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."
probably should have been lowered anyway (Score:5, Insightful)
Re:WTF that wasn't supposed to happen!? (Score:1, Insightful)
Two things... (Score:2, Insightful)
I'm sure retards are going to blame Obama, while ignoring the Republican asshattery that got everyone in this mess in the first place
Two, who the fuck cares about ratings agencys? Werent they the ones putting AAA on CDO's? Shouldnt we burn those fuckers to the ground as the turds they are?
They weren't thinking about it though (Score:5, Insightful)
I mean for one, these debt limit things always tend to be a "to the wire" affair so nobody takes it that seriously. However the other thing was the executive branch made it clear they wouldn't default on bond payments. That they don't have enough money means they have to choose what not to pay. That could be things like social security payments, and instead pay bond holders which is what they said was likely to happen.
Makes sense too, not only does the US have an obligation to pay its debts and want to maintain its credit, but doing something like that would piss people off and cause them to put pressure on congress to reach a deal.
Really I don't think this downgrade should have happened. While there are quite likely to be other problems for the US (spending cuts, tax increases, slow economy) it does not at all look like default is in the cards. Since bond ratings are supposed to be a rating of how likely that is, the rating seems to be incorrect. My opinion is it is politicking. The S&P people in power wanted a different deal and this is their politicking of it.
Downgrading doesn't really matter (Score:1, Insightful)
Right, teabaggers? Of course, this is the same S&P that told us that all those bullshit mortgage-backed securities were legit.
That's ironic or absurd (Score:5, Insightful)
After all, if the ratings agencies had done their jobs a few years ago, we wouldn't be in a lot of this mess.
Re:WTF that wasn't supposed to happen!? (Score:3, Insightful)
If you're going to thank him sarcastically for something, it should be for teaching the Republicans that hostage-taking works. Enjoy this bullshiat happening again in 6 months. Yes, McConnell outright said that: The debt ceiling is "a hostage worth ransoming."
If today's Republican party were described to someone even 5 years ago, they'd assume you were talking about a cartoon villain, with a tophat and monocle, twirling his moustache as he cackles about the latest despicable thing he did just because he could.
EXCELLENT news (Score:3, Insightful)
I hope this will drive into the thick skulls of many americans that the lawyeristic infested, paper based economy is long gone and USA needs to GET BACK TO MAKE THINGS and CUT THE LEGALESE MORASS that thas resulted in too much copyright of basic ideas, red tape for any f...ing simple thing and so on...
Shit ! I start sounding like them populists, but it is jus THE HARD FACTS...
Welcome to the brave new world people...
Re:WTF that wasn't supposed to happen!? (Score:0, Insightful)
Because Obama was the one who took the debt ceiling hostage in order to force people to accede to his nearly religious-cult-obsession with never raising taxes to pay for anything, ever.
It's only recently that I've seen people get bold enough to field this absurd logic.
Spend and spend and spend on things we don't want, then scream that it's our "nearly religious-cult-obsession" unwillingness to accept tax increases that's to blame.
How about, stop spending what you don't have? God forbid we slow the firehose of outgoing dollars for various programs we don't want or need. But if you say that, then it's, "Oh so you don't want traffic lights? What's wrong with you?" As if that's where the money is going. I've had it with the bullshit political rhetoric, and people just repeating what they heard on Fox News or Jon Stewart.
Stop spending my f'ing FEDERAL tax dollars on crap I don't want, in places I don't live in. That includes other countries AND other states.
Re:That's ironic or absurd (Score:1, Insightful)
Re:probably should have been lowered anyway (Score:5, Insightful)
It's OK to run a massive deficit, or reduce taxes during a war, or create massive unfunded programs like Medicare D, if you're a Fiscally Responsible Republican however.
That this viewpoint (or at least the first half of it) is unquestioningly repeated by nearly the entire media is the problem. The Republican party's slow descent into insanity began when they realized that the media would unquestioningly repeat absolutely anything they said, no matter how ludicrous or patently false...
Re:Can someone explain (Score:4, Insightful)
I only have a background in economics 101 and I'm not an investment banker, but could someone tell me how the worlds biggest borrower, the most in debt country in the world, a country so in debt that we're talking about grandchildren repaying the loans, and a country which seems to have for the last 50 years shown only a steady increase in spending and debt manages to have a AAA credit rating anyway?
I thought the purpose of these credit ratings were to determine what is a good investment, with AAA being safe, but how is an economy which has never repaid and only ever printed money a safe investment?
Also why is it that for the past 2 years people have been steadily divesting from the American economy (which can be seen in the fall of the USD vs all other currencies) yet it is only NOW that some ratings agency (which also caused much of the financial crisis to begin with) actually decides to reduce the credit rating, and even then only to AA+?
Easy solution (Score:3, Insightful)
You don't have to worry about your borrowing costs if you stop borrowing.
Time to start cutting Federal programs we can no longer afford.
Income went down 15.2% in 2009 for Americans. Unless you happen to be taxing the other 85% of the people, your taxes will be going down also.
And unless income bounced back up 115% in 2010, you won't be making enough in taxes to cover your existing programs.
Re:WTF that wasn't supposed to happen!? (Score:4, Insightful)
Because lifting the debt ceiling isn't about spending, it's about paying for money that's already been spent. Which is why you hear folks making those sorts of claims. A good analogy would be back in the 80s when it was common for credit card transactions to be done manually with that device and carbon paper. You'd go in hand the card over and they'd zip zip the machine and you'd be on your way.
What happened with the debt ceiling would be more or less equivalent to your credit card company telling the merchant a bit later that you were actually over your limit and that they'd have to raise it or you'd have to pay off some of your debt or they wouldn't give the merchant the money.
Which is why the folks that were holding the debt ceiling hostage as a preventative measure against spending were so stupid. They could have gotten $4,000bn in cuts had they accepted $100bn in loophole closures, instead the final deal was cuts only and ended up being a little over half what the cuts would otherwise have been.
Mod parent up. (Score:5, Insightful)
If you just "somehow find the money" to make the interest payments (as you did for how many dozen times), the banks wouldn't give a damn (even if it meant creating more US dollars out of thin air). Because the people working in those banks would just hope that the time you guys finally blow up, they might be safely retired in the Bahamas.
BUT the minute you have a very public discussion about whether you are going to bother to find the money or not, the banks will get worried. And rightfully so.
That's why many around the world were calling the US politicians all sorts of things: irresponsible, reckless, absurd etc.
They can't peacefully farm on the rich dirt by the volcano once the volcano makes crazy noises...
Re:WTF that wasn't supposed to happen!? (Score:4, Insightful)
I like to use this analogy:
If you've got a hole in your roof and your solution is to buy a bucket to catch the rain water. That bucket fills up and then you have to buy another one... and another one... When you're whole house is filled with buckets, that's not the time to say that you're not going to spend money to buy buckets anymore. It's time to say, "it's going to cost a lot to fix the roof but it's something that must be done."
The problem is that Obama tried to get a roofer in but caved into pressure to not pay him enough to fix the problem. So now we've got a huge hole in our roof, no more spending on buckets and water damage being done everywhere.
Re:They weren't thinking about it though (Score:5, Insightful)
Given the ever increasing debt load and utter failure to come up with a plan that will even reduce the deficit, much less balance the budget, the US deserves to have it's credit downgraded. Sorry, but you can't keep spending more than you take in without it coming back to bite you -- no matter how self important you are.
Re:So does anyone really think... (Score:3, Insightful)
I doubt it, as long as the GOP refuses to allow taxes to rise high enough to pay for essential spending and pay off our debts it's not likely to happen.
Re:Two things... (Score:5, Insightful)
"Raising the national debt" is a play on words that doesn't actually reflect Obama's actions. "Raising" makes it sound like he spent an extra $3T. What happened was our income dropped substantially (and we spent extra on stimulus).
Both Democrats and Republicans agree that the solution to our current fiscal crisis is to boost GDP so that we can increase revenue back to previous levels. If we had 1999 revenues in 2009 we wouldn't be "raising the national debt" even with present spending levels.
Even including Obama since 1972 our spending as a % of GDP has been decreasing. If the stimulus worked [Insert Debate] then arguably even the "spending" Obama had saved even more in revenue. The Bailout has almost completely paid itself off and is expected to actually return a profit. Did the stimulus pay for itself? Maybe. But one thing we do know thanks to the CBO is that the 2003 Tax Cuts are responsible for a huge portion of our deficit. Obama tried to end those Tax Cuts--he was blocked by the Minority Republicans.
Obama has tried to reduce the deficit, he even proposed a larger spending cut than the GOP--but the GOP has lost their fucking minds trying to please a tiny fraction of the US population who is completely unwilling to raise taxes or close loop holes. They rejected trillions in spending cuts because there were also some revenue increases to go along.
This is the first time in history that we've cut taxes during a War. Not just one war, 2 wars. If we're supposed to look to business to learn how to operate an organization then we need to be realistic and acknowledge that "sometimes you have to raise prices to not go bankrupt". We continue to vote and poll that we like our government services. That's fine. There is nothing wrong with liking social security and medicare etc. But now we have to be adults and pay what it costs to run those organizations.
Re:WTF that wasn't supposed to happen!? (Score:5, Insightful)
Are you sure it wasn't Reagan's Star Wars?
Are you sure it wasn't Bush's decision to slash taxes when we were running a surplus for the first time in modern history and on course to pay down the deficit?
Or his decision to not only not impose a war tax to pay for his overseas adventures, but for the first time ever cut taxes during a war?
We are buried in debt that was created almost entirely by Republican administrations, due to Republican policies. Federal taxes are at their lowest point in living memory, federal revenue as a fraction of GDP is 20% below where it was in 1980, and we are facing a deficit that will never be closed unless that circumstance is changed. Taxes go up or our deficit continues to accumulate - your choice.
Will any investors care? (Score:3, Insightful)
How many large entities who regularly invest $billions in bonds or other debt actually look up the grade rating in S&P's investment index when deciding whether or not to buy debt from the U.S. Government? It's not like the U.S.A. is some obscure Elbonia country where your average economist would have to look up what that country's assets and liabilities are, it has an economy larger than the 7 next-richest countries combined and any investor worth his salt has these figures memorized for the U.S.A.
The reasoning behind the downgrade is of much larger concern to investors -- that the national debt to GDP ratio keeps increasing quickly, and the vast majority of federal government is strongly opposed to either reducing spending or increasing taxes.
I see this as the financial equivalent to moving the Doomsday Clock one minute forward.
Re:Can someone explain (Score:5, Insightful)
how is an economy which has never repaid and only ever printed money a safe investment?
The USA repays the borrowed money, with interest, all the time. But the volume of the offering grows. It's not a concern until the point where you start suspecting that the country won't be able to service its debt. In other words, your one-year T-bills mature but the government says "fsck you, come later."
That point was reached in several ways. First, the very discussion of default undermines the reliability of country's debt. But then the amount of outstanding debt also makes it possible that the country will either physically run out of money to pay interest and buy matured bonds back, or it prints so much paper money that the profit of those bonds becomes negative, or does something else equally displeasing. The US debt stops being a safe store of value. It wasn't for about a decade already, but events like that serve as excuses for policy makers of countries to reevaluate the allocation of their currency reserves without being crucified.
Also why is it that for the past 2 years people have been steadily divesting from the American economy (which can be seen in the fall of the USD vs all other currencies)
The USD loses to other currencies not because "people are divesting" but because its value drops, and that happens because the printing press works day and night. For most of 2011 the US government borrows money from Federal Reserve which makes it out of thin air. When dollars are created at the rate of a few billion per day, why anyone is surprised that they get diluted?
Besides, most of investments in the US economy are done not by rich foreigners but by mutual funds and the like. This money remains in the system. If you take the money out of the market there will be excess of stock without buyers, and that will result in a serious crash of the stock market. That hasn't been observed. The US economy flounders because the business climate is bad, taxes are high, future is uncertain, labor is very expensive, and whatever you do or don't do you get sued. Can you open a small business and sell goods to China? Chinese can do that and sell their goods to the USA.
Re:WTF that wasn't supposed to happen!? (Score:4, Insightful)
But that's not what's happening, is it?
Re:probably should have been lowered anyway (Score:5, Insightful)
Dimensional analysis should be required learning in high school
Re:They weren't thinking about it though (Score:5, Insightful)
It seems to me that S&P, along with the other credit rating agencies, lost a lot of credibility when they were giving AAA ratings to the guys holding bundles of sub-prime mortgages in the lead up to the financial crisis. I don't doubt that they play a useful role in rating smaller organisations but when it comes to rating governments and financial heavyweights they're playing politics more than they're making objective assessments.
Re:Two things... (Score:5, Insightful)
Re:probably should have been lowered anyway (Score:3, Insightful)
"It's not how much you borrow, it's whether you are seen as trustworthy to repay it on time or not."
Hahahaha... by that measure, Government should have had a C rating decades ago. They have only avoided that by printing more money to pay off the debts, causing inflation.
Remember the Government telling you that a certain amount of inflation is a Good Thing? Uh-huh. I knew you would.
Data source?? (Score:5, Insightful)
CostOfWar.com: BOTH wars cost $1.1 trillion
According to the CBO, the cost of Obamacare alone: $2 trillion
First of all -- where are you getting that $2 trillion figure? Sounds like a talk radio number, honestly. Your argument is really very uncredible if you don't link to a reputable source. You're at your computer right now -- you don't have to do this stuff from memory.
Re:So does anyone really think... (Score:5, Insightful)
What is "essential" about the government increasing its budget by around 50% in the last 10 years? While at the same time, services have downgraded?
Get a grip on reality, my friend. Before it bites you in the ass.
Re:WTF that wasn't supposed to happen!? (Score:4, Insightful)
We needed Obama to be a tough negotiator and instead he consistently gave the republicans everything they wanted. So yeah, thanks a lot Obama.
Re:probably should have been lowered anyway (Score:5, Insightful)
The problem is beyond partizan. What the US government does now is fiscally irresponsible. It's like getting another credit card to pay your credit card debt with.
The only reason the credit rating isn't dropping faster than knickers at a school dance is that the companies who do the rating have a vested interest in the rating being good.
To put the debt in perspective, they've now raised the debt ceiling to almost 16.4 trillion dollars. The total income tax in the US is around 1 trillion dollars. So if the politicians froze the debt ceiling and cut all spendings to stay within the budget, doubled everyone's income tax, and earmarked the extra tax to go to pay down the deficit and nothing else, it would take around 25 years to do so, with interest. That kind of tax increase clearly isn't going to happen. Even if the US completely shut down the military, it will take multiple generations to pay this back now. Just the interest alone is around 25% of your income tax.
In short, we're insolvent, but the creditors can't afford to call us out on it, or their IOU chits will become worthless.
But sooner or later, some big creditors will have to cut their losses. Enjoy your life while you can, because this ponzi scheme will burst - they always do. What happens then is up to your imagination. Civil war and declarations of new countries is likely - it may be the only ways out of the existing debts. Other countries won't be able to help; they will be busy enough trying to survive the domino effect when their investments in the US collapse.
AIG in 2008 was safer than U.S. Treasury in 2011? (Score:5, Insightful)
It's just hard to believe that the U.S. Treasury is now considered a riskier borrower than AIG was in 2008. It's also ironic, since a good part of the U.S. debt burden was incurred bailing out AIG and the rest of the financial industry (which assumed AIG credit-default swaps would protect them, in part due to S&P's high rating of AIG).
Re:Obummer (Score:4, Insightful)
Thank you Tea Party... and GOP ... this is 100% your fault.
YOU guys manufactured the fake crisis, and then insisted on no revenue. S & P specifically stated that it was because of the lack of new revenues that they did the downgrade.
We need to vote ALL the Tea Party morons out of office. And most Republicans. How Eric Cantor or Mitch McConnel live with themselves, I don't know. We know Boehner just drinks a lot.
Ugh. Stupid right-wing nut jobs.
Main thing is the bond markets (Score:5, Insightful)
While the credit rating thing is unprecedented and sort of iconic moment, the real test of the credit-worthiness of the USA will take place in the bond market.
And what do these people vote? (Score:5, Insightful)
The republicans are pretty damn obvious with their policies, cut back anything that benefits the poor and keep and increase benefits oops tax cuts for the rich. They don't even bother to try to disguise this as trickle down economics anymore.
Yet West Virigina, which you claim is filled with poor people, colors very red on the election maps I can find.
But hey, if I am a small shop-keeper why should I pay for medi-care or social security for other people. I AM NOT UN-EMPLOYED, I got my own business, I don't need a handout... why isn't there anyone in my store? People to afraid to spend because if they loose their job they need every penny they got? Oops, now my store has gone bust... I need social security to stay alive!
Really, the republicans in the recent debt talks insisited openly that a tax cut for people making more then 250.000 dollars introduced by econimic wonder boy Bush was extended. And every single republican making less then 50.000 was in favor through their vote for the republican party. Because when you are on minimum wage, guys making a quarter of a million are your first priority.
It must be the American dream. Someday I will be rich so I better make sure I vote in the tax cuts for my future self right now.
In most of the rest of the world people vote in social security should their future self need it.
At 25 I stopped drinking to save the liver of a 40 year old man. An American commits suicide at 25 to stop a man from dying at 40.
Washington will take care of Main Street when the people in Main Street stop making it very clear with their votes that the people in Richville are their main concern.
Re:Obummer (Score:5, Insightful)
At very least the Reps and Tea Party should split into two parties so people can choose which one they vote for. Of course that's not going to happen, the TP wants to piggyback on the strength of the Reps in the two party system.
This lowers credit standing of all US businesses (Score:3, Insightful)
Lowering sovereign debt rating means that all businesses and individual ratings in US are also now lower than before. That's because sovereign debt rating is always considered to be the highest rating and all other ratings are below it. Of-course that's because the government can unfortunately print money and companies/people cannot legally do that.
Of-course being able to print money is the reason that the credit rating is lowered for USA, and AFAIC the rating of any entity that can print money should always be the lowest out of all businesses that actually produce something. If you can print money means that you can monetize your debts, and that's default. US government has been defaulting for decades now, always printing more money, always issuing more debt, never paying debts out.
This credit lowering is of-course political, everybody knows US bonds are junk and US debts will not be paid with anything of any value.
Now think about how much harder it will be for businesses to get credit in US that government credit rating is lowered. This is what I am talking about when I say that government credit crowds out private credit and prevents any business activity because government gets all the credit first and whatever measly leftovers go to some businesses for investment (if any is going there in a country that decided that destroying its currency and thus investment capital is the way to go, while also destroying business via most regulations in the world and some of the world's highest taxes on work and with most debt in history of the world.)
The fix for the economic problems requires cutting the spending of government by some enormous amount, as during the 1921 depression, which ended in 1923, the government spending was cut by 70%. Of-course at that time personal savings were high, country had an enormous manufacturing sector and was largest creditor in the world. Today none of that is true.
The real GDP is much lower than the government admits at the very minimum because the real inflation is about 13%, not 2%, and they must deflate the GDP by inflation number, and since this year the GDP is seeing under 1% growth, last year it was 2.9% and years before that it was shrinking, the real GDP has actually being shrinking by maybe 10% a year for years now.
So when you are talking about tax to GDP ratio and saying that in US the taxes are lowest ever compared to GDP, this misses all the important points: GDP is shrinking and in absolute terms taxes are highest ever. The raising of taxes on only the 'rich' will never do the trick. The most economic activity and money is in the middle of the country, so if you want to raise taxes to raise government revenue, that's where the taxes will go up, while the 'rich' will simply move their money quicker than they are doing now and you will see even less of revenue from them.
The only solution is enormous cuts, and that's the politically impossible solution because the people are bought by the promise of cradle to grave welfare state, and it's an impossible promise.
Re:WTF that wasn't supposed to happen!? (Score:5, Insightful)
Yeah, because he had so many other choices that it must be his pure evilness that he picked exactly this one after taking over a flaming train heading to a wall with the breaks being removed.
Seriously, if anything this reaffirms my suspicion that the Reps sent the McCain/Palin team into the prez race of 2008 to make sure they can't win and be blamed for the crashing and burning waiting to happen. It was by some margin the most ingenious planned defeat ever. Now the Democrats will be the ones being blamed for the recession that was obvious and to be expected by no later than 2007. If it looks like we'll be out of this mess by 2016, they'll send a winning team into the prez battle next year and emerge as the shining heroes that put the country back on track after the Democrats ran it into the ground. If it doesn't look like the US are out of the shit by 2016, they'll send two more duds into the battle.
And help us God if the Dems catch on and do the same.
Re:They weren't thinking about it though (Score:3, Insightful)
Not that I care, the other credit ratings maintained the US as AAA status, so it's not a huge deal at least yet.
Re:Easy solution (Score:5, Insightful)
Time to start cutting Federal programs we can no longer afford.
Works for me. We can start by cutting the military budget in half. No need to be the world's policeman anymore.
It is a TEA (party) tax (Score:3, Insightful)
I'd like to thank the TEA Party and the Republicans for this 10% tax on my ( and everyone else's ) 401K.
Re:probably should have been lowered anyway (Score:5, Insightful)
There is not a single media organisation in the United States that espouses any kind of opinion that's even remotely "left of center". Your nation has drifted so far to the right you've no perspective left.
Re:probably should have been lowered anyway (Score:5, Insightful)
Fiscal policy does not work that way. As long as you keep the economy growing, you will be able to outgrow your debt or at least manage your debt load.
It is analogous to if you take out a loan to start a business, as long as your business grows and you have sufficient revenue to meet operating expenses to service your debt, you are creating wealth.
However, the problem we have is that in the good times, no only did we not pay down our debt (which we were very close to during the Clinton years), we blew it on a few wars and on tax cuts/refunds.
Now times are bad and we are at a crossroads, but it is completely a manufactured crisis. The reason being is that what the markets are looking for is for the government to commit to a plan to close the fiscal deficit gap. This usually means passing some legislation to reduce spending and to increase revenue over X number of years. And anything can happen to the economy in the long term, this commitment through legislation is always really just an "understanding". However, we failed to pass this because we have obstructionists in government that mask their flawed esoteric agenda as the new populism.
Working to make you miserable when you are old. (Score:4, Insightful)
Michele Bachman and other TEA/Republican party members got on the television last week and told the American people flat out that the U.S. government defaulting on its debts wouldn't hurt anything.
Now we have this new economic burden as a result of only solving that argument too late.
I don't expect anyone who is a Republican or a TEA party member to admit that they were wrong about that. People who supported playing chicken with the U.S. economy last week just don't have the character and integrity.
I hope OTHER people now see what these people are about. They are angry, ignorant and DANGEROUS denialists just like the people who will not vaccinate their children and who believe global warming is a hoax.
They call it Synergy. (Score:2, Insightful)
I've read that this credit rating downgrade will result in at least a 10% loss in most American's 401Ks. This was the result of the Republicans and TEA party playing chicken with the U.S. Economy during the debt ceiling negotiations.....which they did so they could cut money from medicare.
If their conscious, stated goal was to make Americans poor and miserable when they are old, then this "serendipitous" result would be called synergy.
Re:Mod parent up. (Score:4, Insightful)
The politicians certainly bear blame, but the fact is that a lot of voters have gotten fed up with debt as well (and not just in the US). That trend is likely to continue, which means that future politicians voted in will feel less bound by enforced debt incurred against the electorates wishes. Drag it too far beyond what the voters willingly condone and you start getting politicians whose campaign promises include defaulting.
Still, the US hasn't deserved an AAA rating in a long time. With the Fed printing dollars like there's no tomorrow, the dollar weakness means you're not getting back anywhere near what you invested.
Indeed (Score:3, Insightful)
S&P had such a major effect when they downgraded Japan's debt in 2002!!!!!! I'm sure S&P etc are still hoping for another 4 or 5 disasters to make that come true. Let's of course, not forget that S&P rated the rags that we previously knew as collective mortgage assets AAA up unto the last day... and I'm supposed to invest? Heh.
Re:WTF that wasn't supposed to happen!? (Score:5, Insightful)
Allow me to elaborate on that. Just in case any teabaggers are reading and not realizing what "cutting tax" really means. And please don't take that 'you' used below personally, English just lacks an impersonal pronoun.
Because for most Americans, cutting taxes means less money in their pockets. Not more.
Tax money is the government's income. It might surprise you, but the feds don't just eat those dollars. They spend it. On YOU, no less. Cutting incomes means for the government the same an income reduction means for you: They can't spend as much. Since they spend it on you, that means less money gets spent on you.
Now, of course, one might argue "hey, who cares? The money I don't have to give them I can spend myself!" True. Very true. And if you earn in the six digits (and not the lower ones), it actually means you gain a lot with every percent tax you pay less. Else, it means that you now have to buy something or pay for something the feds paid for earlier. Because, as it is in our world, TANSTAAFL. Someone has to foot the bill. And if the feds can't, you have to.
Again, who cares? So I pay for it with the money I save on taxes!
No, you do not. You can not. Unless of course you're one of the 6 digit earners. If you're not, you will not be able to afford it. For the simple reason that those that earn more, and hence pay more tax, paid that for you while taxes were high. Allow me to give you a simple example:
Let's assume a flat tax of 10%. Yes, I know progressive tax, but progressive tax complicates the example and it's already evident with a flat tax system. A progressive tax system only aggravates it and makes it more blatantly obvious, but the flat tax already shows it nicely.
Let's also assume that I earn 100k a year, you earn 10k a year. Yes, 10k. There's a lot of people who have to get by on that. At 10% Tax, I pay 10k a year and you pay 1k. Let's furthermore assume that school for a child costs 5k a year. Yes, in my example educating our kids takes up almost all tax. Bear with me, ok? So you have a child and so do I. In a 10% tax system, both can send our kids to school. For "free". Of course, it's not free because it's paid for with tax. But the government just had an income of 11k bucks, so paying 2x5k is quite possible for them.
Now let's slash taxes. From now on, we only pay 8% tax. Huzzah! You just saved 200 bucks in taxes! I saved 2000, but hey, who cares, you have 200 bucks more to spend now.
True. But unfortunately the government now only has 8800 bucks and thus paying for school is no longer possible. Cough up those 5k a year if you want your kid to continue enjoying an education.
It's a constructed example. Granted. But it should illustrate what "cutting tax" really means for the lower income brackets. It means having to spend more on what used to be "free" because the high income brackets paid for it with their taxes.
Please Remember This During Elections (Score:5, Insightful)
A lot of Americans will not go to vote for President Obama on election day because they are disappointed in his performance and that he has not lived up to 100% of their hopes.
Please don't be like that. Please remember this and go out to vote.
As we have seen the Republicans and the TEA Party are working hard to take things away from you.
This credit downgrade will make you lose money in your 401K and increase the costs of credit........whether buying a home if you are one of the shrinking middle class that can still hope to do that.....or starting a business.
Govenor Scott Walker cut people's jobs so he could give a tax cut to the reach and the TEA Party showed up to counterprotest the Americans who were fighting for their jobs.
Republicans at the state level fought to redefine rape away and to deny coverage for abortions to women as a result of rape.
That is what these people are about. Trying to take things away from you either by conscious design or ignorance. They are turning the US into a 3rd world country.
Please go out and vote to keep them out in 2012 elections.
Re:probably should have been lowered anyway (Score:3, Insightful)
I suspect you're European; not that it matters, but it's important insofar as many Slashdotters who participate in discussions related to US politics who espouse similar beliefs to yours are often unaware of their own bias, which has helpfully been created by their respective domestic media. Just as many Americans have significant misunderstandings of non-American culture, so do many non-Americans of American culture (and politics, media, and so forth). It's just unfortunate that individuals, like you, generally believe they're far more civilized (excuse me--civilised) and above such things, in spite of being almost as bad as many of my fellow countrymen in some regards. (With the exception that Americans are generally poor communicators and typically quite rude, depending on which part of the country they're from.)
My personal take on the media is thus; please take it as only an opinion, also rooted in my own personal biases, etc.:
"Mainstream" US media and talk shows (think the Daily Show, etc.): Left-of-center. Hard to believe? They're generally more critical of our political right and usually very receptive and supportive of our political left; think the opposite of Fox News, except without the fanfare since public perception on the Internet is largely in agreement with and supportive of these networks and programs.
Associated Press wires: Generally neutral. I tend to read the AP wire before anything else, because 1) I'd rather read the news than watch it and 2) whatever bias exists in an AP article is usually easy to detect; further, their articles are typically of good quality, although not quite as good as the BBC. They do report some sensational and "whacky" news, which is unfortunate, but I suppose everyone has to make money somehow.
Fox News: Right-of-center. As with the Daily Show and other left-leaning talk programs, Fox's right-leaning new commentary generally receives a bad wrap from viewership of the opposite persuasion. I understand that their business news is quite good; however, I don't watch it.
I'm probably wasting my breath considering you've already made up your mind. But in the offhand chance you're willing to listen to the opinions (which is all these are) of an American, it is here for you to read. I suspect I'm liable to be flamed for it. It seems that whenever I try to be reasonable and fair, someone with a vindictive personality has to come out and blast me. :)
Nobody with a brain takes S&P seriously (Score:5, Insightful)
The US government spends, what? 40% (and growing) more than it takes in?
The US hasn't deserved a AAA rating for years. Hell there are trillions in junk MBS which S&P rated as AAA. All you have to do is look at the direction of the chart to see if it is sustainable. Screw the rating agencies.
Re:They weren't thinking about it though (Score:2, Insightful)
...and didn't pay the bill to the FAA and loose MORE money in not getting airfare taxes.
I don't think you said what you thought you said. If they'd loosed the money, the FAA wouldn't have shut down. As Google says, "did you mean lose?" Seems to me that the airlines should be prosecuted for fraud for collecting and keeping money that was supposed to go to the government. Collecting those fees (taxes!) was thievery.
Sorry, I'm already in a bad mood and the aliteracy struck a raw nerve. I'm misusing the word "aliteracy" here, or perhaps redefining it -- reading nothing but the internet isn't reading.
I'm in a bad mood precisely because of this topic. Stupid teabaggers. Look, I'm 59 years old and Federal taxes are lower than they've been in my entire life! The Tea Party was started by the unpatriotic billionaire Koch brothers, and idiot low class and middle class dimwits are all for taking away the Social Security and Medicaid that I've been paying into all my life so the rich sociopaths can be even richer.
How's that 401k looking now, you dumb kids?
That's enough ranting for now, I'm off to a different topic. I ranted [slashdot.org] about this very thing in my journal yesterday and the day before [slashdot.org]. It pisses me off that the dimwitted teabaggers want to help the billionaires steal even more of my money. I've been to the ballot box and the soap box, there are two more boxes left. The Koch brothers better have some damned good security; I'm not armed, but most guys my age are.
Wake up, people. And get off the internet and read a book; I'm in the middle of Fred Pohl's newest one right now ("All the Lives He Led", published this year).
I just hope congress will do something instead of blaming each other.
Both sides are at fault. But I covered that in Thursday's journal.
Re:Will any investors care? (Score:5, Insightful)
A lot do look up the ratings. Institutional investors (aka the 401k investors spending billions on your and my behalf) are required by law to only buy AAA rated investments. So now there will be a lot of them scrambling to find another investment to put their billions into so that they don't go to jail.
Re:Two things... (Score:3, Insightful)
Re:So does anyone really think... (Score:4, Insightful)
the GOP refuses to allow taxes to rise high enough to pay for essential spending and pay off our debts
Do the math. You could tax everyone who makes $1m or more per year (you know, the evil hated rich people) at a rate of 100% (confiscate all of their earnings for the year), and it wouldn't close the deficit - not even close! - let alone pay down the debt. You want more tax revenue? Do the things that allow the taxable economic activity of a non-stagnant economny to come back to life. Essentially, undo all of the things that this administration has actively done to squelch economic activity, stifle the start-up and growth of businesses/jobs. The key to having a large tax base is to allow the economy to actually work. Taking larger percentages of a diminishing flow of cash is exactly the dis-incentive that prevents that from happening.
... completely disengenuous BS.
Not that you don't already know these things, of course - you just don't want to call all of this what it actually is: spending wildly more money than is available, and holding the position that the minority of the people in the country who pay income taxes - and the very small minority of them who pay the vast majority of those taxes - are somehow insufficiently taxed, and that's why we're trillions in debt
Re:They weren't thinking about it though (Score:2, Insightful)
BS
Compared to most countries the US is fine with the debt to assets ratio. We are not Greece or close to it. Japan has twice as much as the US and now has the same credit rating. How is that fair?
The tea party and the abuse of the fillabuster created this. Since no one can vote they purposedly waited then quickly tried to strong arm the President to get rid of the new deal or else they will harm America. Now they blame Obama as it is his fault for not screwing the poor and senior citizens. Fuck em.
The US has plenty of money still even in a recession and the problem is both a spending (American Reinvestment and Recovery Act) and lots and lots of tax cuts for the wealthy and job creators. They would rather have grandmas bag groceries and work 2 jobs then to give up their tennis courts and yatchs while the Chinese work 16 hours a day to pay their lifestyle since they are too cheap to hire Americans. They made sure the Republicans would not raise taxes OR ELSE.
Do I think the rate of spending is sustainable? No. Does it need to be cut? Yes, but right now is a terrible time and all the was a show to make sure a Republican can be in office in 2012.
Stopping fillabustering needs to be done as this abuse is what they republicans used to gain power by making the democrats look incompetent. Make sure the far right wing got their way when the democrats were in office. This downgrade is dangerous as many banks have treasury bonds with customer requirements stating must have certain percentage as AAA and so on.
Sorry if my post was strong as I tend to lean republican the past few years but I am very angry and think this is dangerous. I am not a troll in any sense of the means. The US has been responsible and has plenty of capital to pay its debt in the short term future regardless of Ron Paul and FoxNews have to say.
It does not matter if someone wants to do something about spending if they play a game of chicken and scare investors to fullfil some guys pledge at the expense of the people to make a point. Now with spooked investors it will be harder to pay it back. The US is not the same as a person that keeps taking on debt. Infact the debt ceiling is more akin to paying an existing bill rather than additional spending.
My fear is this abuse will be used to ban abortition, unions, campaing finance reform, and anything the far right wing wants or else they will harm the financial system. This will surely keep the bond ratings downgrading time and time again and it is not right.
Re:Obummer (Score:4, Insightful)
Party politics aside the US government is borrowing too much money.
It has little chance of ever paying the national debt back without truly drastic measures.
Re:WTF that wasn't supposed to happen!? (Score:5, Insightful)
The rich should not pay more in the proportional sense. What gives you the right to profit by someone eases labor? Similarly the banks and the wealthy people who own them should not have been given bailouts they have no right to your labor. The PROBLEM with this country is this business of redistribution where everyone rich and poor a like feels entitled, and charity is done at gun point. The direction of the flow being determined by the political whim of the moment.
Oh and the fact that we go on these ridiculous military adventures for "humanitarian" reasons while we selectively ignore suffering elsewhere because they have oil, or it might irritate China, or Russia. What this nation needs is a heavy dose of 19th Century political thinking. 20th Century politics are FAIL, let us not wast the 21st with it.
Re:Two things... (Score:3, Insightful)
That does not fit the data. The right has been completely unwilling to compromise. They essentially took your country hostage over their radical demands.
http://www.nytimes.com/2011/07/05/opinion/05brooks.html?_r=2&hp [nytimes.com]
Re:probably should have been lowered anyway (Score:5, Insightful)
I'm a European and, from where I'm sitting, the problem isn't cultural bias on either side. It's the way any criticism of any aspect of American culture results in "individuals, like you, generally believe they're far more civilized (excuse me--civilised) and above such things".
Suggesting that America is far to the right compared with most other countries isn't about hating America. It isn't even necessarily a bad thing. It's a simple observation. Most of the policies of American democrats look moderate-right in a European context. The current French government is hard right by European standards, despite being more interventionist and more wedded to the public sector than any American politician I have ever heard. Nationalising popular music, anyone? Imposing a legal quota for French music played on private radio stations? Government purchases of old cars about every second year? Social charges that are over a third of income for most people? Five weeks statutory vacation a year plus a dozen national holidays? How much of this is in the Democrat manifesto?
So when right-leaning Americans talk about Democrats as if they are virtually communists, it really is very hard for anyone outside America not to burst out laughing.
Re:Two things... (Score:4, Insightful)
Re:So does anyone really think... (Score:5, Insightful)
I say, lets return to the fiscal policies of January 2001.... remove the bush tax cuts....End Medicare part D....end Medicare Advantage...... remove the oil subsidies..... end the wars over seas...
With those moves we will be back in black.
Re:WTF that wasn't supposed to happen!? (Score:5, Insightful)
The gold standard served to keep a lid on the GDP to debt ratios though ... which is why Nixon got off it (the oil based trade deficit necessitated an ever increasing debt to GDP ratio to maintain economic growth in the non oil producing countries).
That said, I fail to see a reasonable alternative ... if the world is ready to give you oil for IOUs for decades at a time allowing you to maintain a much higher standard of living than otherwise possible, why not take the deal? You can always default on IOUs ... of course you do need to have contingencies plans for the inevitable default.
If we had started building trillions worth of nuclear and solar-thermal plants instead of fighting 2 completely fucking useless wars we could have weaned ourselves off our oil dependency ... now we're quite simply fucked, there is no solution. Just a great decline (not a depression, a depression suggests a dip ... while we are going to experience a great reset, with no accelerated growth at the end).
Re:They weren't thinking about it though (Score:5, Insightful)
This is typical Republican bullshit. I don't have time to pick apart your post, but let's just take this, a particular hot-button topic I've seen:
When people sign for a mortgage they could never afford...
As it turns out, I bought a house right at the start of the housing boom. Living in a family predominantly of homeowners, I had a lot of people offering me good advice. A couple of the best pieces--things I wish that everyone had known--was 1) get a fixed-rate mortgage, not an ARM, and 2) the bank will approve you for a lot more money than you can afford. Figure out how much you can afford before going to the bank, and don't go over that amount. There were a few other things, such as don't use your real estate agent's mortgage broker because they can collude in ways that are not in your best interest, but those were the biggies.
So in my particular case, I decided that I could afford a $200,000 house. I took that information to the bank to get a loan. The first thing that got on my nerves was that he was trying hard to get me into an ARM. In fact, when I mentioned that I wanted a fixed-rate mortgage, he rather treated me like an idiot at my insistence that I wasn't interested. He told me how unlikely it was that interest rates would ever go up, how my payments would be so much cheaper, how I was basically gambling that things would change in ways they couldn't. At one point, he even said, "With real estate values rising like they are, you may even want to consider an interest-only loan, live there for a few years, and move. A lot of people are making a lot of money that way.
The second thing that got on my nerves is that he tried hard to upsell me on a higher loan amount. He told me that really, with my income, I could be looking in the $300,000 range instead. He pointed out that the increase in my mortgage wouldn't really be much of an increase, thanks to the mortgage deduction on my taxes. He pointed out that if home prices go up, they will go up a lot more on a $300,000 house than on a $200,000 house.
Now, keep in mind, this is MY BANK. (A bank, by the way, that I have since fired, and a bank that I ended up not using to finance my mortgage.) Supposedly someone who is an authority on mortgages, someone I'm paying to look out for my best interests. As the housing bubble collapsed and so many people got stuck like they did, I couldn't help but think back on my own experience getting a mortgage. Had I not been lucky enough to have people I trust who were homeowners offering me advice, I might very well have believed that slime. Everything he was telling me seemed to make sense as I was in that office talking to him about home loans. He told me that housing bubbles like the one we're coming out of could never happen, yet here we are.
So yeah, go ahead and pretend like it's all those malicious and stupid people who are responsible for our problems, and they deserve to be thrown out on their asses. I was there, I know the pressure they faced, and I have firsthand experience of what the banks were doing to try to keep their pyramid scheme going. They lied and misused the trust people put in them to cause this mess, and for the most part, got away with it scott free.
Re:It is a TEA (party) tax (Score:4, Insightful)
90 democratic congressmen could have rendered the Tea Party congressmen irrelevant, but chose not to, why not?
Re:WTF that wasn't supposed to happen!? (Score:4, Insightful)
Spending during difficult economic times should be higher than tax revenues. It's not unreasonable that the US government be borrowing heavily right now. The problem is that politicians never prepare properly for the next recession by stabilizing their budgets and then paying down debt. Then recession-time governments have room to respond....except, of course, politicians would always prefer to spend their successors' tax revenues to buy popularity rather than do the right thing. GWB was borrowing heavily at a time when he should have been paying back debt; so was Gordon Brown in the UK; so were many of their predecessors. Even when debt was paid back its always been half-heartedly. Greek and Italian politicians have spent years dodging fundamental problems partly by borrowing because its politically easier (deal with corruption in the tax departments and break down entry-barriers to industries that let insiders do a cushy job badly at everyone else's expense [gasp], no way!). And its US government debt which has helped China keep its currency artificially low and allowed the US to import from China without needing an export industry.
What really is shocking to an outsider is the ludicrous, fantasist faction of US politics that treats tax rises of any kind as the ultimate governmental evil. Even if the budget were balanced right now there are still huge quantities of government services provided years and decades ago that haven't been paid for. The US population needs to accept it must start paying for those soon, and hopefully learn that it needs to keep its politicans spending under control even when things are good and there's a republican in charge. And, personally, I think a good way to do that would be to impose an income tax separate to the normal budget of something like 1/20th of the national debt as a percentage of GDP, adjusted anually. Having taxes go up whenever the debt goes up should at least get people's attention.
Re:Obummer (Score:4, Insightful)
Re:WTF that wasn't supposed to happen!? (Score:4, Insightful)
Re:Obummer (Score:5, Insightful)
You do realize Obama was left with a clusterfuck from Bush and did massive spending because most of his economic advisers said that was the only way to head off a major depression don't you?
Group Think fail (Score:2, Insightful)