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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."
The other two ratings agencies, Moodys and Fitch, have no plans to downgrade US debt.
I wouldn't be so sure about that...:
Ratings agency Moody's repeated a warning on Monday it could downgrade the United States before 2013 if the fiscal or economic outlook weakens significantly
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"
...which would result in a massive devaluation of our debt as China quickly sold it to other investors, resulting in interest rates skyrocketing as we issued new bonds and no one would buy them at current interest rates.
You don't really understand how this works, do you? China isn't sitting there with a bunch of pieces of paper that say 'bonds we sold to China'.
They just have normal bonds. Like any other bonds, they can be sold to others. We can't just magically revoke them, it's not like there's a list, and the way the bond market works, half the time it's not even China redeeming them anyway. They could easily make that 'none of the time' if they felt like it.
The only reason we know that China has about $900 billion of our debt is that they've told us that, and we can roughly confirm it by watching how the market operates.
And this is not to mention the fact that once you start targeting individual bond holders and changing the laws so you don't have to pay them (Or delusionaly think you don't have it, when of course they'll just sell the bonds to others.), uh, you've basically destroyed your credit rating forever.
If corporations are people, aren't stockholders guilty of slavery?
As a European commenting on our domestic policy, you apparently aren't getting the full story or are choosing to ignore it.
Oh, but it does. The president must sign or veto each spending appropriation. And Obama has approved and encouraged plenty. Wikipedia can show you that since Obama has entered office the rate at which the debt is growing has increased substantially.
You blame defense spending for all our woes. Defense spending is still high, but not historically out of line for the past 50 years and it is set to decrease in the next few years. Well, except for interest on debt, which is stupidly high.
You know what else costs a gigantic pile of money? Entitlements. Here's another picture for you that is showing what is happening on that side of things. Note that historically it is only increasing. At least defense spending had had a cut once in a while, but entitlements are not sustainable at their current growth rate. But don't worry. Obama has nothing to do with this. It's just a coincidence that we use the word "Obamacare". Really.
So no, Obama isn't the only one to blame. It is insane to think that he is. But saying that he has nothing to do with the problem at all is similarly pathetic.
That is not at all what the TP wanted to do. They wanted to cut spending so that we were still meeting debt obligations but cutting back on everything else. Your analogy is flawed. What the TP wants is to order dinner at a restaurant but then leave off the expensive dessert at the end so that they can afford to pay the entire bill.
Love sees no species.
"All you need to know about rating agencies is that in May 2010 Moody’s still rated Greece triple-A." - Mark Steyn
I don't doubt that Mark Steyn said that, but what he said is false. In April 2010, Moody's lowered Greece's rating from A2 to A3, which is definitely not the same as Aaa. It is closer to "junk" rating than a triple-A rating. It is also worth noting that less than two months later, in June, Moody's cut the rating all the way to junk status, Ba1.
Note to self: Stop putting jokes in my insightful comments so I can get something other than +1 Funny!
Federal income taxes are deducted from state income taxes.
Wrong. Backwards. State income taxes are a line item deduction from your federal income taxes. Increased state taxes result in less federal income. (See Schedule A).
Strange that states that charge a sales tax with no income tax are doing much better than those that rely in income taxes. Compare Florida to Michigan. Compare Texas to California.
Comparing anything to California is invalid because California has so many Constitutionally-mandated spending requirements and Constitutionally-prohibited tax sources that it's basically a given they're going to be broke year in and year out. What about Nevada? They have no income tax at all and are currently facing a $1.8 billion dollar deficit on a $3.6B budget; that's even worse than the federal government, as a percentage of money spent.
I drive on the local interstate much more than the top 1%. Sure, those interstates bring products to my local store, but I buy them from there, so I benefit from that as well.
Okay, let's look at that. That truck bringing groceries to your store can weigh (legally) up to 40 tons, but let's conservatively say it weighs 25 tons. That's 12.5 what a good-sized car weighs. Taking into account that road wear is proportional to the fourth power of weight, and one semi bringing groceries to the store causes as much wear and tear as 24,414 cars. Do you think that semi pay 24,000 times as much in taxes and fees on a per-mile basis as you do? If not, then business owners are getting a lot more out of their road and fuel taxes than you are.
My bank account is FDIC insured, just as the rich guy's, but I don't have over $250,000 in any account, so I'm 100% covered; rich people are not.
If you honestly think that anyone well-to-do keeps more than $250,000 in a single savings account then you'd make the world's worst financial advisor. Even the moderately wealthy have their money tied up in investments (not FDIC-protected) and their savings spread across multiple financial institutions in order to minimize risk. That's not even taking into account that the FDIC is broke, and the institutions where the rich keep their investments just get a direct federal bailout when they go under. So in summary:
Would you like to be wrong about anything else today?