Aug 06 2011
America Loses AAA Rating Due To Arrogant Elites In DC
Update: This is the most heart wrenching, bleak assessment of our economy I have seen. It points to the results from all the failures of the liberal left – from messing with mortgage lending rules to trickle down government stimulus. And it is why we cannot afford for any more naive liberal fairy tales and policy blunders when it comes to assuring a sound future for our children. – end update
Update: A hat tip to Ed Morrissey for noting this WSJ interview with Eric Cantor on what drives the DC Dems right now -and it ain’t fiscal sanity but only a stubborn belief in a liberal fantasy straight out of TVLand. – end update
S&P’s downgrade of America’s long term credit should not be a surprise to anyone, especially after the fiasco that was the debt limit debate. S&P has been warning for months that our out-of-control spending was going to force us into losing our AAA rating. As Ed Morrissey points out, the reasoning is obvious and bullet proof:
I’m most amused by the shock, to tell the truth. S&P didn’t say anything yesterday that was not common knowledge and common sense. If you had to rate a potential investment that had an income of, say, $22,000 a year but had costs of $37,000 per year, a standing debt of $143,000, and contracted future debt that exceeded $1 billion, would you give that investment a gold-plated AAA rating and buy their bonds at the lowest interest rate possible, or at all? Of course not, but that’s exactly the fiscal situation of the US, at a 100000:1 scale.
And this situation has not been lost on the American voter – who spoke loud and clear in the 2010 elections. New Tea Party members joined new libertarian, conservative and independent allies in the House of Representatives to put and end to the mindless auto-pilot that DC has been running on. That election was a clear indication from We The People that business-as-usual must end and now. But too many in DC wanted to ignore the ramifications of that election process, ignore the people speaking loudly, clearly and in unity from the voting booth last fall. And it is those arrogant and stubborn DC elites who brought this upon this nation.
S&P is quite clear and rational when they make these points about where we ended up after the debt ceiling nonsense:
We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.
No surprise here. The Congress and White House kicked the can down the road as I noted last week. There are no real cuts until 2013 since the only near term cuts reflect about 1.5% of the annual deficit as it stand this year. When your expenditures run 70% ABOVE your income, a 1.5% adjustment is not going to indicate a serious change in fiscal direction.
But this also caught my eye because S&P tried to be apolitical and claim a pox on both parties:
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.
Here’s the rub on trying to either blame the newly elected representatives in the House who stood firm and demanded basically the same thing as S&P did (fiscal sanity) or in playing the equal blame game. Only one party refused to recognize the 2010 elections happened. Only one party tried to claim there was no message in 2010. Only one party has ignored the will of We The People and stubbornly tried to continue down the path that is causing not only the fiscal madness, but is also the reason the voters sent a historic message to change paths – now.
And that Party is led by President Obama and Harry Reid, both completely dysfunctional leaders. They live in the most rank areas of the DC bubble, where they think even elections cannot touch them. They are the lofty denizens of Mt Olympus, whose typical reaction to an energized grass root movement is irritation and insults.
Democracy only works if the leaders LISTEN to the voters. The voters did not want empty and useless promises of future deficit reduction. There NEVER has been, nor ever will be, future cuts – we have heard this tried song for too long. Politicians who want to make a living on Mt Olympus dare not try to cut a damn thing, or else the will be tossed out of heaven. That is what stinks about the deal we just got stuck with. All spending, no real cuts and a super congress of 12 hand picked (not by the people mind you) demigods who will only mute the messengers sent to DC by the voters.
DC is nuts if it does not think the people will tear down this mess if it does not get its act together. There comes a point where things are so screwed up nothing is worth salvaging. Many of us can see we may have already passed that point. And that force for change exists in the most powerful segment of America – the middle and upper middle class. The rich have individual power, but they do not have collective power. The Elites may delude themselves as they babble inside their bubbles and deny the forces gathering outside. But that is just denial, not leadership and not salvation.
Here we are with a downgraded credit rating, a debt that ballooned massively in less than 5 days after the limit was raised underpinned by useless promises of future fiscal sanity from a group of incompetents that brought is all of this mess. And on top of all this the US Postal Service comes out and claims it is bankrupt.
The people understand the only way out is to throw all the bums out, tear down their icons to stupidity and start over. I would never think the polls could go lower than now, but after this I think we will be trolling the depths of American frustration as they await their next round at the voting booth.
We now MUST fight this and not let it get us down. THAT is exactly what the Left wants to happen: demoralize us. What they don’t understand because it is not in their DNA is that we are WINNERS and we don’t accept defeat. We don’t play victim and we don’t suffer fools easily.
It is time for honest anger to rise to fuel our courage to restore our nation to greatness…a greatness we have had for over 232 years and one which did NOT need “TRANSFORMING.”
WE WILL NOT TAKE THIS ANYMORE! And that includes republicans who have enabled this.
The right terms for “republicans who have enabled this” is REPUBICS or RINOs.
Found this at FREEREPUBIC….FANTASTIC.
Small Businesswoman’s Epic Rant Against Obama’s Disastrous Economic Policies
August 6, 2011 1:48:51 PM MDT · by Justaham · 13 replies
Breitbart.tv ^ | 8-6-11
This is brilliant. Just brilliant. A must see video.
The crowning achievement that President Obama will be remembered for in the history books will be as the President who ruined America’s credit rating.
This was a very predictable result based on the net capital disinvestment @ 18 months ago (+/-6 months), i.e., of reinvestment in existing capital stocks falling below replacement level.
American tax revenues rely very strictly on employment, AKA sales taxes and income taxes. If capital investment tubes from bad government domestic policy — taxes, regulation, corrupt practices, politically inflicted fear, uncertainty and doubt — so will employment and government tax revenues as sure as night follows day.
Instapundit linked to this:
http://taxprof.typepad.com/taxprof_blog/2011/08/average-income.html
…showing that US Incomes fell 15.2% in 2009, AKA after Obama was President, while he was doing stimulus, auto company take overs, and Obamacare.
Future employment can also be predicted in the same way, and the current declining capital investment rates says this recession will get worse instead of better until we get a President who will start massive reductions in force of Federal employees, starting at the top, in the most oppressive regulatory agencies (See EPA, TSA, NLRB).
But things won’t really get better until the bad debts from the housing loan collapse are written off en masse.
That will happen only when the banks holding the mortgage bad debt are subjected to a cram-down of mortgage notes to real values and are turned over to their former bond-holders.
A savvy friend of mine — a political “semi-pro” — predicts it will be the spring or summer of 2014 when the next Republican President realizes that nothing else is working, and that he can be re-elected only if he does the cram-don.
That is because it will take 18 months for cram down’s impact until the economy recovers from the financial shock of cram-down’s implementation.
That is, if the next President delays cram-down past the summer of 2014, the real economic recovery won’t start until just before the election at the earliest, and the public will already have turned against him.
Like they have already turned against Obama.
It no longer matters what Obama does, let alone what he says. The public is fed up with him. It is now only a matter of how much damage Obama and his supporters do to the economy and the Republic before they are thrown out.
The Republicans actually did what they needed to do. John Chambers at S&P said that had the Senate passed and Obama signed the Ryan budget that the House sent to the Senate, the downgrade would have been avoided.
The House did what it could do. It sent a budget to the Senate. The Senate left it on the table. The onus is on the Senate Democrats and the White House to get their act together and cut $4 trillion in spending over ten years. That is what S&P says would have been needed and would have been a good “down payment” on the problem.
Why cram-down has to happen, via Instapundit:
http://pajamasmedia.com/instapundit/125714/
“Regarding David Inviglio’s contention that there is no explanation for why Americans would be running up credit while hoarding cash, I can offer one: negative real interest rates on some consumer credit.
I have a significant amount of debt I’m carrying, and I have enough cash and liquid investments on hand to wipe it out right now. Why don’t I do that? Because the debt is at zero interest.
With inflation getting in gear, why should I pay it off now when Ben Bernanke is devaluing it for me?
So long as I’m working (knock on wood), real carrying costs remain negative, and my investments beat 5% (and they do) there’s no reason why I would do otherwise.
Economic disaster doesn’t factor into my calculations, simply because my credit score would be the least of my worries by that point.”
We must be wide awake in our search for the next POTUS.
No squishes need apply.
We are at a point in time where only drastic cuts in real spending will bring us back to prosperity.
I am talking eliminating entire departments and agencys, drastically cutting the federal and state payrolls.
The cuts touted throughout this mess were merely cuts in factored in increases, no cuts to the baseline, no cuts to the budget, only cuts to the increases.
Baseline budgeting must be gone and real cuts in government expeditures applied if the country is to survive to provide basic services to the truely needy. Welfare roles must be scrubbed and able bodied Americans must be forced to support themselves regardless of their weight, their alchohol or drug habits, or their degree of sloughfullness. Social securtity will need to be means tested and severly cut with promises to the younger generations that the money they put in will mostly be there not stolen by pandering career polls to by votes. Bush tried this as he tried to reform Fannie and Freddie and was stifled at every turn by the very players who caused this mess.
Bush was good here but his perscription drug big spending social experiment allowed the ushering in of Obamacare which must be stopped in its tracks. Sadly no-one save a very few are even now articulating this. the career repubs seem intent on kicking this can down the road to the supremes and if they don’t come through this greatest rippoff of the taxpayer ever will become the law of the land.
The Fed has been complicit also. Interest rates have been held artificially low for a decade and their must be a wholesale audit and house cleaning at the Fed.
It will take a bold, innovative, agressive leader to confront these problems and articulate them to the American people.
The folks who are being touted as leaders by the establishment will not do. Anyone who hid in the weeds and took a stand only after the deficit battle was over are political panderers without the courage to articulate or stand by their convictions if they actually have any other than what the latest polls say.
The Republican House passed and sent to the Senate the Ryan budget. John Chambers said in an interview with Cavuto that passing that Ryan budget was one of the ways the government could have avoided downgrade. Another way was by following the recommendations of that deficit commission that Obama created and then ignored.
The Republicans have done their part. The onus is now on the Democrats to do something other than spend more money.
The Democrats want tax increases. Interestingly, the UK did that very thing two years ago. Now they are talking about rolling the tax increases back because they have resulted in a loss of revenue.
The Democrats want tax increases for the sake of tax increases. They, according to Obama during a 2008 debate with Hillary Clinton want to make things “more fair”. It is not the role of government to make life fair.
“The Democrats want tax increases for the sake of tax increases. They, according to Obama during a 2008 debate with Hillary Clinton want to make things “more fair”. It is not the role of government to make life fair.”
The thing about tax increases is that the government will always find a way to spend that revenue without making ANY real budget cuts. It’s like giving a drunk more money to buy booze.
So the Obama administration runs up our deficit to unheard of levels in the name of stimulus, and now they want to raise taxes to pay for it??? There is nothing “fair” about that!
The thing about tax increases is that at these levels of tax rates, they result in reductions in revenue and make the deficit problem worse, Congress’s need to spend all available revenue and then some notwithstanding.
Trent – I agree with you that a “cram-down” is the only viable solution in the long run, and that we will get there. But I don’t think you or any of the people advocating it truly understand the consequences, which is why it hasn’t been done so far.
I put them out here not to warn against them but to show just how distasteful the actions of the next Republican President need to be – they are going to be hard, hard, hard.
The key part is the hidden inteconnectivity, and interdendance, of the entier financial system. Every part of it is pledged as security for every other part, and once a thread is pulled out, the entire structure will unravel. Now understand, I think this has to happen – but as soon as the “cram-down” happens, *EVERY* financial institution is going to be bankrupt. Their working capital will all be gone. The only way to avoid years of lawsuits and infighting is immediate recapitalization by the Federal Reserve and indemnificaiton of all claims. Now since this would be outrageous to give to private companies, this can only work if there is a wholesale nationalization of the banking system, as was done in Sweden some years ago, followed by a slow reprivatisation over the next decade.
I do mean this seriously – the next Republican President is going to have to nationalize the banking system and much of the financial sector with it. It is going to be the only way to keep us from falling into total 1931 level financial collapse. He probably also going to have to at least partially default on T-Bills. We simply owe far more than our economy can support anymore.
When you think about a cram-down, and I agree it will be necessary, understand that this is where it leads.
I actually believe Glenn Reynolds is on the right track. If you want to increase taxes, fine, repeal the “Eisenhower tax cut” on the entertainment industry. They enjoy substantial tax breaks including exemption of federal excise taxes on their product. Tax pay per view movies, etc. Then you will see the left howl and argue that tax increases are job killers. Prof. Reynolds has a column in the Washington Examiner:
http://washingtonexaminer.com/opinion/columnists/2011/08/sunday-reflection-why-gop-should-give-obama-higher-taxes-he-wants
14-4. “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.”
The Lyin King owns this downgrade with his unconstitutional rants about default. His continually running default as a possibility is directly opposed to 14-4 of the constitution.
Another instance where impeachment is called for. This and the Libyan intervention should be the end but alas no-one has the guts to even dare suggest impeaching the most far left President ever. Largely because of his skin color he is protected as he always has been.
The fool backed the S&P into a corner and left them no room to wiggle with his juvenile, partisan rants.
THIS IS THE OBAMA DOWNGRADE, THE OBAMA RECESSION, NO MATTER WHAT THEY SAY OR HOW THEY SPIN, THE TEA PARTY TRIED TO PREVENT THIS, BUT THE LYIN KING AND HIS PARTY WOULD NOT CUT ENOUGH AND THIER REVENUE SOLUTIONS WERE NO SOLUTIONS RATHER DISINCENTIVES, DIMINISHING REVENUES!
This has been a crushing weekend for Obama.
I am reluctant to make sweeping predictions as emotion often guides our thoughts. However, the shooting down of the CH 47 and Seal Team 6 in Afganistan and the S&P downgrade will be sign posts of the edge and plunge of the Obama administration.
Both are “Shark Jumping” events that the public has not ignored and will not forgive. He only needs to loose “Cronkite”
Since Walter Cronkite is not around any more I guess Bob Schieffer will do.