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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."
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.
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
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.
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.
Hmmm, As I read the agreement - all the 'Savings' are not reductions in actual spending - just a promise not to overspend as much. Hardly a basis for sound debt reduction.
It isn't basic math, or any math at all, really. Despite massive quantities of data analysis and some of the most mind bending graphs ever devised, plain old emotion still rules most financial markets and most certainly rules things like applying "AAA" versus "AA+" to some piece of paper.
These people everyone is amped up about changing the US' rating are the same people who entirely failed to foresee the biggest economic collapse most of us have ever lived through. They were handing out AAA ratings, to mortgage backed securities that no one other the guy who invented them could even understand, just a few months before they became almost completely worthless. 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.
"Sacrifice for the good of The State" - The State
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 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.
Not to be silly or anything but it deserves to be downgraded.
AAA is supposed to be rock freaking solid. You do not worry about it.
This up to the wire biting your fingernails crap is *NOT* AAA material. If you saw the last 3 budget rounds being this sort of fiasco (which it was) would you want to invest in it?
If you have to worry about it then it is not AAA material. It is still 'good' credit. But something you need to keep an eye on so AA+.
The rating system was subjective in the first place. As seen by the AAA ratings they were giving out to 'too big to fail' institutions right before they failed. In many ways s&p helped create the very mess they are downgrading the US gov for. As the US gov covered their bets...
But then again, most mortgage owners have a reasonable plan to get out of debt in a certain time. For instance, my mortgage will be fully paid off in 15 years, and even assuming I default before that, the bank can sell the house and get their money back, so it won't disrupt anything else.
Can the US government claim the same ?
Fonzi rates US debt "Aaaaa..." and gives it a thumbs up.
I wonder which agency carries the most weight though. I suspect it is S&P, though I'm not sure.
We have a huge cultural problem. Most people don't care about any of the important things. Of the people who care, fewer still are educated. Of the people that are educated, many are polarized in to incompatible philosophies. This is leading to paralysis. I hate to say it, but more and more the idea of dividing the union just makes more sense. The belief that the Federal government should be doing all that it does makes the US too big and too diverse to govern in a reasonable way.
I don't mean any of this in a doom and gloom kind of way, just saying I think it makes a lot more sense. Everybody knows the US is majorly divided on how we should do just about everything, largely based on geography.
If I can just reach out with my words and touch a butthole, just one, it will all be worth it.
Please somebody google the news "Standard & Poor's Clarifies Assumption Used On Discretionary Spending Growth" over the last two days from multiple places.
According to Bill Gross, the total US liabilities add up to about $60 trillion. At an average price of $5000/acre, the 600 million acres only add up to $3 trillion. That's not an order of magnitude more.
You seem to be implying that S&P is secretly acting on behalf of the Democratic Party in support of President Obama's re-election campaign, which I find to be an interesting point of view.
The rest is even more confusing.
WALSTIB!
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.
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
The total debt US has is way too high anyway, if a person had same sort of debt load they would be insolvent.
That is a pretty astounding thing to say. Most people who have a mortgage have a far higher debt load than the US government, and sub-prime victims excepted, the vast majority of home-owners do not go insolvent in the process.
When the government has already borrowed to over 10x it's annual income and continues to borrow yearly at almost double its income, I can assure you it acts NOTHING like a normal person. If I had a $500,000 mortgage and only earned $50,000 a year but had a car note that cost me $100,000 a year... you think creditors would get anywhere near me! AAA?? More like FFFFFFFFFFFFFFUUUUUUUU.
The common mistake with the "debt to gdp ratio" is that the federal government doesnt have a valid claim on every dollar in the GDP. They have a claim to what they have levied in taxes (it says so in our constitution). So saying "oh debt to gdp is better than anyone with a big mortgage" is like saying "oh the rest of the guys at my company all own a Porsche, i am just a janitor and my paycheck is 1/10th any of theirs but I can afford to get one too because WE all make TONS of money!"
Liabilities to yourself don't count. Sure the people will be mighty pissed when you don't pay but that's a different story entirely. This is also why Japan's debt doesn't matter...
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."
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.
I happen to be on the side of "spend less", but it is a perfectly legitimate opinion to want to spend more AND collect more. The Democrats aren't advocating raising spending while lowering taxes. Frankly, that sounds like what the Repubs did under Bush II.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
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?
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.
We can all agree that S&P shouldn't be trusted, but if bond buyers still trust them we're screwed...
Ken
Yes, because the position of the Democratic party (and all Democrats) is that basic. "SPEND MORE!"
It must be a simpler, more straightforward world in which you live.
Most every Democrat I've heard has talked about the desire to do some spending cuts in combination with some array of revenue increases. Sometimes they differ in what they think should be cut or protected (Medicare, Social Security, defense, whatever), which can then lead to internal disagreements among Democrats that might make it look like the entire party doesn't want to cut anything; the same holds for revenue increases, I'd say. I'd hope that over time they could come up with a plan that at least most Democrats could get behind that would be part spending cuts/reforms and part revenue increases.
On the Republican side, there are certainly some I've heard talk about the need to reform the tax code and (at least) start cutting out tax expenditures. I'd say that those Republicans are in the minority, mainly because of the no increased taxes pledge and the Tea Party pressure from the right of the party.
I wouldn't mind the "cut spending" pressure coming from the Tea Party if the people pushing hardest for that didn't also seem to be entirely incapable of compromise. Compromising isn't something to be frowned upon, it's how both parties could leave with a deal they might like (or at least dislike equally). As I see it, the Tea Party's anti-spending stance is one that we need - it's the execution that is lacking.
> Democrats want less government spending as a percentage of GDP [1]. The TEA Party wants to destroy government [2], unions [3], and the US economy [4].
FTFY.
Sources: [1] http://en.wikipedia.org/wiki/File:US_Federal_Debt_as_Percent_of_GDP_by_President.jpg
[2] http://www.contractfromamerica.com/Idea.aspx
[3] http://en.wikipedia.org/wiki/2011_Wisconsin_protests
[4] http://www.standardandpoors.com/ratings/us-rating-action/en/us/
Join the window installer's union, where prosperity is a brick throw away!
Let me break it down to the most basic of concepts:
Democrats want the government to spend more. The TEA Party wants the government to spend less.
Who do you think is right here?
In a global recession on the verge of depression? The Democrats, hands down.
Although 'the Democrats' misrepresents that side of the argument. Sane economists and a few lawmakers want to increase government stimulus. Some Democrats are stupid, however, and want to spend less, just not as much less as the Tea Party. The president, unfortunately, is among the latter.
Genocide Man -- Life is funny. Death is funnier. Mass murder can be hilarious.
Yeah, and God Forbid the people that can afford to give a little more to help the country that allowed them the opportunity to become wealthy in the first place actually do so. They didn't write those big bribe checks...oh, I'm sorry, campaign contributions... to have someone turn around and raise their taxes and cost them an extra percent a year. I mean, what is that, a few thousand dollars less a year? How will they ever survive?!
I'm all for spending cuts, but without taxes being raised on the wealthy, it's just more of the same BS. Tell the people living on 12 grand a year in the projects that it's time to tighten their belts so that the asshole speculators on Wall Street can get away with their ridiculously low effective tax rates. Oh, but I forgot, all that paper being traded back and forth "creates jobs". That's why these there's so many jobs out there now, right? That's why these companies are all sitting on record amounts of cash in the bank both here and abroad, meanwhile they're laying people off left and right...
This is just Part II of the extortion scheme that started with the bailouts as the rich try to snatch up an even bigger piece of the pie than they already have.
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"
Immediately followed by the next questions: who is benefiting from Moody's and Fitch not downgrading their rating ? And who benefited from S&P waiting so long to downgrade ? And who's benefiting from only downgrading to AA+ ?
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.
Any time I see a 10 year budget I get a good chuckle. We don't even have a budget for this year.
I love Jesus, except for his foreign policy.
Actually doing it before would have been political, as an attempt to influence how the deal went down. Doing it after just means they waited to see what the outlook was like, since there was at least some attempt to fix the government spending problem. You seem to be under the mistaken impression that the debt limit fight is what is triggering the downgrade, rather than our overall financial outlook.
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
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
Which isn't the way Congress did this. What they did was "We spend X trillion on this now. In ten years we expect to spend 5X trillion on this. If we instead decide to spend only 4X trillion in ten years, we've saved X trillion."
Roughly comparable to me saying "I can't afford my house note (this is theoretical, since I paid my house off ten years ago). I was planning on buying a vacation home in the Hamptons. Instead, I will buy a vacation home in Canada's cottage country. I have therefore saved money."
"I do not agree with what you say, but I will defend to the death your right to say it"
Considering how petty Congress is being about the entire issue, I would downgrade the damn rating as well. From their ( S&P ) standpoint, the leaders of the USA are willing to put the entire economy at risk while they squabble about their own little pet issues.
:|
We ( the US ) obviously can't get its act together by ourselves. Congress proved that. It took the threat of a downgrade before we finally decided to get semi-serious about the issue. Personally, I would consider the S&P downgrade as a warning shot across the bow. In effect "Get your sh*t together or suffer the consequences".
We shouldn't REQUIRE a GD debt increase to begin with. If our idiot 'leaders' would learn to spend less than they take in, we wouldn't NEED a debt ceiling at all. S&P sees this, as does the rest of the world. The leadership isn't interested in reducing their spending and, as a result, S&P made the right decision. This isn't a sustainable path. At some point it WILL come falling down around you. Why the retards in charge can't figure this out is beyond my ability to explain.
Personally, I hope the other rating companies follow suit. It will take that level of threat before my elected morons finally quit bickering and note the cliff edge they're dancing on. Maybe ( and it's a longshot ) they'll be able to get this train back on the right track. Maybe.
Given their track record, I'm definitely not counting on it. . .
...the same people who entirely failed to foresee the biggest economic collapse most of us have ever lived through. They were handing out AAA ratings, to mortgage backed securities
This suggests that it was merely incompetence on the part of the rating companies, when outright fraud would be the more apt term. They gave out those AAA ratings not because they're boobs, but because their customers - the big investment banks - were paying them them huge fees to do just that. The fact that no one's even been investigated, let alone prosecuted, for this continues to amaze and practically guarantees a repeat performance in the future.
Have you read that section? If not, read it:
The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
Note the keywords in the first sentence "authorized by law". Note that the Debt Ceiling thing is a LAW which defines how much debt is "authorized by law".
Remember, borrowing beyond the legal debt limit is, itself, illegal.
"I do not agree with what you say, but I will defend to the death your right to say it"
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.
plain old emotion
and politics - don't forget politics. S&P has decided that doing this will benefit them, so they did it. It's not based on any particular calculation, it might be justified by one, but in the end, S&P dinging the US credit rating is going to gain S&P some advantage, or at least they think it will.
Except the budget itself is law, and it authorized the debt by requiring more expenses than are supported by income.
Learning HOW to think is more important than learning WHAT to think.
Certain forces within the US government (on both sides of the isle but I think the argument can be made for one side more than the other) have shown a willingness to play political chicken with the nation's debt, up to and including using imminent default to attempt to blackmail the US population into a new constitutional amendment. You can't just come out with a 'deal' and say "no no we worked it out after all", investment is about trust, and when scoring political points is more important to the people in control than keeping the US out of default of course the credit rating is going to drop.
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.
But not all expenses are public debts, so what does that have to do with the 14th amendment and all this hullabaloo?
What the democrats are calling a default, like not sending out social security checks, is not an ACTUAL default, because the government doesn't actually owe anybody social security via a financial contract. In fact you can look on the ssa.gov website and they will tell you, the money you pay them is not in any way yours anymore and you are not entitled to get it back. Your money goes to pay others' benefits. You know, like welfare.
Political posturing and the political circus has contaminated sound judgement in the US.
If deciding how to spend tax revenue isn't a central, complex political issue, what IS? You think there's some obvious "sound judgment" that everybody intuitively knows but it's been covered up by master politicians?
You are sitting on a multi-billion dollar fleet...
The fact that the only spending problems you pointed out are related to the military makes you sound really biased. A credible solution is going to involve cuts everywhere.
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
I think you've got it backwards. It couldn't be an economic decision until the deal was actually done. Had they downgraded before it would have been purely political as no final decisions had been made.
Developers: We can use your help.
Except that none of these rating agencies *ever* cared about the deficit until it was used as a political weapon...
Once the deficit becomes the sticking point to actually getting things done in Congress...like say passing debt limit increases...well now your rating agencies are going to price in the possibility you might actually default.
The GOP completely manufactured this disaster and deserves the *entire* blame for it. And I mean the downgrade and it's aftermath, the 'current' debt and deficit are largely GOP created, but not completely. Long term debt issues come from more Democratic policies..SocSec/Medicare. But the current debt is much more the GOP's creation than anybody else's.
People in cars cause accidents....accidents in cars cause people
No it's more like the spoiled child who is used to getting "A" grades suddenly gets a "B" and starts arguing with the teacher about some trivial points of marking, when overall the work is inadequate and doesn't deserve an "A". AAA rating does not mean almost defaulting on debt. It means rock solid. Honestly myself I rate the US little higher than junk. I would not touch treasuries to save my life. less than 2% on a 5 year? THREE whole percent on a 30 year? Yeah right. Eat my shorts - literally. I've made a killing this past week with short sales. Now blame me for the market drop.
Seven puppies were harmed during the making of this post.
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.
AAA is supposed to be rock freaking solid. You do not worry about it.
This up to the wire biting your fingernails crap is *NOT* AAA material. If you saw the last 3 budget rounds being this sort of fiasco (which it was) would you want to invest in it?
The up to the wire biting your fingernails crap was pure political theater. No one thought the US would default on any of its debt. Obama and the Treasury explained that they might default on military salaries, but not on debt. Likewise, the downgrade is political theater. It's S/P, playing the part of the audience, saying this drama is crap and we're tired of watching it.
The "deal" didn't cut any current spending and it didn't raise any revenue. It didn't change the account balance at all. All it did was agree to smaller formula increases in future spending (it doesn't even prevent congress from including non-formula increases in those same budget lines.
As for "rock freaking solid," S & P's corporate AAA rated corp bonds have an historical default rate of 0.6%. That's worse than their BBB rated muni's. Reference ie: AAA rated corporate bonds are just about as good as "junk" municipals. One imagines that sovereign debt is evaluated under similar criteria as munis.
Uh, reference please. Medicaid and CHIP, the only two broad general programs I know of, certainly do not allow that. And the way you worded that is a prime example of rhetoric: "a family of four with an income up to $82k can....". Well, "can" is not the same as "does", and if it is really true likely has some other fairly strict requirements.
S&P's rationale may or may not have some holes in it - but their decision is valid. We suck. We don't deserve credit.
Its valid in a vacuum, its somewhat silly given the US compared to other AAA rated credit holders... all of which have bad deficits.
If you want to argue that AAA should be for economies with a balanced budget... I'll go for that... but then the rule has to be applied universally.
The insurrection part is at the end and says things they won't pay for. The first sentence is quite clear.
You're still looking at it from the wrong point of view. We use that money to keep these areas from turning into the slums of Rio or Mumbai, which in turn keeps property values up, which in turn benefits the property owners. This also keeps the crime from spiraling out of control and spilling out into the surrounding area, which unchecked would further lower property values, which would kill the businesses in these areas, adding to the number of people living in these depressed areas, which then pushes crime farther out, and the cycle continues...
In the end, keeping poverty under control is in their best interests. They can either spend a little today in the form of raised taxes or they can spend a lot later trying to turn their home into a fucking fortress and living like they do in Somalia, where every trip to the grocery store has to be planned tactically to avoid the roving gangs stopping people and shaking them down. We have evidence of this from all over the globe, we have seen where it all ends up if we start cutting people off and letting them twist in the wind and live the "dog eat dog" lifestyle the neocons seem to want so bad.
I mean, do people deliberately ignore the link between crime and poverty, or did a large portion of the population just become suddenly blind to that fact?
The 2011 budget was enacted on April 15, 2011, as Public Law 112-10. The 2012 budget will most likely start in September.
FYI - The President does not pass a budget, Congress does starting with the House and moving on to the Senate. The President then signs the passed budget into law.
The requested budget the President submits to Congress is a courtesy that started in 1921 by Warren G. Harding. It is not required by the Constitution, nor is it legally binding in any sense. It is an informal "this is what I'd like to see" document only.
Learning HOW to think is more important than learning WHAT to think.
Trouble is, if they actually do reduce to spending what we take in or less, the voters who put them in office, including the ones that say they want spending cut, will revolt because things they want will also be cut. Instead, everybody is stuck in a deadlock of trying to only cut the other guys spending so the voters can keep on blaming the other guy.
You are sitting on a multi-billion dollar fleet of F-22's that have been GROUNDED (google it).
We stopped ordering new ones, though, despite the original orders being for a lot more. Once you have a couple dozen F22s, you have air superiority if needed. We simply haven't faced an enemy we need to use them against yet, so when a bug cropped up, we suspended the program and slowly began an investigation, but we still have the planes.
I assure you, if we go to war with a major modern power, the F-22s will be back in service within a day or two. They are not a bad thing to have around.
-- IANAL, this isn't legal advice, and definitely isn't legal advice for you. Also, Squee!
2. The government writes a budget that says "Next year we're spending $100 on roads, even though we only have $50 of actual income devoted to it.. we'll borrow the rest." That's not a debt, it's a projection. The next year comes and they say, "We changed our minds, we're spending $50 on roads." That's not a default, it's a change of budget.
Hmmm...I'd have to read the exact wording in the budget passed to verify this. I suspect you're correct as it is a projection, but there is the detail of the actual appropriation. Does each budgeted item get appropriated separately, in groups or en masse?
The actual appropriation could be construed as an authorizing law.
And, if you want to quibble, the budget itself can still be read to imply it authorizes the necessary debt via specific appropriations. None of the numbers are real surprises when the budget is passed, and they know damn well it is deficit spending at that time.
As far the Cato link...we're talking at cross purposes. "Entitlements" is a word with bad connotation. There is *mandatory* spending defined by specific laws and this includes SS and Medicare among other things.
The Budget that is debated by Congress is the discretionary part, which excludes mandatory spending.
As far as the SCOTUS ruling, all that means is the current law MAY be changed to not pay benefits regardless of contributions. However, it would require a law change as currently on the books it is *mandatory* spending.
Learning HOW to think is more important than learning WHAT to think.
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?
Roughly comparable to me saying "I can't afford my house note (this is theoretical, since I paid my house off ten years ago). I was planning on buying a vacation home in the Hamptons. Instead, I will buy a vacation home in Canada's cottage country. I have therefore saved money."
The only reason this sounds bad is because you are making the subjects of your analogy as silly as possible. If the analogy were instead: 'I can't afford my mortgage. I know the cost of my kid's health care is going up. I will change plans to offset the cost of the increase. I have therefore saved money' it wouldn't have any punch at all. The crux of the argument is really that you don't like how the money is being spent, not about how savings are counted. Everyone likes to imagine there is a nice easy answer where money is being wasted on trillion dollar toilet seats, but the reality is that the core of our spending goes to programs people are really quite fond of, and throwing them out during a recession will cost us more than it saves.
This is an emotional argument, has nothing to do with the math
The difference is (and the S&P even mentioned this in their analysis) that our political process is broken.
Other countries don't have belligerent ideological fanatics who aren't willing to negotiate or compromise and are willing to cost the country billions in order to save a few million.
Remember the GOP turned down a $4T package because it included revenue even though about 75% of people think revenue should be part of debt reduction.
The TEA Party, rather than being a cause, was prescient in warning that such negative consequences were on the way, and did their best with their limited power to stave the downgrade off.
NO. That is an untrue whitewashing of history. Even S&P, hardly the bastions of reliability now, disagrees with that assertion. They put, as one of their primary reasons for the lack of faith in the government, the inability of the US government to increase revenues.
The money had been spent -- of course you raise the debt ceiling. The time to have the debate over how much money to spend (and those are very good arguments to have) is when you're putting the budget together. You make those decisions when you consider whether to buy something and charge it on the card. It's too late when you buy and then see your credit card bill.
This was an entirely artificial crisis, and that we came close to defaulting on our debt is why the ratings agencies are a bit leery of whether the US Government can keep its financial obligations.
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.