United States Loses S&P AAA Credit Rating 1239
oxide7 writes with this excerpt from the International Business Times: "The United States lost its top-notch AAA credit rating from Standard & Poor's on Friday in an unprecedented reversal of fortune for the world's largest economy. S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about the government's budget deficits and rising debt burden. The move is likely to raise borrowing costs eventually for the American government, companies and consumers."
Re:probably should have been lowered anyway (Score:5, Informative)
Just the fact that we were even thinking about defaulting or raising the debt limit should have lowered our credit rating.
Reagan raised the debt ceiling eight times. Nobody even batted an eye.
Actually, Reagan raised it 18 times, and Bush II raised it 7. Lack of eye batting mostly true.
Re:Two things... (Score:2, Informative)
Credit rating is ideologically ignorant - it's a matter of high debt and inability to meet payments.
The debt comes from massive tax cuts coupled with massive spending increases. In this regard Bush and Obama were a perfect tag team.
The inability to pay back debt (or the perception thereof) comes from the crazed grandstanding that happened by both parties.
However, the idea that blaming the person in charge, who pushed a program of new programs in an age when revenues were low, is pretty much common sense. Nice job of trying to cut it off with such eloquent adjectives, however.
Re:Two things... (Score:1, Informative)
Obama has raised the national debt by over three trillion dollars. He added more debt in the first 19 months of his presidency than all presidents from Washington through Reagan combined. If Obama supporters are really going to try to pin everything on Republicans, they're going to be in for a big disappointment in next year's election.
Re:WTF that wasn't supposed to happen!? (Score:5, Informative)
Yes, it's all Obama's fault, the economy was perfect when he took over.
http://en.wikipedia.org/wiki/File:US_Federal_Debt_as_Percent_of_GDP_by_President.jpg [wikipedia.org]
Democrats have been so bad for the US debt! Or maybe the last two years are first time it has risen as a percentage of US GDP under a Democrat since 1975. Still Obama's fault, since he started 2 useless wars... oh, wait, that inflection point seems to be set squarely in his predecessor's term. Personally I'll wait until the end of this term to see how much of Bush's damage he can undo.
Or should I just say "you're so right-of-center you don't need facts and statistics, they just get in the way..."
S&P Report (Score:4, Informative)
Re:WTF that wasn't supposed to happen!? (Score:4, Informative)
Re:Two things... (Score:5, Informative)
No. [washingtonpost.com] You're repeating a right-wing talking-point lie, spread by a deceptive Wall Street Journal article.
Re:Two things... (Score:5, Informative)
Can you provide a link to an official CBO statement/paper/whatever stating that health care reform will cost 2 trillion dollars over what we would normally spend? Because I've been under the impression that the CBO considers it a break even or save.
Re:probably should have been lowered anyway (Score:4, Informative)
Actually, it pretty much IS partisan.
The GOP ran up most of the debt (close to 80% of it), most of the projected debt is due to GOP policies (mostly the Bush Tax Cuts, plus Medicare part D, plus the wars).
The GOP manufactured the "debt ceiling crisis" and held the economy hostage and threatened default if they didn't get 100% of what they wanted (acting much like terrorists in the process).
The GOP refused to consider any new revenues at all, the prime reason cited by S & P in their downgrade.
So this can be laid almost entirely at the feet of the GOP and the crazed fanatical Tea Party extremist wing that seems to completely control it these days.
We could be solvent quite easily, if it weren't for republicans and the tea party. Expire the Bush Tax Cuts, close tax loopholes, another stimulus bill to put people to work and repair infrastructure at the same time (while interest rates are low and the labor is availalbe), boot strapping the economy to add jobs, thus increasing revenue further and reducing the expenses paid out in unemployment benefits, medicare, etc...
The budget would balance within ten years easily. Add on more intelligent cuts and reforms (like allowing Medicare to negotiate better prices). Draw down the Iraq and Afghanistan forces faster than scheduled, cosolidate our over-seas bases, cancel obsolete or white-elephant weapons programs, dismantle the Department of Homeland Security... there is LOTS of money to be saved, as well as raised.
We're the richest country on earth. We're not insolvent. We just have a really bad political problem. It's called The Republican Party.
Re:They weren't thinking about it though (Score:4, Informative)
Interesting read. I think the very reason they screwed up so badly before is why they are going though all these detailed methodical research now. Even if it screws us:P
Even the report says "Standard & Poor's transfer T&C assessment of the U.S. remains 'AAA'. Our T&C assessment reflects our view of the likelihood of the sovereign restricting other public and private issuers' access to foreign exchange needed to meet debt service."
They clearly say that we can pay our bills. It also says they don't believe congress will even follow the bill given. There are numerous complaints that congress will not raise revenue at all and that kills all the projections they have. Call it new taxes, call it tariffs, call it a damn VAT. You cut spending, increase revenue to get out of a hole. All we are doing is tightening our belt and promising our wife that we won't go out to eat as much.
Re:Will any investors care? (Score:3, Informative)
> it has an economy larger than the 7 next-richest countries combined
GDP figures from the CIA world factbook
USA 14.66 T$
China 10.09 T$
Japan 4.31 T$
Germany 2.94 T$
So why should we take anything else you wrote as being creditable either?
Re:They weren't thinking about it though (Score:4, Informative)
Really I don't think this downgrade should have happened. While there are quite likely to be other problems for the US (spending cuts, tax increases, slow economy) it does not at all look like default is in the cards. Since bond ratings are supposed to be a rating of how likely that is, the rating seems to be incorrect.
Read Standard & Poor's press relase [standardandpoors.com] (PDF)
Essentially what triggered this is the Tea Party's ability to completely gum up the works by insisting on no new taxes.
S&P says that, from what they've observed, they are not certain that this intransigence can be avoided when the Bush Tax Cuts are set to expire.
They go on to say that if those tax cuts aren't allowed to expire, they'll cut the USA's rating again.
And without additional "revenue increases" and cuts in spending (entitlements), they won't raise the rating back to AAA.
My opinion is it is politicking. The S&P people in power wanted a different deal and this is their politicking of it.
Politicking is what caused this downgrade.
S&P is advising that we don't let it happen again.
Who told you S&P said that? (Score:2, Informative)
That's not what they said at all [wsj.com]:
We have a spending problem. S&P wanted to see debt reduction, they wanted to see a bigger amount of savings, but they didn't care where the savings came from. If anything, they listed cuts to entitlement programs like medicare and social security as more important than anything else (because they quite frankly are).
Laying this entirely at the feet of the Republicans is just more blind partisanship. Both parties are worthless and ineffective. Arguing about which one is worse than the other isn't going to help us get out of this situation. Our entire system of government needs a massive shakeup at all levels, and it's going to happen one way or another: either at the ballot box in the short term, or in a complete collapse of the government in the long-term.
Re:Can someone explain (Score:4, Informative)
That's the total sum of the loans that were issued. Many of them were overnight loans.
There was never $16 trillion in outstanding loans.
Re:The debt increases exponentially (Score:4, Informative)
Re:WTF that wasn't supposed to happen!? (Score:3, Informative)
Your post represents perfectly the causes of the problems the US has right now: partisanship. You want to fix the blame on the other side instead of fixing the problem.
Regardless of what Bush II did, the spending under Obama [wikipedia.org] stuck up in that level. If it were really Bush's fault Obama could have simply got the spending to the levels they were when Clinton left office. The reason why he didn't do that is because his Administration seems to have an unlimited belief in keynesianism. Obama's policy seems to be to spend his way out of debt [wikipedia.org].
It's not quite fair to say that it was Republicans who held the government hostage, because it was Obama who insisted on standing right on the ledge. If you do not stand too close to the precipice no one will be able to tell you "do it my way or I will push you over".
It would be good for America to remember what happened when Germany [wikipedia.org] had a debt, imposed by others on them, that they felt they could never pay.
Press release from S&P (Score:5, Informative)
is here: http://blogs.wsj.com/marketbeat/2011/08/05/sp-downgrades-u-s-debt-rating-press-release/ [wsj.com]
It is interesting that deficit isn't the only, nor it seems, most important issue. FTA:
Re:no, your the dumb mofo idiot (Score:5, Informative)
When I lived in the U.S., for a while I had to go from Saint Louis to KC for one week a month for a while for work so listened to a lot of talk radio on the way.
I remember about 7 or 8 years ago listening to Bill O'Rielly on the radio talking about "socialist" Canada, and how rotten the place is, and wondering why anyone would talk nicely of it considering especially how it was always in debt and had spending out of control to finance its socialist agenda. All pure bullshit of course. I can think back on that now and smile.
Since O'Rielly is a darling of Fox, I just to look and see what Fox News' slant was on this was and how they were going to misinform their viewers/readers on the subject. And here it is... not even all that subtle: The three main credit agencies, which also include Moody's Investor Service and Fitch, had warned during the budget fight that if Congress did not cut spending far enough, the country faced a downgrade. [foxnews.com]. Completely misleading and feeding the Tea Bagger bullshit machine. Ah yeas, the Murdoch slime machine at work.
The downgrade wasn't because the U.S. didn't cut spending. It was because they decided to keep deficit spending (increasing the debt ceiling) instead of addressing the "money in less than money out" issue. Tax increases and the lack of them also figured into the rating change, considering the U.S. has about the lowest tax rate of the G7 countries, but near the highest per capita debt. But hey, if they really wanted to cut spending how about looking at the notion that the U.S. spends more on its military than all the rest of the world does combined... sorry, forgot about the ego and paranoia problem. And a tax increase isn't really a good way to put some of what they could have done to increase revenue. For example, it could have started with getting rid of the Bush error (oops I mean era) tax cuts on the wealthy that was supposed to be temporary to begin with. Alas, the Tea Baggers were rabidly against doing that to their financial backers.
Fox wants to propagandize this to pander to its misinformed viewers to make it seem like the fact that the Tea Baggers prevented tax increases for the most wealthy had nothing to do with it. The most wealthy have the lowest tax rates they have ever had. They omit saying that during some of the most productive and economically booming times in the past century the tax rates on the upper income groups was much, much higher. e.g. In the 50's under Republican president Eisenhower, and during the 90's under Democratic president Clinton. Not increasing revenue by returning taxes to prior levels definitely figures into the credit downgrade.
FWIW, Canada balanced its budget and began paying down the debt starting in the early 90s through to 2008; the only member of the G7 IIRC that was doing so (and why Canada was one of the least affected countries from the current recession). The balanced budget went out the window around 2008 with this recession when the current conservative government went way overboard on stimulus spending.
Re:EXCELLENT news (Score:5, Informative)
http://www.msnbc.msn.com/id/41349653/ns/business-us_business/t/despite-chinas-might-us-factories-maintain-edge/ [msn.com]
So much for "HARD FACTS" ...
Re:WTF that wasn't supposed to happen!? (Score:4, Informative)
You need to learn how to read the very charts you're linking to. The Clinton administration absolutely did have a surplus, and you can see it in the taxpolicycenter.org spreadsheet which you linked to, specifically in 1998, 1999, and 2000, including the first year of Bush's term, 2001.
This is also where you learn that surplus refers to a budget surplus, as in the difference between revenue and spending. It does not refer to outstanding debts in any way, which is what your treasurydirect.gov link refers to.
I recommend you take a look at their faq here, specifically the second question, which explains your misunderstanding of debt and deficit: http://www.treasurydirect.gov/govt/resources/faq/faq_publicdebt.htm [treasurydirect.gov]
Thanks in advance for not spreading misinformation in the future under the pretense of stopping the spread of misinformation with your newfound experience with statistics and FAQs.
Re:WTF that wasn't supposed to happen!? (Score:4, Informative)
Sweden is doing just fine, with good governance a wellfare society can be maintained ... not to many modern examples of a maintainable anarcho capitalist/social darwinist society though, but good luck if that's what you want to try ... you will need it. Have fun with rioting on the streets in a country with more guns than people, you don't have the same type of population as in the 30s any more.
America's debt is a combination of foreign oil dependency and simply being backwards hicks who don't want to pay taxes.
Re:WTF that wasn't supposed to happen!? (Score:4, Informative)
Re:WTF that wasn't supposed to happen!? (Score:4, Informative)
Down here in the south, we solved that with "y'all". And its plural "all y'all".
Re:They weren't thinking about it though (Score:4, Informative)
"That could be things like social security payments,..."
The very fact that you, a thinking and knowledgable adult, believed that social security payments (which are funded by cashing in existing treasuries held by the Social Security Trust Fund, and thus is debt neutral) would have been affected by us hitting the debt ceiling, tells me that one of the real problems here is that the current Administration has completely failed to effectively communicate the current state of financial affairs in Washington D.C.
(Social Security holds treasuries, so to send out a check for $1, they would cash in one of their debt treasuries for $1--which the Treasury department would then sell to someone else for $1. The total debt stays the same; it's just that the $1 of debt would be transferred from the Social Security Trust Fund to some bank in China. Thus, Social Security payments would not be effected unless someone in the Administration decided to stop paying Social Security as a sort of political "fsck you" to get seniors riled up about whomever (Eastasia, Eurasia) we're at war with.)
By failing to effectively communicate the current state of financial affairs, this has increased the risk on the economy (because I bet you're not willing to spend $100,000 on new hardware for your plant if you can't figure out what is going to happen tomorrow in Washington D.C. because all our leaders--Democrats and Republicans alike--are acting like spoiled children rather than the dignified leaders of one of the most powerful countries and powerful economic forces in the world today), and this has lowered tax receipts and the non-governmental GDP. And by failing to effectively communicate Administration intentions during a crisis point to the banks and to Wall Street, holders of Treasuries were uncertain if the Administration was even going to be making the latest wave of debt payments on current (income yielding) treasuries, or if they would cashing in existing debt instruments, since rolling those over involves creating new debt. And there was no clear guidance if, in the event there was a defacto balanced budget enforced by the debt ceiling what administration priorities would be when having to choose what to fund and what not to fund.
In other words, by failing to effectively communicate clearly what Administration intentions are, setting a set of fixed goals, and moving in a deliberate and careful way to those fixed goals, we've lost S&P's confidence that we can even pay the bills like mature adults.
Re:So does anyone really think... (Score:5, Informative)
Yes, and less spending. I think S&P was quite clear in their evaluation that this will not be solved by spending cuts alone. Nor will it be solved by more taxes alone.
Like what specifically? The businesses have been sending jobs overseas for the last 35 or so years. It's not something new. Oh wait, you probably mean stuff like let companies bring money back into the US at low tax rates so they can stick it in their pocket and not create any new jobs like they did the last time we did that. Maybe you mean less regulation so businesses can come up with more crazy schemes like credit default swaps? The idea that business will act in the best interest of the country has been debunked (go read Greenspan's book). Nobody believes that crap anymore.
Well yes there are people in this country who are not paying taxes but most of these are rich people with lawyers. It was so helpful when President Bush shut down the part of the IRS that goes after rich tax evaders. Same with corporations. Exxon-Mobile payed $13B in taxes last year. None of it to the United States.
Yes, the rich are insufficiently taxed. If they are paying 15% by laundering their money through capital gains and I am paying higher than 15% then they are not paying their fair share. Period. All of this "disengenuous BS" stuff about the rich paying the "vast majority of taxes" is understood by anyone who has a general knowledge of elementary school math. So, 15% of 1 million is larger than 20% of 85,000. No shit! That doesn't mean that the guy making a million is paying his fair share if other people are paying a higher percentage of their income.