may rate anybody as they please.
Smoke and Mirrors. Cowards and Crooks. Liars and Lawyers. Fiction and Falsehoods. Deception and Deceit.
I'm sure we'll hear a lot of political ideology in today's comments, but I just wanted to remind folks that S&P reputation isn't that stellar. S&P and Moody's used mathematical models to rate mortgage backed securities as safe as governmental bonds back in 2007. Then about 90% of those bonds were then rerated as junk bonds which forced a large sell off.
I also want to remind folks that the treasury bond yield rates are the lowest they have ever been with a yield rate of 0.01 for 1 month, and 3.82 for 30 year. A downgrade by S&P may force the government to raise the yield rates on these treasury bonds in order to maintain current levels of borrowing (by the government). So keep all this in consideration while we debate the merits of a fox guarding the hen house.
These comments are my own and do not necessarily reflect the views or opinions of my employer or colleagues...
Please somebody google the news "Standard & Poor's Clarifies Assumption Used On Discretionary Spending Growth" over the last two days from multiple places.
"Some of the activities they undertook contributed to the prevailing mood of the time!"
Did they entirely fail to see it coming? "Well, they're not so sure about that...".
Go Gregory Brothers!
http://www.youtube.com/watch?v=-fTh2GffJsM
My first Journal Entry ever, in 8 years! http://slashdot.org/journal/365947/aphelion-scifi-fantasy-horror-poetry-webzine
He says the government's performance is sure not AAA, but he'd rate the debt as AAA.
Remember: Ratings on bonds is supposed to be how likely they are to default. Nothing has changed that makes the US more likely to default.
http://www.cnbc.com/id/44056326
Please see their original report and press release. Here are some quotes from the August 5th press release:
"The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy."
"Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act. "
Their explanation didn't suddenly switch to political. It was there all along, yet so few pundits chose to focus on it.
Years?
I know people like to talk about futures and about entitlements and this and that. But I would like to see the cancelled checks. What did we literally write checks for over the last 4 years. Sorted by amount, application, and area of responsibility. Does anyone have that chart? How often is it updated?
Not using revenue as a tool to decrease the deficit is stupid. The Norquist Nutjobs hung together and they shall definitely hang together if people have a memory come 2012. Holding the rest of us hostage while you have your pissing contest by inserting language unrelated to the matter at hand just to make people reject it is unforgivable.
Boehner said he got 98 percent of what he wanted, a smashing victory for his side. So he can't blame the Democrats for the S&P downgrade.
Republicans, you waged war against the American People. Traitors.
Go ahead, mod me down. Fuck you. I'm mad.
--
BMO
The math on this doesn't matter a whole lot. The fundamental problem is that the US is addicted to borrowing and has no credible plan to stop. Forget about paying it off, there's no realistic way to stop borrowing more anytime soon.
The reaction to this decision is mostly emotional and not rational. Warren Buffet had this to say: "I can go out drinking all night, but if I've got a printing press, my debt is good." ... yeah, see. THAT right there is the heart of the problem. "Print more money" is not a legitimate way out of debt. It's what banana republics do, like Zimbabwe under Mugabe (and it worked out so well for them). This is not an AAA debt, and people are only pretending it is because they have so much personal wealth tied up in it that the reality will be bad for them financially.
-- "So they told me that using the download page to download something was not something they anticipated." - Bill Gates
entire world knew that it was aeons past the time it needed to be downgraded, and the joke was on the 'standard agencies' that were, for some reason, unwilling to do that downgrade for a long time now.
it is just saving face. reason does not matter. even as of this moment, american federal reserve bank keeps printing money.
Read radical news here
I heard Robert Reich make that point weeks ago on NPR. Here's one of several rants on the topic: http://www.businessinsider.com/why-sp-has-no-business-downgrading-the-us-2011-8
It was S&Ps rating system that the banks gamed with repackaged mortgages in the first place. Fuck um.
How long before the media points that out? Think they will?
Not the "mainstream" media - Fox News will. And they'll blame it on all of the entitlement programs and the Democrat's crazy spending and whatnot - we all know that wars pay for themselves so including Iraq and Afghanistan and other Middle East actions are NOT to blame for this. And we all know that eliminating loop holes in the tax code is really increasing taxes and we can't have that! No sir-ee! It's just backhanded way of taxing the rich! And the rich create jobs! Why just imagine how shitty our job market would be if the tax rates were higher!
Can you give examples? This fresh list suggests otherwise:
In fact, there's a book out there which suggests that historically the threshold starts at 90% of GDP. Above 90% is where you see nations either having to do hard cuts, defaulting, or praying for better times.
Of course, it's not only the absolute debt, it's also the debt vector. Care to tell the class what the vector for US debt is?
1) Total debt, United States of America, Inc. ~$1.4 trillion
2) Total Gross Income (GDP) United States of America, Inc. ~$14 trillion
Looking at these numbers it seems simple to me that if we simply raised the taxes on corporations and those who make their money off of investments we could probably pay the thing down in a short time. In the mean time, since United States of America, Inc has the largest economy of any country in the world ever (and the second largest isn't even a tenth the size of the US GDP) I think USofA, Inc is a pretty good bet for the long term bond market. As a matter of fact, if we just made it official and turned the country into a corporation with the Constitution as the articles of incorporation and then issued stocks we could probably clean this mess up in no time. I know I'd be there buying a thousand shares.
A modest proposal, indeed.
Currently the US's debt is right around 100% of GDP. That means the US owes an amount equal to roughly its total economic output for a year at current levels.
Ok, well as an individual, I have a much higher load. I have a debt load of near 200% of GSP. I earn about $50,000 per year gross. My only debt is my mortgage, but on that I owe around $100,000. So I owe twice what I make, gross, and more of course if you want to count it net once you've taken out the 33%ish of money that gets withheld from my paycheck for taxes, retirement, insurance, and so on.
Now am I suggesting that the government should get more debt? No, but your comparison is rather off base. Individuals and companies tend to have much heavier debt loads.
so, as an european, let me get this straight:
The US have been like 24 hours away from official bankruptcy and therefore get downrated by one lousy point and all hell breaks loose - the EU tries to save it's countries for the last two years and get's its countries ratings down to a C and nobody cares? And of course the first one is a conspiracy against the USA while the latter is just common business? Right...
In reality none of these rating agencies have any credibility, don't forget, Lehman Brothers, AIG and all other financial institutions that completely failed all had top ratings by these companies.
Moody's, Standard & Poor's, and Fitch Ratings all maintained at least A ratings on AIG and Lehman Brothers up until mid-September of last year. Lehman Brothers declared bankruptcy Sept. 15; the federal government provided AIG with its first of four multibillion-dollar bailouts the next day.
Why do people care what these rating agencies say? The market is a much better rating agency than any establishment out there, the market downgrades USD all the time, it's not a surprise, you can't have vendor financed economy, you can't have consumption without production, you can't have "jobless recovery", you can't have stimulus creating jobs that are meaningful in that they reduce the trading deficit, you can't have debt that is constantly growing while real production is shrinking 10% a year (that's because GDP is overestimated year to year, because real inflation is around 13% but a much smaller deflater is used, some 2% CPI).
You cannot have an equitable economy with 18% unemployment or underemployment, 40% finance industry, 10% government industry, 50 million people on SS and under 11% manufacturing (probably mostly military and value added assembly from imported parts.)
You just can't have 50 billion dollars/month trade deficit, where you consume 50billion dollars/month more from imported goods, produced elsewhere, while exporting printed paper and not at least an equal amount of goods. It's not possible to do this forever, and USA has been doing it for a very long time because it's exporting inflation because USD is so called "reserve currency", so other governments make a huge mistake of buying and stockpiling it by inflating their own currencies.
The debt is the crisis, not maintaining the debt ceiling, which could have been beginning of a solution.
If you want to see somebody who has real credibility on this issue, on the issue of financial institution ratings in USA, look no further than my sig. Now that guy predicted and explained in vivid detail exactly how the financial industry was going to collapse and how the housing bubble would burst and most importantly he understood the underlying principles behind these events and explained them.
Here are his thoughts on this S&P downgrade, and if you care to listen to an opinion of somebody with credibility, that would be it.
You can't handle the truth.
Bush really handed Obama a poison challis, two wars bleeding money out of the US economy. Looks like it's time for some quantitative easing as the value of the US economy is devalued yet again, buy buy assests. You do realise that the Central banks are privately owned, don't you? Oh you need a car analogy;
America is pants down over the bonnet of the car and the private interests are considering if lubrication is actually necessary before insertion of the fist into assets.
Perhaps when neither of the two US political parties want to be in control anymore there will be a realisation of the deep structural problems inherent in the US economy. With any luck by the time they do it won't be too late.
My ism, it's full of beliefs.
The CBO assumed discretionary spending will grow at the rate of inflation. S&P assumed it grows with GDP. Both of these are perfectly valid assumptions (if any complaint is to be made, they're both too optimistic since historically the growth in discretionary spending has far exceeded both measures); a legitimate alternate choice of economic models is not an error. This is the Obama administrations typical "all reasonable experts agree" tactic of painting legitimate differences in opinion as disengenuous.
As for S&P's "acknowledgement", it was more along the lines of "we just reported your long term unfunded obligations are $211 trillion and you lack the political will or ability to do anything about it. And you want to have an argument over whether it's really $211 trillion or $209 trillion? If it's that improtant to you, we'll use your numbers, but you're completely missing the point here."
Moody's should have simply stated that they would count cuts where discussions on what would to cut haven't been made. It's like a fat guy telling you he'll cut 200 calories out of next week's food intake. He'll just increase this week's by 200 hundred and calm to "cut it" next week.
Business and finance bought themselves a Tea Party Congress last year and now they're not happy with the results.
Though I guess it's telling that they're as good at math as the candidates they threw campaign money at...
S&P downgrade is correct of-course, but it's nowhere near enough of a downgrade of US debt, which is all junk and will never be repaid in anything of any value.
Many believe that Tea Party got a win out of this debt ceiling deal, but that's just not true. The Win would have been if there was no debt ceiling hike at all, instead it's a loss, with the concessions being completely irrelevant. 2 Trillion spending cuts that are not real cuts, they are a so called 'cut' from a 9 Trillion base increase!
What kind of a cut is it, when the spending goes up by 7Trillion anyway? That's ridiculous, anybody arguing that's a cut is either mentally challenged or is a liar, or both (a politician).
Any actual cuts are about 25Billion this year. That's all, and that pocket change, less than a rounding error in the budget. The 2 Trillion is scheduled for cuts after next Congress is elected, but that means there will be no way to force the cuts either, and since the US economy is in recession, has been in recession and never left the recession based on real inflation numbers, by which the GDP should have been reduced (13% instead the fake 2% CPI). The reason this so called 'recovery' was jobless is because it was never a recovery in the first place.
Recovery would have allowed the economy to restructure bad debts, remove a bunch of dead weight from the economy, liquidate assets to repay debts and allow economy to start growing in private sector, which is the only sector that reduces trade deficit and creates meaningful jobs that can reduce the trade deficit. Any government created 'jobs' are welfare with a work condition attached to it, it doesn't produce anything.
There is no win in this deal, there is only loss for American and World economy. American - because it means depression continues and worsens, credit dries out and debt is monetized, USD is destroyed and US consumer is left without products to buy at all.
World - because USA CAN be an economic engine producing things the world needs, but instead USA CHOOSES to be a drag on the world, starting wars and building weapons instead of building cheap, high quality consumer goods to exchange for in the global markets.
US debt rating is junk, the debts won't be repaid, the USD will be hyper-inflated because US government does not have the political courage to do the right thing and cut government spending, which means stop Wars, SS, Medicare, government programs, cut government departments, cut income taxes, allow more business with less regulations of products and labor. There is no way this will be done politically, instead the politics of this thing will bring USD to its logical conclusion and US economy to an unfortunate situation, which will take hundreds of years to get out of.
You can't handle the truth.
The new standard: we're all poor.
The market has pretty much given up on the ratings companies and many market participants now do their own rating.
Finally! A year of moderation! Ready for 2019?
The US had already been downgraded by Egan Jones back in July:
So S&P isn't really a "one off" if you thought that.
All these "yes but X were wrong about A, so they're probably wrong about B" is halo affected thinking. It may feel logical, but it's not rational.
Having Standard & Poors downgrade the creditworthiness of the United States, and warn it about further downgrades, is a little like having the Catholic Church lecture scout leaders on the proper behavior toward boys. http://news.yahoo.com/why-congress-standard-poors-deserve-other-092005860.html
I laughed; but, I still don't know if it is funny or just plain sad.
Having to work for a living is the root of all evil.
Imagine a man making the right decision for the wrong reason. For example, when picking out a card with the correct solution to the math problem "2 + 2", this man picks out the card that reads "4" because it has a blue background and it matches the eyes of the woman giving the test.
Was his judgmentment flawed? Sure.
Did he have the right answer? Sure.
Would you trust his informed opinion on matter relating to math? I hope not.
(Not to mention you have to go back further-arguably to the Eisenhower administration-if you want to find a time and place that the US had sound fiscal management. But neither that assessment nor the question of how just how bad the the current predicament for the US is makes much difference to my pedantry over whether the S&P has flawed judgment.)
It's just their opinion.
Nobody is arguing that they're completely wrong, just that they're being a bit premature, or being a bit cynical, but not completely out to lunch.
AA+ is very high quality with long term risk.
You can blame people for overhyping the debt limit, but the reality is that this risk (and others) when from theoretical to an actual (though small) possibility. You have a growing vocal minority that want to get US government spending under control at almost ANY cost, even up to simply not paying the outstanding debt. I don't see how anyone can not see that as a risk.
I'm sure we'll hear a lot of political ideology in today's comments, but I just wanted to remind folks that S&P reputation isn't that stellar. S&P and Moody's used mathematical models to rate mortgage backed securities as safe as governmental bonds back in 2007. Then about 90% of those bonds were then rerated as junk bonds which forced a large sell off.
Only because the bank deliberately gamed the system to hide the fact that they were lending way beyond the Basel rules. Don't blame the ratings agencies or the governments - it's all the greedy bankers' fault.
We can all agree that S&P shouldn't be trusted, but if bond buyers still trust them we're screwed...
Ken
By politicians? I've seen these before, starting with Reagan about how supply side economics are going to pay off the deficit by reducing revenue.
It is fiction. Worse, it is unbelievable fiction. It isn't even fictional, it is a bold faced lie.
The S&P shouldn't look at hypothetical projections at all. They should have downgraded us a step for each 1 trillion dollars in debt we accumulated. And then only upgrade us once we pay off a trillion dollars in debt.
He does argue that cutting spending in the way that both parties seem intent on cutting spending will worsen an already weakened economy. But if the economy were stronger, he'd be fine with many of the cuts and, perhaps, suggest additional cuts. It isn't the general idea of spending cuts he's against. Rather he's opposed to diminishing one of the largest inputs to the economy during a time of severe economic contraction.
I suppose we could put up a For Sale sign in Florida and hope that someone nice buys us.
Like Texas, perhaps? That would work pretty well since everyone in Texas already speaks Spanish anyway.
What amazes me is that any politician of any slant would think it's a great idea to allow the most wealthy people in society to escape from taxation at the point it is needed most.
... sometimes is malice, not stupidity, the right explanation.
Democrats want the government to spend more. The TEA Party wants the government to spend less. Who do you think is right here?
A plague on both their houses!
From what I read here, outside of the USA, where the media are less partisan when covering internal US issues, the Democrats want the government to spend LESS, and the Tea Party wants the government to spend LESS too. They disagree a little on which parts of government should have most cuts.
Also, the Democrats want to increase taxes a little, to narrow the gap between government spending and income.
The Tea Party DO NOT want to increase taxes to narrow the gap.
Both are proposing that the government spend more than it raises.
Did I miss anything important?
Paul "Say no to feeping creaturism"
I don't give too much stock in S&P for the very good reasons pointed out, however the fact that a non-trivial number of GOP members (most under the astroturfed Tea Party branding) actually felt that defaulting was an option makes me personally nervous about investing in US Bonds. This is especially true when one of these people is actually considered a potentially viable candidate for President at the moment.
You really ought to try the internet.
For example: http://www.usgovernmentspending.com/
Join the window installer's union, where prosperity is a brick throw away!
Anybody who believes that these rating agencies are independent is fooling themselves. The question everybody should be asking, is, who is benefiting from this downgrade (directly or indirectly) and what is their connection with S&P?
You can't outlaw these fuckers, after all they provide a potentially valid service. But the public should be educated about their ties to other financial institutions and politicians should not let themselves be chased by them.
Free Manning, jail Obama.
>as US bonds would be sold off by lots of pension investment funds
This is false. a) Very large bond investors do their own analysis. Think they sit around reloading Moodys all day to tell them what to do? b) Investment rules (almost) never mention ratings directly, instead they might say "must be investment grade". AA+ is still investment grade. I believe you must go down to "BB" to lose that designation. c) Even if bonds would go below investment grade, it'd probably only mean the fund couldn't buy more, not that it'd have to immediately eject already existing bonds.
Anyhow, this "if we're not AAA funds will be forced to sell" is an oft cited thing, but with no grounding in reality. As you can probably see now?
In a US mortgage, the bank owns the house. That is why people can walk away from a mortgage in the US by leaving the house. Try that in the EU...
Anyway, US debt is NOT the same because if the US walks away from the debt, debtors can't just try to resell the white house or Florida to recover the money.
Mortgage is a very bad comparison.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
There is one answer to our problem. Secession. 49 of the US states (all except West Virginia) - secretly meet and agree to withdraw from the union. Form a new country: New American Democratic States. We'll be free from debt and get to start over again, fresh and hopefully keep a low debt profile this time. What about West Virginia- the only state left in the USA? Oh they'll probably default on the USA national debt. When this happens we can consider letting them join the NADS.
"That's the way to do it" - Punch
How is this any different than how credit agencies rate individual users? It usually has nothing to do with how good you are with money, but how much money the banks will make off you. Never have credit and keep a fairly decent balance in your bank account = bad credit (as long as you don't have a bunch of assets). Constant balances on your credit cards that make you pay the bank interest = good credit (assuming you pay them). Pass laws to break down the banks!
...if there wasn't a black guy as president.
Almost feels like a Republican conspiracy. My country makes me sick to my stomach.
I'm fairly certain that this "error" found by the government was in S&P's arithmetic (or even in their data). I doubt that S&P was doing any actual mathematics for this report.
In the worst case scenario USA will just print a few trillion dollars and discharge the debt. Of course, dollar will be devalued and the purchasing power of the money paid to retire the debt will be much less. But strictly speaking, your bond matured, you got the promised number of dollars. So how the hell can USA default?
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
Except when it comes to defense. Which is a very large part of the budget.
1) Plan on gaining 100 pounds.
2) Gain 75 pounds.
3) Congratulations. You have a weight loss of 25 pounds.
Except for ending slavery, the Nazis, communism, & securing American independence, war has never solved anything.
You can run the numbers all you want, cook them every way but over-easy, and produce a powerpoint presentation of them that would make even the most die-hard quant choke. But at the end of the day, it's all about confidence. All those dollar bills in your wallet are only as valuable as we collectively agree they are. This can range from "Not worth the paper they're printed on" to "Holy shit, this is the best currency in the world!" But it all depends on confidence. U.S. currency (and bonds too, for that matter) has no real objective value.
The U.S. government takes in so much in revenue each year, and outlays so much in spending. Right now spending way outpaces revenue. Could that economy be balanced? Probably. But who knows what that balanced economy would even look like, or whether it would even work. Maybe even trying to balance the U.S. economy would turn the U.S. into a second-world country, hopelessly spiraling towards collapse. Maybe the U.S. economy is doomed to collapse no matter WHAT we do. In that kind of situation, what are those dollars worth? Who the fuck knows. It's all a question of how much confidence you have that the U.S. economy WON'T collapse, that the government WON'T default on its debts.
Right now, the world has a lot of confidence in the U.S. But recent political events put this seriously into question. Republicans have a vested interest in keeping the U.S. economy in the shitter through 2012 (to help their party's political ambitions). And, more importantly, they have shown their ability (and willingness) to best the Democrats politically at almost every turn. They have a great deal of party discipline and the determination to keep the U.S. economy down. This puts the chances of an ongoing, and possibly much more serious, recession as very high. S&P was just recognizing that fact, along with the fact that it's highly unlikely that either party at this point will ever be able to get the U.S. debt under control without some kind of default.
SJW: Someone who has run out of real oppression, and has to fake it.
Unless just changed, those numbers are from 2003 and really out of date.
Belief is the currency of delusion.
In Washington, it you plan on increasing spending by $10 billion and you only increase it by $9 billion, you call that a $1 billion cut.
Except for ending slavery, the Nazis, communism, & securing American independence, war has never solved anything.
The fact that anyone still trusts S&P and their ilk is illustrative of the fact that emotion rules this game. They've proven with math that they know no more than anyone else.
"All you need to know about rating agencies is that in May 2010 Moody’s still rated Greece triple-A." - Mark Steyn
Life is hard, and the world is cruel
The entire debt ceiling is a giant failure. Most of the so called "cuts" are not due until at the end of the ten year period where it's unlikely that future congress will abide by it. Second issue is the National Debt. Only in Washington D.C. will spending increase by $7T in borrowing, a "cut." Yes, US Government would have borrowed another $9T but now they are going to "cut" and only borrow $7T. So we are now looking, after those "cuts" of only owing $22T, what a deal! But what if interest rates go up? US is only paying what, ~1.5% now, but if it went to 5.5%-6% like it was in the 90s? Remember 1/3 of the nation debt is in short term debt that rolls over in under 12 months. So $22T paying out 6% is $1.32T in INTEREST PAYMENTS. Greece recently had it's interest rate at 13.5% and there is no one big enough to bail out the US.
Now add in unfunded mandates worth about $60T+ and the trillions of dollars that the Fed threw around from quantum easing I and II, inflation will add into the perfect storm scenario perfectly. Who would be crazy enough to hold US treasury debt?
Default means not paying your loans.The Obama administration said that not raising the debt ceiling raised the possibility of default. But that didn't have to be true.
As long as you commit to paying government debt first, with tax revenue that's always coming in, you won't default. Unless your debt is incredibly out of control, even more so than now.
Except for ending slavery, the Nazis, communism, & securing American independence, war has never solved anything.
The 2 trillion error is really irrelevant, the governments numbers are already based on a lot of wishful projections, as history shows if you do some research. Unfortunately even if they really did "save" over 4 trillion in 10 years, the national debt is still going to explode and be well over 20 trillion dollars. So are we really saving 4 trillion, if the debt just keeps going up? That's washington math for you, constantly increase spending & debt and yet claim you are making cuts and savings.
End these goddamn wars. Now. Yank (har) every single American solider home.
Next on the list - pull out of Korea. South Korea can take the North pretty easily. No need for us to be involved.
After these savings are realized, we can start to look at other things.
I am very small, utmostly microscopic.
... is simple.
"Import Taxes"
when it's cheaper for a US State to employ a Chinese company (Government) to build a bridge (While doing so create totally new companies JUST for the Iron smelting / making and building of the bridge) while giving 1000's of jobs to low skilled workers that fabricate it in China, Ship it over in pre assembled kit form that only needs a few 100 US workers to assemble the kit. you gotta think something is wrong...
http://www.nytimes.com/2011/06/26/business/global/26bridge.html?pagewanted=all
If you tax the import of things which can be made in America; Then more companies will find it more cost effective to hire US workers to make things.
More workers = more spending
more spending = more manufacturing
more manufacturing = more revenue for the government.
Laters Sol "Have you found the secrets of the universe? Asked Zebade "I'm sure I left them here somewhere"
What people fail to realize is that some borrowing is a good thing as long as you can guarantee that a fixed amount of debt will decrease in value relative to the GDP over time. Debt is currently about 59% of GDP. If growth is 3% and inflation is 2% annually, then that debt will be worth less than 35% of GDP in 10 years. So we can borrow another 24% of GDP (around $5T in 2011 dollars) over those ten years and not be in any worse debt than we started.
I've currently got student loan debt and a mortgage. The amount I owe is about twice my annual income. It's manageable because I've got plenty of time to repay and the interest rates are reasonable. When you consider tax receipts (which could always be higher, of course), the U.S. is about in the same boat. It's not a critical situation - yet. The real problem comes from people who are unwilling to do what is necessary to keep annual deficits under control.
You mean all of the politicians that refused to cut spending and tax the rich....
Why? The problem is not the rich. As others have noted here, you could seize every dime from them and still get nowhere close to solving the problem.
The problem is two things. The military budget is the smaller problem. There's some room to cut there, especially in bloated weapons procurement, pay policies, and having troops stationed where we don't need them.
But by far the biggest budget problem is us. The sainted "middle class". That's where the big spending is. We like to have our tax refunds and our EIC credits too. We cry "get spending under control!" right before we cry "but don't touch MY benefits!" Americans are largely hypocritical about government spending.
Life is hard, and the world is cruel
In the US a family of four with an income of up to $82k can qualify for free state provided health care for children. Why is the government providing free health care for families that are perfectly capable of paying for their own? There are many other entitlements like this that need to go away. We're talking tens and hundreds of billions that could be slashed and start eating away at the debt.
"A plan fiendishly clever in its intricacies"- Homer Simpson
The US Government is now simply a Financial Pedophile. It is a bloated piece of shit that shames me. Cut ALL programs that did not exist prior to LBJ but adjust those that survive to today's Cost of Living. Then pass the BBA.
Conservative, mod down for violating
Government: We planned to increase the budget deficit by $4 trillion next few years, but now we're only increasing it by $2 trillion! We cut spending by $2 trillion dollars!
S&P: You still increased spending. You didn't cut anything. You still spend almost twice as much as you make. You are no longer credible.
Government: Traitors! Terrorists! Hostage takers! Can't you idiots in private industry do math?
Pathetic. Even the slashdot title of this article is complete rubbish.
6th Street Radio @ddombrowsky
Speak for yourself, I've been Citizen of this country for only 10 years. There's no blood on my hands.
The economy is built on a set of beliefs. There are phrases like "consumer confidence", which show how subjective it all is.
And then there are the politicians who have to base their decisions on limited and conflicting information, while keeping their voters in mind.
It would be silly to suggest that S&P would have an objective analysis about the economy and the USA's financial status.
And it would be silly to suggest that politicians would really let this analysis influence their plans.
So, really, there's nothing to see here. Move along, move along!
The US hasn't deserved its AAA rating for decades.
Just because they were wrong thousands of times before doesn't me that they can't be wrong yet again.
Time to offend someone
It's immoral, all this debt and intentionally living beyond our means. Are we really better than other countries? And if not, shouldn't we strive to be better? Shouldn't we strive to be the best? We can't when so much is wrong with us.
The budgeting process: hopeless. The promised entitlements: impossible. The regulation: choking. The public education: weak sauce. The freedoms: eroding. The military: abused. The dollar: distorted. The people: unhealthy. The politics: BORING!
Want a thrill? Like a challenge? Take your lumps, America. Eat humble pie. Cut the credit card and pay your debts in full. That pain you will feel? That's what taking responsibility feels like. Get right with whatever deity or market you worship. Straighten up, all you dumbasses, because there's a totally torn up world out there that is dying for leadership.
Historians only write glowingly about ACHIEVEMENTS! Beggars and thieves might get a tombstone as their legacy, if they're lucky. Are you a defender of this American Way and want it to continue? Then I label you a shameful beggar or thief who won't even get a footnote on our page. Shame on you and what you believe, reap the whirlwind.
Intended or not, corporations saw Social Security as a excuse to drop employee pensions (and take the difference as profits). At one time, even "menial" workers got decent pensions as part of their employment package. After 30 years of downsizing, rightsizing, off-shoring and union-busting, most people's only options for retirement are to gamble what little savings they have on the stock market (we all know how that worked out) and fall back on Social Security for the rest. The problem is not the "entitled" poor and retired, it's the entitled corporations who have sucked this country dry and given nothing back.
Support Right To Repair Legislation.
When you save $4 trillion and spend $10 trillion in budget deficits, you haven't saved anything. S&P was quite right in downgrading based on over $50 trillion in unfunded mandates in the near future. You aren't going to get $1 trillion per year in extra tax revenues, so it's going to be mostly spending cuts. The big four are social security, medicare, war department, and interest on the debt. It is quite clear these will get cut by means testing, retirement age, and (hopefully) returning US forces. Sadly Greenspan is right - the US will continue to print money. With inflationary pressures and an unemployment rate above 8%, Mr. Obama will not regain this office. It is an abject failure of statism and the command and control planned economy. Hopefully we don't get another GWB.
I guess you did not watch "The Warning" yet:
http://www.pbs.org/wgbh/pages/frontline/warning/
>Liabilities to yourself don't count.
Hear that Americans that expect to get a pension? As long as not paying you anything is an option, all is well in the land of the free!
Heck, don't worry about that, we can always just print you the money you're owed. Imagine how rich you'll feel with your $1M bill as you hand it over for some bread.
Have a nice day, and please argue in favor of our AAA rating. Remember, the US always pays its debts!
But but trickle down! See, the richest are standing above us, so if we make them drink more, then their piss will spray down on everybody else, more efficiently than if the government were to collect the water and pass it out.
Oh wait, you say they've found some very expensive diapers so when they do piss, they get to save it? Oh wait, they don't even have a shortage of water barrels so they can store the water instead of drinking it?
Oh who cares, TRICKLE DOWN!
America, brother could you spare a dime?
I am Bennett Haselton! I am Bennett Haselton!
What's asinine is that the US still has a AA+ credit rating. WE ARE INSOLVENT! WE'RE THE LARGEST DEBTOR NATION! These credit ratings are a joke, plain and simple.
Want to bet they have short positions in the market?
Income versus debt most of us have bigger debts in our houses and cars(nevermind college). This is just a bunch of noise to stick Obama with something and hide other shenanigans. Otherwise why complain about the debt now when it's been astronomical since Reagan and few said much of a word the whole time especially republicans.
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They didn't game anything. The logic of the bundling worked when it was initially conceived as a small portion of a portfolio. The problem is that as the government expanded the number of bad mortgages (IE poor people who shouldn't have had them) and banks dropped lending requirements (giving 100% loans to people who are already running 90% debt to income), these bundles became saturated with bad mortgages. If you bundle 500,000 mortgages and only 1,000 are high risk, then the realistic risk factor on that bundle would only be just over 0.2%, but as soon as 60%-70% of the bundle are low income/high risk mortgages it's a very different story.
There are a lot of people to blame for what happened, but don't forget that it was the government and the people themselves that did the lions share. The government wanted to hand out houses like candy to get people to do what they want, unfortunately they learned why lenders had requirements in the first place. It's really no different than anything else the government does to try to buy the public's support. It never works out in the end.
"When the people find that they can vote themselves money, that will herald the end of the republic."
- Benjamin Franklin
Well, first a positive note : America's not nearly as bad as most other nations that grace this planet. China, while currently better than America, isn't without debt problems. But America's better off than Europe when it comes to debt. Yet Europe is better behaved than Turkey & middle east, who are in worse shape despite massive influxes of money.
But still that would mean that on the average, Americans ... did never even intend to repay their debts. Welfare states were created, knowing full well they were doomed. People trading their income now, in the form of taxes, for health care, study help for their kids and pensions that won't come, except for the first ones who enjoyed these benefits.
And yet lots of generations had the option of turning the tide, and didn't. Not just in America, but in Europe, the middle east, and Asia, lots of people had the option of stabilizing the system by choosing to take responsibility instead of shoving the bill to their kids, and all chose wrong.
The real question is, now that the cat's out of the bag, how long do we pretend we can put it back in ? The system has failed, and while this obvious truth can still be denied, it will reassert itself soon enough. Though I do hope we can pretend a while longer, I have a family to take care of, and despite the rosy pictures implied in leftist and progressive propaganda if we simply take the money from the bankers, we all know that their promises of wealth, brotherhood and justice for all will turn into the wars, concentration and slaughter camps they turned into last time.
I would simply suggest to take the lessons of history to heart : when public opinion does not just jabber about evil bankers, but actually attacks them in numbers, do what millions of people forgot to do before world war 2 : run ! Run to a place with sufficient food, home produced food, without multiculturalism (which will soon be nothing but a fancy word for ethnic wars), and preferably a nation without military alliances. Stay far away from any large American city, get the fuck out of Europe (the EU, not Switzerland), get the fuck out of the middle east, get the fuck out of Africa, or if you must, at least stay out of Northern Africa and the Saharan countries.
I don't know who will rise, it depends on many factors. I guess it will be whichever decent nation manages to not get destroyed, and I frankly seriously doubt it will be China.
these are the same credit rating agencies who were giving collateralized debt obligations triple A status just before they went tits up..
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She experienced the early Soviet Union first-hand. She saw how the alternative to our capitalistic system actually works in real life.
So she went to the other extreme.
Fuck McGraw-Hill. They own S&P. Sell their stocks. If you don't own their stock, short-sell them. Tired of this tea-party downgrade bullshit.
Twitter: @dainsanefh
And they are wiping the egg of their face for that. Now they are extra stringent on all their ratings.
All those dollar bills in your wallet are only as valuable as we collectively agree they are.
Well then, let's collectively agree they are worth a mansion and a yacht for each citizen, shall we ? As it turns out, the long term value of money is not the result of psychology, rather a simple division of the economic output of the country by the outstanding monetary base. If some guy in Washington keeps printing those bills, they will eventually drop to zero, no collective agreement needed.
But who knows what that balanced economy would even look like, or whether it would even work.
Yup, we should stick to what we know works: spending money that will be paid by the future generation. I can't see any reason why this can't go on for ever.
Can't we just all tune into Fox and MSNBC to hear this discussion? I am sure, regardless of what side of the political spectrum one may be on that one of those two networks will hash it out to everyone's liking, ad nauseum.
Its the voters who cannot do math. They are getting the politicians they ask for plus disastrous results too.
I think you're the first person I've seen so far who gets it. And you put it so eloquently, too. I hope you don't mind me shamelessly stealing your obese 8 year old example.
:(){
I don't know if anyone read it but someone recently placed a $1 billion bet against the US retaining their AAA rating. This level of bet does not require a longterm downgrade. It is likely this size of investment could easily be exploited quickly if rating was even called into question for a short period of time. The question is whether someone pressured or influenced S & P to make a $2 trillion math error in order to cause a temporary downgrade in order to exercise their position in the market. The fact is the US debt to GDP ratio is lower then many other developed countries as well as many who have and recently regained their AAA rating. Further the other credit rating firms Moody's and Fitch did not downgrade the US rating. Maybe my tinfoil hat is poisoning my brain but it sounds like conspiracy and market manipulation to me.
"Of all the things I've lost, I miss my mind the most." ~Ozzy Osborne
We don't have a wealth tax in america, we have a bracketed income tax. The "tax cuts for the rich" mantra is pure feldercarb. You have exactly the same loopholes and tax strategies available to you that the "wealthy" do. There is no "escape" from taxation. Corporations however do have a whole bunch of tax advantages that regualar citizens do not since (theoretically) the result of letting a corporation fail (or even make less profit) would be a reduction in job force and overall competitiveness resulting in a net loss of tax income due to the loss of employee income tax and additional unemployment benefit burden. Now that effectiveness (particularly in a global economy) is debatable (and complex). You can see by this paper (and the included chart) http://taxpolicycenter.org/UploadedPDF/1001547-Why-No-Income-Tax.pdf that very few of the "rich" are "escaping" taxes, and fully half of the population is paying no federal taxes at all (and they aren't the rich).
Or rather, the lack thereof. We're on day ~830 without a Federal budget. Nothing's been passed since mid-March, 2009 when President Obama signed the FY2009 Appropriations bill (which Harry Reid and Nancy Pelosi didn't take up until February 2009). Maybe S&P and a lot of the rest of the world is looking at Harry Reid's refusal to even address a budget as a fundamental sign that at least one part of the 3-step-dance that is the budgetary process is just going to sit on its hands and do nothing.
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
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Except when it comes to defense. Which is a very large part of the budget.
Defense is 20% of the federal budget- about the same as Social Security and a little less than Medicare/Medicaid.
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Congress loves to claim savings but Congress uses Base Line Budgeting which allows the appearance of savings when in fact no cuts are made. Essentially they state this is what it will cost in the future so if we say we will spend less than that we have made a cut yet spending can still and usually does increase.
So when you see a Congressmen bemoaning about harsh/absurd/severe cuts to their favorite program (defense/social/etc) you need to understand the numbers they are using. The closest to real cuts that has been offered up is the Ryan plan and Obama went out of his way (childish immature method too) to lambast this to Ryan's face in a speech!
I know, some say, raise taxes. Well even if we did raise taxes like Obama and some in Congress wants we would not make up a hundred billion this year and stand to make up even less going forward. We could make taxes confiscatory about a certain limit and still not balance even this years budget. The simple problem is, they promised more money than other people even have. Top it off with the Affordable Healthcare Act (or whatever it is called, know that the names assigned to bills usually results in the opposite) is chock full of increases to taxes in 2013 and beyond.
Entitlements need to be changed completely. We simply give too many people money they don't deserve and we don't even try to prosecute real fraud (estimated at over 100b a year in Medicare alone). We need to raise retirement ages for everyone over under 50 by a year, under 40 by 2, 30 by 3 and 20 by 4. We also need to make it harder to qualify for social security. We need to chop a carrier group or two, get our bases out of countries rich enough to defend themselves, and end the war on drugs. Also, remove the taxation of profits earned overseas. Bring that money home.
Obama is wrong, it is all about spending. He is up over 25% from Bush alone. When tax revenue goes down is not the time for the government to ramp up spending, Keynesian spending (think government spending money to boost economies) has been shown to not work here nor in Europe yet they still persist in trying and when it fails they come up with hundreds of excuses). Increasing taxes only works if you can hope that those who have the money keep using as they are, but they won't. They will simply use their money where it is not taxed which means revenues go down. It happens time and time again.
* Winners compare their achievements to their goals, losers compare theirs to that of others.
That makes sense but you are completely wrong. The deficit, in real dollars and as a fraction of the GDP, is expected to grow over the next 10 years. To say nothing of the debt, which is slated to increase very dramatically over that time. The defect reduction is indeed calculated by taking where we expected to be before the reductions and subtracting it form where we expect to be afterward.
The major issue is entitlement spending, which if nothing changes, would require us to raise the federal income tax rate to 50% for the average American in order to have a balanced budget 10 years from now. This is due to almost entirely to baby boomers who will become eligible for social security benefits at that time, so it's a number that is well known.
Only a complete idiot would look at the deficit reduction deal and conclude that it will make any difference in the long run. We need to either raise taxes dramatically, or raise the retirement age an cut benefits, or both. These ridiculous promises to cut "discretionary" spending are pointless and woefully inadequate.
On the other hand i have never seen any political party so unwilling to accept (and clean up) the mess they made as the Republicans.
Thank you
Yeah, but we can probably also agree that the USA shouldn't be trusted.
The problem is the deficit and the Obama administrations optomistic accounting procedures. Essentially the deficit projections. You can go to www.gpoaccess.gov and download an excel spread sheet detailing the historical outlays and receipts on the budget for 2011. Currently hard numbers are only available up to 2009. The hard numbers for 2010 have either not been finalized or not released in this document. The Obama administration plans on an 18% increase in receipts for 2010 over 2009. The deficit in 2009 ran 67% of receipts collected. In 2009 tax receipts collected amounted to about 2.1 trillion dollars or about 1/7 of a GDP of 14.1 trillion. Outlays totaled about 3.5 trillion. The projections for 2010 claim receipts will total 2.2 trillion, outlays 3.7 trillion and the GDP is projected to be 14.6 trillion. 2012 projections are even more fanciful. You can actually gauge the accuracy of these projections by reviewing the historical data on budgets for 2010, 2009, etc. These projections tend to be optimistic. If we review the fiscal year budget projections for 2012 we see that the receipts for 2010 are below the projections in the 2011 budget and the outlays are greater. When a company continually posts optimistic projections which are not met year after year investors begin to doubt the management capability and future performance of the organization. This is what S&P has done, questioned the management capability of both the current administration and congress. You can review the budget historical data at http://www.gpoaccess.gov/usbudget/fy12/hist.html change fy12 to fy11 for 2011, etc. Strip hist/ from the URL for other budget docs for that year.
What amazes me is that so many people think that raising taxes on 'the wealthy' will solve anything. I can't recall the site where I saw the calcs, but in a nutshell, even doubling the tax rate on everyone with over $250k of yearly income would do exactly two things to help our budget problems: Jack and Shit. The numbers are just that big.
"Gold still represents the ultimate form of payment in the world." - Alan Greenspan, 1999
I have been coming to Slashdot for a looong time. In the "old days," something like this wouldn't have been considered remotely relevant to the site. And if somebody actually posted it, 80% of the comments would be complaining that it shouldn't have been green-lit.
Now? Posts like this look just like every other political pissing-match forum. There is a reason I don't go to Reddit.
we all know what we have to do here. This is not a brain surgery. If we want to reduce the deficit, we have to cut even more taxes on the wealthy. See, i'm a creationist...a job creationist, and i believe that jobs are created from these mitical figures that are the wealthy, that provide us with jobs. All of this talk that taxes evolve the government to a stable deficit and social equilibrium is nuts.
No "insider" would ever do something like this, right?
"I love my job, but I hate talking to people like you" (Freddie Mercury)
Think of your clients first and the money will be a consequence... not his exact words, but I coudn't find the quote. OTOH, I highly recommend his other quotes to:
1) know what you need to do;
2) remember how great some people in the history of the US used to be.
I'm certain some great folks like him or the founding fathers would weep if they saw your present reality (I'm a foreigner). No, they wouldn't... they would roll their sleeves and put their energy to work, not to make the US great again but to make the world better by making the US great once more.
It all starts on the moral basis, as Ethics will always be more fundamental than Law. Forget this and enter a labyrinth of despair.
Ethics to recognize that power must be wisely used, Ethics to understand that the world is bigger than the US (and bigger than mankind!), Ethics to call other countries to do what is right, Ethics to not impose your values (even religious ones) on less powerful people.
Ethics means abstract things like "First, don't harm" or "Love others like you want to be loved". Do this and learn why they're important. Don't do it and ask again next time: "How can we leave this downward spiral?"
http://www.youtube.com/watch?v=7GSXbgfKFWg
It's broke now.
Except for ending slavery, the Nazis, communism, & securing American independence, war has never solved anything.
I wonder if you'll say the same after the "super committee" makes its recommendations or the triggers activate reducing defense spending.
Debt is an industry too, just like oil and shit.
The neo-liberal ideologues keep insisting that the United States has a large economy, and merits a AAA+ credit rating, but strip away the huge deficit spend, adjust for the massive reduction in GDP that will result from balancing the budget, and you have a bankrupt banana republic, lead by a dysfunctional regime of religious zealots, corrupt bankers, and corporate fascists.
Nobody likes the United States, given the last few decades of tyranny. Don't expect anyone to put anything in the bread basket.
> the long term value of money is not the result of psychology, rather a simple division of the economic output of the country by the outstanding monetary base
Agreed
> Yup, we should stick to what we know works: spending money that will be paid by the future generation. I can't see any reason why this can't go on for ever.
True we can't spend forever, but we also need to weigh in the problem of good and bad economies. It's most effective if the government softens the blow of bad economies, while saving money during the good times. This has been proven time and again from Hoover to 90's Japan. Now that we didn't save, the arguing goes into high gear, and nothing productive gets done. Seems prudent to slowly and surely, but not drastically and immediately, cut the deficit (unless you feel that we are in good times with a great economy - then by all means lets cut like crazy).
Everyone's original offer focused on the 4 trillion number S&P has been asking for a while. The only way the negotiations fail and the problem wouldn't get solved is if one side takes the position of not negotiating.
Nothing has genuinely objective value. Either you can consume it, in which case its value is subjective and depends on the consumer, or you can swap it for something you can consume (which, as you say, often depends on confidence), which in turn has only subjective value. The value of something like dollars or gold isn't about collective agreement, it's about the level of confidence everyone has of being able to exchange it for something useful.
The US economy isn't just unbalanced because of its government budget. It also has a trade deficit, and the two and China's exchange rate policy are linked. IIRC, at one point the US had tax revenues of 16%, spending of 21% and a savings rate of 0.5% (and so at least 4.5% of GDP of government debt must be coming from foreigners). If China is exchanging Yuan for dollars to buy US debt and keep its exchange rate down then US importers can buy their Yuan cheaply from the Chinese government rather than its own exporters to China. Correspondingly, the US has been able to consume more than it produces.
The dollar needs to fall and the yuan rise. The US needs to start exporting more and consuming less of its output. Even when GDP recovers it may not feel like it. And if the US (and China) don't sort out their external balance then even if the US government stops borrowing China will start buying up US companies and assets instead.
S&P is not a competent organization. The failure of all the rating agencies, not just Standard and Poor's, caused the present economic depression. The rating agencies rated derivatives AAA that were based on extremely shaky financing.
I think you'll find that there is plenty of blame to go around. Government for not enforcing regulations, and repealing one that would have prevented the snafu. Rating agencies LOWERED their rating standards to make more money on mortgage backed securities. Even the SEC wanted to clean up the rating agencies back in 2003 citing anti-competitive behavior and conflicts of interest.
These comments are my own and do not necessarily reflect the views or opinions of my employer or colleagues...
Hey everyone worrying about the debt is being played - the US can borrow money at 1.25% that means the interest paid on a trillion of debt is 12.5Billion dollars, which is rounding error in the US budget - the US now pays less interest on debt than it did during Bush I. Also people fail to recall that if you borrow money to create assets, such as roads and infrastructure it is not the same as borrowing money to spend on hookers and blow - since that assets you create have some long term value. We, as a people, are getting played by the rich and the powerful - it is very sad to see this country getting played by a bunch of ultra-rich right wing plutocrats who create one phony crisis after another to scare us into enriching them further.
I see nothing in this article about S&P making a mistake and admitting it. I only see this quote from someone in the administration:
A senior Treasury official Saturday called S&P's move a "$2 trillion mistake" and said there was no justifiable rationale for the decision. "The magnitude of this mistake—and the haste with which S&P changed its principal rationale for action when presented with this error—raise fundamental questions about the credibility and integrity of S&P's ratings action," John Bellows, acting assistant secretary for economic policy, said in a blog on the Treasury's Web site.
How is this a story? A blog on the Treasury's website said the move is a "2 trillion mistake"?
It really makes all the difference, the sloppy, MENDACIOUS attitude of both parties players and media is exactly why we got here;
The culture of evade, lie, spin and do it anyway compounds that;
S&P should re-visit their calculations, then decide their conclusion and then announce it.
Those at the extremes tend to be impractical and even dangerous if implemented in real life.
Luckily, Atlas Shrugged hasn't been implemented. But "The Communist Manifesto," "Das Kapital," "What is to be Done?," "Quotations from Chairman Mao," and "Complete Collection of Kim Il Sung's Works" have, with the cost of about 100 million lives in less than one century.
Given that we had 50+ US congressmen arguing that a sovereign default was either no big deal or desirable is a lie, no one did,
Certainly the Tea Party, committed to Honesty did not, They did point to the 14th Amendment and say NO MORE,
and they are right
A thousand Karma times, THIS.
+ *All* of the listed countries have a higher tax rate (revenue as % of GDP) than the USA.
+ *All* of the listed countries have decent public health care systems.
+ *All* of the listed countries have less violence (which is a function of disparity between rich and poor).
+ *All* of the listed countries have lower incarceration rates.
+ *All* of the listed countries have comparable wealth as % of GDP. (Norway is quite a bit higher then the USA.
+ *All* of the listed countries have environmental regulations that are comparable to the USA, and not considered taboo.
Sure, the USA pays too much tax, and the military just isn't quite advanced enough, with it's ship-board lasers and all.
I guess "socialism" is doing pretty well.
Paul Krugman at the NY TImes did this AM.
http://www.nytimes.com/2011/08/08/opinion/credibility-chutzpah-and-debt.html?hp
It was in the Time article I read 15 minutes ago.
It doesn't hurt to be nice.
regardless of the math, S&P's reasoning is sound.
yep, they reason that their political friends on the right wing benefit most from anything that embarasses their political foes, so they pull wreckless stunts like this in order to try and force the abandonment of every progressive policy the U.S. has implemented in the last 100 years.
You can download the latest radio program here.
You can't handle the truth.
The media already has...
"And S&P’s pretty well had to say something about the U.S. Having issued platinum ratings for garbage-mortgage-backed securities in the last decade, the agency has taken a much tougher line of late. Admitting that a nation with a debt as large as its economy and is on track to borrow, on average, $1 trillion a year for the next decade has a debt problem was sort of the least it could do."
Read more: http://www.foxnews.com/politics/2011/08/08/white-house-downgrade-doesnt-matter-unless-its-tea-partys-fault/#ixzz1UShi0XFY
Actually Fox pointed that out this morning. Having said that, the reason they allowed the AAA rating was that the U.S. government was backing them. Now the government has taken on WAY too much debt with not foreseeable way to pay it back with the current budget. Granted, they could pass a true balanced budget amendment to the constitution and then has REAL conversations on what they should spend money on, but that bill died the in the Senate thanks to Reid.
Why would I argue in favor of something I don't agree with? And which has nothing to do with whether the US is technically insolvent?
So let me get this straight, in a deficit situation you want the federal government to CUT tax revenues??!??
Love to you know what you're smoking. Oh wait i already know, republican shill tobacco.
Nah, the media, as in Slashdot, can't solve a simple thing like "amp" in their RSS feeds (or bastardized HTML tags like br and em), so don't expect much from them
They even do it here.
Can I light a sig ?
The "tax cuts for the rich" mantra is pure feldercarb.
The rich are paying less now on the same income than they were before George W Bush - I'd call that a tax cut for the rich. What would you call it?
We also eliminated the estate tax (although it is coming back in a weakened form) which is another tax cut for the rich (especially for trust fund kids who don't need any income and therefore don't pay any income tax).
You misspelled "almost half of the population" (46% is the estimate for 2011 who won't pay federal income tax), and that includes nearly 1500 millionaires using arcane tax shelters (yes, they are the rich).
Either way, I'm not so sure that collecting taxes from those folks will help. How much tax revenue can you squeeze out of unemployed/working poor people who can't even afford to eat three meals a day? Even if you could somehow make them bleed $500 a year for you, that would still only be about $30 billion -- barely a drop in the bucket for a $3500 billion budget. And for the 1500 millionaires, say you can get an extra million dollars from each of them. That's $1.50 billion -- not even a rounding error in federal budget scales.
Getting tax revenues from that 46% is like me wanting to buy a Chevy Volt and getting a hundred dollars from my uncle to help with it.
I've already heard it in two places, but then again I listed to NPR and watch PBS.
All those dollar bills in your wallet are only as valuable as we collectively agree they are.
Well then, let's collectively agree they are worth a mansion and a yacht for each citizen, shall we ? As it turns out, the long term value of money is not the result of psychology, rather a simple division of the economic output of the country by the outstanding monetary base. If some guy in Washington keeps printing those bills, they will eventually drop to zero, no collective agreement needed.
Well, it is a little of both - like any measure of value.
To the guy wanting to buy a house, $100 should buy a house. To the guy wanting to build a house, $100 should buy a bucket of nails. The two meet somewhere in the middle, and that is the value of money.
In practice, your description is a good way to get a sense of where people will end up. However, how do you measure economic output without using dollars? If you measure economic output in dollars, then your definition of the value of the dollar is circular.
If all people did was make nails, and trade them for dollars, then the value of a dollar in nails would be trivially measured as you stated. However, the whole point of currency is allowing us to value financial transactions that are not obviously comparable (such as how many buckets of nails to pay your doctor for an operation, when he has no need for nails).
Inflation isn't inevitable, except for the Fed.
No country with fiat money has ever resisted inflating it to near-zero value. I think the US won't be the first.
Economic chaos always ensues.
For that reason alone, we should abolish the Fed, get back on the Gold Standard, balance the Fed budget, eliminate the debt, and pass a Constitutional Amendment that prohibits the Federal gov, the State govs, and all county and local govs from ever borrowing money.
Yep, piss poor track record with very little by the way of credibility. "Lehman Brothers is a safe investment," the day before it imploded.
But it all depends on confidence. U.S. currency (and bonds too, for that matter) has no real objective value.
Does anything have objective value?
Money buys power. That accounts for the very many screwy things that the posts on this topic discuss.
It is also the reality that no one wants to deal with, mostly for reasons of ideology.
If you don't like strong corporations, you have to cut the government power. Otherwise, you are an ant attacking an elephant in a frontal assault, not a hope in hell of winning.
If you don't like the gov giving our tax dollars to , you have to cut the gov's power. Otherwise, ditto.
Wishes for honest politicians, fair and honest bureaucrats, citizens and Congressional representatives that vote for the long-term good of their country, while quite inspiring, are hopeless, clueless, self-indulgent, idealistic (in the sense of words and ideas being given primacy over external reality), and generally worthless except for producing lots of posts and benefiting the corporate advertisers who make all this possible.
"The Constitution, the WHOLE Constitution, and nothing but the CONSTITUTION."
jeez; for a more coherent discussion, see this:
S&P decision is irrelevant
http://bilbo.economicoutlook.net/blog/?p=15580#more-15580
Terrorist threatens to kill two orphans.
Superman tries to stop him through lengthy debate and negotiation.
In the end, the terrorist and Superman reach a compromise: the terrorist only kills one of the orphans.
Voters from Superman's district are furious that he allowed an orphan to be killed and threaten primary opponents.
The terrorist uses the claim that he saved an orphan's life to promote his re-election campaign.
There, ftfy.
In the UK, it's mentioned in every respectable news source, though admittedly, in about a sentence next to 5 paragraphs of "WE'RE ALL GOING TO DIE!"
S&P knows better than anyone else that with the right to print money, there is no way the US Government could EVER fail to pay its debts one way or another. Their silly weekend hijinks amount to a pointless political swipe, better delivered in some other way. All they did was hurt the process they were trying to criticize.
And in the meantime, trolls have invaded Slashdot, usually free from the political disinformation that infests so many other news websites.
Nerds should be apolitical professionals - base you thoughts on the actual data, not biased perspective and repeated tag lines.
OK, who gave Sarah Palin a job at S&P?
It was S&Ps rating system that the banks gamed with repackaged mortgages in the first place. Fuck um.
How long before the media points that out? Think they will?
It was discussed on NPR today. Thing is though, it doesn't matter if S&P were incompetent or complicit in the past. It doesn't matter if S&P is right or wrong even. It doesn't matter if the media discusses it either. What matters is how people will react to the downgrade going forward.
S&P has a credible argument that the US debt should be downgraded until there is clear evidence that our political leaders are willing to act like adults and actually deal with the problem. Right now the US government is borrowing $0.40 of every dollar it spends. Worse, we have a bunch of idiotic congressmen willing to play a game of chicken with the full faith and credit of the US government. That is insane. S&P might be wrong but at least their argument has some reasoning behind it. Congress isn't thinking about anything except getting re-elected.
It was S&Ps rating system that the banks gamed with repackaged mortgages in the first place. Fuck um.
How long before the media points that out? Think they will?
Paul Krugman's OpEd in the NY Times points out the role that S&P and the other ratings agencies played in the 2008 crash when they gave AAA ratings to mortgage backed securities. I guess S&P thinks a sub-prime mortgage is a more reliable investment than a US Treasury note. Huh. Their opinion is really valuable to me.
http://www.nytimes.com/2011/08/08/opinion/credibility-chutzpah-and-debt.html
It seems doubtful that a non-OpEd news story would provide that much context in their reporting. Maybe they think context is biased ("Hey, man, we reported that stuff back when it happened in 2007-2008").
This is why The Daily Show actually ends up playing a useful role in news dissemination (considering that it's a "fake news show"). The replay of old footage and context given for new stories is actually really informative (IMO). I frequently feel like Jon Stewart delivers more real, useful, insightful news than my local NBC nightly news broadcast.
We the people need to create a new demand from politicians. Meet the claims you present, the demands we want, fix this country or we will kick you out. We the people are responsible to keep the government in check, we need to fire congress and get a new group of people in there, fire the president, the senate, the house. California needs to fire there state senate and governor. We need to have a zero torrence for lies and empty promises. In the real world if some company said they would do X if you hired them you expect X. If you don't get it you ask for a refund, fire them or otherwise. If my job let me do nothing I promised and keep my salary, I would be spending my days programming games and posting comments on slash dot. (Oh wait, I work for the government?)... All politicians should post a commitment of goods. Think of how quickly they would change if we replaced them on failure to live up to their commitment. It does not matter what the laws say, it does not matter what they claim, it does not matter, we the people have the right to change things either by demanding change through peaceful discussion, peaceful activation, or violent revolution. If the government is corrupt we the people are supposed to overthrow it. I do not believe in violence, so I say we pick a day say 6 months down the road, and set a task to the government to have us back on track or we strike. If 50 million people skipped 1 day of work, the government would have to wake up and do their job, that says we are not going to take any more. Once should be enough for 20 years of politicians doing what they are supposed to, but if not, we can strike until they step down and allow new people in that will fix it. Who is with me?
In the long run I think this will hurt S&P's credibility more than the credit worthiness of the USA.
Risk of a USA Default = 0 - 14th Amendment Section 4 "The validity of the public debt of the United States, authorized by law,.., shall not be questioned. "
Anyone hear from Arthur Anderson lately?
"How long before the media points that out? Think they will?"
Check out the AP story where billionaire investor Wilbur Ross is quoted "It really does feel that what they downgraded was democracy, rather than anything else,"
S&P is a ratings agency.
As a private entity, its valuations (sold to investors) are its main cash cow. You don't have to believe what they say--that's your prerogative. If you think what they say is BS, out of touch with reality, or a "$X trillion mistake," that's what the other rating agencies are for (Fitch, Moody's, etc.).
Who gave S&P the authority? Private enterprise gave them that. They happen to be very good at gauging these things, which is why people tend to trust them.
OK, so they were manipulated (or manipulating) for mortgage pass-through securities during the 2008 credit crisis. They fell asleep at the wheel, should have been paying more attention, should have been better at figuring it out. They could have been more savvy to realize that the CDS market was getting bigger and bigger all at AIG's expense. But they weren't. That also happens to NOT be their primary market. Fannie and Freddie are supposed to be responsible for securing mortgages. S&P is all about stocks, bonds, and indices.
Think of how many times does S&P get it right compared to how many times it is off base. If there is one plane crash, does everyone decide not to fly ever again?
I'm no big fan of S&P, but at the end of the day, S&P is answerable to its investors and its clients, no one else. Certainly not Robert Reich. Who gave HIM the authority?
It seems apparent, just based on media stories and nothing else, that S&P could be quite easily manipulating this situation. Lets look at one potential path that S&P could do such a thing. If they decided to downgrade the US (regardless of what the rationale is, they have demonstrated that there is no actual exogenous rationale based on data), if they then communicated their decisions ahead of time to "premium" investors, those investors could reasonable stand to make a lot of money. Based on this wild assumption S&P, would then move forward with the downgrade, regardless of the rationale, knowing the likely reaction in the US markets. Shouldn't the DOJ and other regulators (maybe the FBI) investigate the company for these business practices that really seem like they could be unfair to the entire US market. This is just random speculation based on an imaginary premise. But I seriously question the patriotism of S&P and will be looking for alternatives to all of their data and products given their obvious allegiance something other then the American ideals.
Does Moody's have a potential increase in revenue if the US rating is lowered? Why, yes it does, if nothing else from the churn of the holdings for institutional and private investors. So with S&P "at arms length" but Moody's child, Moody's makes money, S&P remains "independent" and brokers buy more Ferraris or whatever this years bonus candy is... The tumult in the government is an excuse to lower it. Facts don't matter; and, where there is a difference between the rating agencies, there is a chance to play between them as that influences peoples investment strategies. Who wins? Why the brokers win. No matter if a investment gains or loses the guy brokering the deal makes money, from both sides. The seller pays their broker, the buyer pays his broker, and slowly through churning they make considerable amounts without a contribution to the GDP.
/. is even interested in this article...
And how the times have changed that
- Tjp
I am in wallow with my inner money grubbing capitalistic pig. ... Oink!
Anyone in for a Class-Action lawsuit against S&P? The plaintiffs will be just about all US citizens, with certain obvious exceptions like guys who work for S&P, judges, and twelve randomly-chosen people to be the jury. We'll sue them for $14 trillion, or about $40,000 for each plaintiff. I could use an extra $40,000.
No Congress can constrain a future Congress's action by mere laws -- it takes a constitutional amendment. It's probably a fact in any other such system. Each US Congress lasts two years, and they are bound by the rules they establish at the beginning of the session, and no others. Merely passing a law which says future Congresses must reduce spending by a certain amount is a joke.
Furthermore, the so-called cuts are only cuts from a laughable baseline. They are not reductions in spending, they are only projected (and "recommended", ha ha) reductions in spending increases. The promised actual spending cuts for this year are only $22B, barely 1% of the total deficit this year. Even that is probably an illusion; the last promised cuts, $38B, turned out to be programs already expired, with only $380M, 1%, being true spending cuts. At that rate, this $22B will only be $220M, so small no one will even notice. Almost all the so-called $2T in future spending cuts are mere vague promises of future actions by future Congresses, almost certain to be ignored because they have no force of law.
The yearly deficit this year is $1.6T. $2T over 10 years is just 15 months of deficit alone. It is pitiful, pathetic, and a joke without humor.
Infuriate left and right
It doesn't take a rocket scientist to see fixing the problem requires that 14.6% and 24.3% move towards each other. Both figures are lowish, so it doesn't matter which one moves. Your S&P rating dropped because your politics is so divisive it is looking like neither will. The right wing is welded to the 14.6%, the left the 24.3%. If they both stick to their guns you are well on your way to creating a banana republic.
I am sure that the people with the money would agree, but the people with the labor who have to build the yacht and mansion have a different opinion.
-rd
These guys are all cut from the same cloth, business majors for a reason.
Spending one trillion dollars on stimulus spending (7% of GDP) will add 12.5 billion per year to the future interest costs.
Stimulus spending makes the economy larger and therefore tax revenues go up— by around 75 billion per year, using a fiscal multiplier of 1.5.
Obviously, if you borrow cheap money to build roads, airports, and schools, you end up with a much wealthier nation.
From: http://krugman.blogs.nytimes.com/2011/08/06/the-arithmetic-of-near-term-deficits-and-debt/
"What matters for debt sustainability is the real interest rate [which subtracts inflation], since what matters is keeping [inflation-adjusted] debt, not nominal debt, from growing. (World War II debt never got paid off, it just eroded in real [inflation-adjusted] terms to the point where it was trivial).
"The US government could lock in 30-year bonds at a real interest rate of 1.25%. That means that a trillion dollars in extra debt would mean $12.5 billion a year in additional real interest payments.
"An extra trillion in borrowing adds something like 0.07% of GDP in future debt service costs."
The problem in the US appears to be that neither side has the power to make a decisive decisions so they engage in these stupid showdowns where they resolve to be irresolute and the situation gets worse. The US political system for all it's supposed advantages strikes me as a complete joke in a crisis that pitches one side against the other. While other governments often have their own faults at least there is usually one party / coalition in charge who can make a decision and it must be abided by.
Of course back in reality if you tap the rich for money you will get more money. Maybe some will attempt to evade paying but I expect they already do, which is why it might be a good idea to plug some of those loopholes and ensuring compliance through stricter tax audits. It's not a case of doubling anything either, simply observing that the economic wheels have come off the US economy and the money has to come from somewhere to put it back on track. And that absolutely should include the rich.
Keep in mind that some of the largest areas of spending are entitlements, and those involve issuing bazillions of medicare payments for doctor visits and surgeries, and a modest check every month to millions of people. In a sort by amount of individual checks, they'd be very low on the list compared to buying buildings or tanks, but they add up to quite a bit. Actually, I'm not sure where the military would even rank on something like this - it isn't like the government just goes into the Lockheed store and buys 10 F-22s - there are probably contracts involving regular payments and such.
In the aggregate the largest areas of spending are social security, medicare, and the military. When you talk about future obligation then the military actually drops off the picture - it is a lot easier to stop buying bombers than to tell somebody that despite paying social security taxes their entire life they're not going to collect as much as their parents did.
So, at this point in most conversations everybody starts going back and forth about which of these three is a legitimate and important function of government, and in the end since we can't agree we keep paying for them all.
You can not make descision on finances based on whether you approve or disaprove of the jackasses making the descisions. You have to base it on facts. To not even consider changing the rating after they made a mistake is as bad as the government idiots not making the right descision.
Everyone is standing in their own shit and not taking any responsibility for the smell.
"Last friday Moody's S&P announced that they had downgraded the U.S.'s credit rating"
Moody's and S&P are rival ratings agencies. Moody's says US is still AAA (for now).
http://www.reuters.com/article/2011/08/08/usa-ratings-idUSN1E7770T020110808
so being up to your ass in debt had nothing to do with it !!
The tax cuts were for everyone that pays taxes- not just "the rich". You are certainly correct in that folks with trust funds don't pay tax on them - nor should they as the tax was already paid on that money(thus an income tax not a savings tax). Estate taxes are when wealth is transfered via death (and the estate tax is what generated a whole generation of "trust fund" babies since trusts don't change hands they are not subject to estate taxes). The poor (since they are already not paying anything in federal taxes) did not get a reduction from 0
You are so correct! I saw one (1), yes ONE reference to S&P's triple-F performance on giving junk bonds AAA ratings, and it was Rachel Maddow on "Meet The Press" last Sunday morning.
And then she pointed out that IF, IF, IF we are going to pay attention to bubble-builders S&P then we should acknowledge that their rating was based on how screwed up our government is that congress GOPs would use brinksmanship to get their way...T-party toddler tantrums defining US policy now.
McCain was also on and he whined about too democratic spending and then the topic switched to his arguing that we MUST stay in Afghanistan...and Gregory never called him on the inconsistency. I was shouting at the TV - thank god Maddow had some sense.
she was just a vile, hypocritical person. I don't see how people can hold her in such general high esteem.
> printing our way out of debt
That's exactly what should have been done long ago. This endless borrowing is what got us into this mess in the first place.
The belief that what comes in must come out equally is a totally failed concept. It hasn't been true for 50 years. It was probably never true -- Kings would go to war to loot other people's money. We should stop pretending it's going to change. Printing the money will finally end this nonsense. Sure, if we print too much it'll deflate the dollar, so don't be stupid about it. Either way it's better than to stupidly keep borrowing exponentially growing amounts.
Why do so many people here base their economics on the small-minded, ultra-conservative mindset of the owner of a small corner shop? In the real world, companies and countries borrow money to leverage their growth. You can't run a multinational corporation or country on the basis that you should save up money for a rainy day and never spend more than you earn in a particular day.
To have a right to do a thing is not at all the same as to be right in doing it
What amazes me is that any politician of any slant would think it's a great idea to allow the most wealthy people in society to escape from taxation at the point it is needed most.
In the US, it seems that to a lot of right wingers taxation is considered an evil in itself, and therefore higher taxes are more evil.
To have a right to do a thing is not at all the same as to be right in doing it