And Down We Go
Well, someday has come:
Standard & Poor’s announced Friday night that it has downgraded the United States credit rating for the first time, dealing a huge symbolic blow to the world’s economic superpower in what was a sharply worded critique of the American political system.
Lowering the nation’s rating one-notch below AAA, the credit rating company said “political brinkmanship” in the debate over the debt the debate over the debt had made the U.S. government’s ability to manage its finances “less stable, less effective and less predictable.” It said the bi-partisan agreement reached this week to find $2.1 trillion in budget savings “fell short” of what was necessary to tame the nation’s debt over time and predicted that leaders would have no luck achieving more savings later on.
A Treasury spokesperson took the tack of belittling S&P, which is fine, as far as it goes, but won’t do much to correct the nation’s course.
Laughing my ass off. Italy has promised the EU that it will propose a balanced budget amendment, has committed to balancing their budget in 2013, and has promised to deregulate to promote growth. That’s right, friggin Italy. What’s wrong with this picture.
You can thank the tea party republicans for this. Their insistence on not raising revenue through taxation is one of the factors that led Standard and Poor’s to take this action.
That would be wrong again Phil:
“On Aug. 2, President Barack Obama signed legislation designed to reduce the fiscal deficit by $2.1 trillion over 10 years. But that was well short of the $4 trillion in savings S&P had called for as a good “down payment” on fixing America’s finances.”
CNBC
The simple fact is that both parties got us in this mess with many years of overspending. The Dems caused it to spiral out of control under Obama, Pelosi & Reid. I think the downgrade was deserved if we look at the facts and take our American pride out of the equation. What is needed is aggressive spending cuts combined with a growth agenda. This is not the time to raise taxes.
“A Treasury spokesperson took the tack of belittling S&P”
Oh, that’s helpful. And mature.
France’s per-capita debt is a good deal higher than ours, but they kept their AAA.
S and P is basically telling our political leaders to cut the crap.
Actually, according to Matt Allen on the radio last night, Phil is correct. It’s not the only reason, but it played a part in the decision. This is another reason that you have to wonder if S&P is making a bad decision. They’re partially basing the downgrade on things politicians have *said* not things that they’ve *done*. S&P is putting that factor into their decision-making. If that is the case, one can see why they’d get belittled.
Patrick writes:
“They’re partially basing the downgrade on things politicians have *said* not things that they’ve *done*. S&P is putting that factor into their decision-making. If that is the case, one can see why they’d get belittled.”
S&P is in the business of predicitng the future, so, they incorporate thisngs which are “said” or threatened. If they waited for them to actually be “done”, they would be predicting the past.
This could be a good thing in the long run. We’ve been waving around our AAA credit rating like diplomatic immunity at the end of Lethal Weapon 2 and we’ve been long overdue for a downgrade. Maybe this will bring some of the spendoholics in our government back to reality. The “let the experts figure it out and everything will be okay” mentality has to end.
France’s per-capita debt is a good deal higher than ours, but they kept their AAA.
Posted by bella at August 6, 2011 7:50 AM
Just plain false. France has a stable debt-GDP level of 83% while Obamaland just hit 100% Wednesday and is rising like a bottle rocket.
Bella and Tommy,
The official downgrade statement from Standard and Poor’s has 1) an 83% debt-to-GDP number for France in 2015 2) a 79% debt-to-GDP for the US that year 3) but the French debt-to-GDP declining by 2015, while that of the US continues to grow…
tinyurl.com/44xrv4f
“S&P is in the business of predicitng the future, so, they incorporate thisngs which are “said” or threatened. If they waited for them to actually be “done”, they would be predicting the past.”
Well, if that’s the case, then why not get all 536 people involved to come out and publicly say “We’re going to cut all spending, cut all waste, lower taxes and pay off our debts immediately.”
Then would S&P raise it back? Or would they wait to see if they actually did it?
Laughing my ass off. Italy has promised the EU that it will propose a balanced budget amendment, has committed to balancing their budget in 2013, and has promised to deregulate to promote growth. That’s right, v. What’s wrong with this picture.
Posted by Max Diesel at August 5, 2011 10:19 PM
Actually, “friggin Italy”, with a rightwing government has a deficit-GDP ratio of 4.5% and will balance its budget in 3 (maybe now 2) years.
In Obamaland we have almost 11% deficit-GDP level-right in line with hopelessly bankrupt Ireland- and it stays around 10% “forever” under last weeks so called “deal”.
“Forever” being defined as “until complete Greek/Irish style collapse”–figure 3-5 years.
Posted by Patrick at August 6, 2011
“We’re going to cut all spending, cut all waste, lower taxes and pay off our debts immediately.”
Then would S&P raise it back? Or would they wait to see if they actually did it?”
They would probably wai to see if there was some action. It is the old “You only get one chance to make a first impression”
Andrew and others- Don’t be fooled by that “net debt” figure. It includes the fake SS Trust Fund as an asset! The real figure is the gross debt-GDP ratio, which sadly passed 100% Thursday. See- US borrowing tops 100% of GDP: Treasury AFPAFP – Wed, Aug 3, 2011 * The US Capitol is reflected in the water surrounding the skylight of the Capitol Visitor Center on Capitol Hill in Washington, DC, in July 2011. US debt shot up $238 billion to reach 100 percent of gross domestic project after the government’s debt ceiling was lifted, Treasury figures showed Wednesday The US Capitol is reflected in the water surrounding the skylight of the Capitol … * US President Barack Obama walks to the Rose Garden to speak to the media at the White House in Washington, DC, on August 2. US debt shot up $238 billion to reach 100 percent of gross domestic project after the government’s debt ceiling was lifted, Treasury figures showed Wednesday US President Barack Obama walks to the Rose Garden to speak to the media at the White … US debt shot up $238 billion to reach 100 percent of gross domestic project after the government’s debt ceiling was lifted, Treasury figures showed Wednesday. Treasury borrowing jumped Tuesday, the data showed, immediately after President Barack Obama signed into law an increase in the debt ceiling as the country’s spending commitments reached a breaking point and it threatened to default on its debt. The new borrowing took total public debt to $14.58 trillion, over end-2010 GDP of $14.53 trillion, and putting it in a league with highly indebted countries like Italy and Belgium. Public debt subject to the official debt limit — a slightly tighter definition — was $14.53 trillion as of the end of Tuesday, rising from… Read more »
“They would probably wait to see if there was some action.”
Warrington, I’m confused. First you said that they’re reacting to what politicians are saying because they’re in the business of predicting the future, but then in the response above, you’re saying they’re wait and see, which contradicts your earlier statement, and that they would then be making predictions on the past. It seems you’re describing them having it both ways. Either they should always base ratings off what people say they’re going to do or they should always wait and see and then base ratings off what did happen.
Patrick,
Your argument would have some basis were it not for the fact that any full assessment will take into account the likelihood that a particular person’s words will match his future actions. Such assessments can change based on the past behavior of those people.
That is, it’s reasonable (if optimistic) for a rating agency to take the view that politicians will “figure something out,” but then to insist that the time has come for them to start showing some real capacity for grown-up budgeting.
“Actually, “friggin Italy”, with a rightwing government has a deficit-GDP ratio of 4.5% and will balance its budget in 3 (maybe now 2) years.”
Actually Tommy, my comment was criticism of this country which doesn’t have the wherewithal to get it’s game together. While I would have to see what was in their balanced budget amendment, I applaud their efforts to get their house in order.