U.S. loses triple-A credit rating from S&P

[Gumby]

Sure there is blame to go around. But Obama has accelerated and exacerbated our out of control spending to levels never before seen. He earns the ultimate blame.

Yes, all $14 Trillion is listed there, above. We can see.

[TBV]

The chart is a predictably partisan piece seeking to obscure who spent the money and when.  I hope this doesn't become too political, but spin like this can't go unchallenged.....

1) As a general rule in government, projected savings are like projected cuts: imprecise when not completely illusory.
2) Presidents only get to sign laws that have been written and passed by Congress. They often reflect elements which a President has publicly opposed. Affixing a presidential signature to a law doesn't make it his idea, at least not in the way people make it seem.
3) There was never any "Clinton surplus."  The total national debt went up every year he was in office.  The claim that he cut deficits ignores the fact that he was able to borrow record sums from the Social Security Trust Fund w/o the intra-governmental transfers ever showing up on the so-called "public debt." Nice trick. SS revenue in the 80's greatly exceeded SS expenditures, for which we can thank the peak earning Baby Boomers, not the occupant of the White House.  This alone accounts for MOST of the alleged surplus.  What's more, claimed deficit reductions didn't materialize until the Republicans took control of Congress and the capital gains tax rate was lowered.  Along the way, Clinton repeatedly opposed balanced budget proposals. Remember 1995?  By sheer luck, he also benefited from revenue boosts caused when worldwide crude oil became much cheaper when he was in office than it was before or after.  Let's not forget the dot.com boom, which Clinton also had no part in, though Al Gore's "invention of the Internet" may be cause for partial credit.
4) After bin-Laden attacked America, the resulting recession made mush of any prior revenue projections anyway.  Now, who was it again who passed on the opportunity to extradite bin Laden from Sudan?  Better shift that Afghan War cost to Mr. C.

A quick glance at actual expenditures over the past five decades and who was in charge at the time (factoring in the WH, Senate and the House) shows a very different picture, one which charts like the one above hope to obscure.  There have been many years of deficit spending, but none quite like the last three (or apparently, the next ten.)  The world has started to notice.

[MediumTex]

I tend to agree that there has not been anything THAT remarkable about government spending since Obama took office.

What has been remarkable has been the collapse in government tax revenue as economic activity has slumped in ways not seen since the 1930s.

A collapse in tax revenue set against a Keyensian approach to bringing the economy out of recession would be expected to generate large deficits.  This quandary we find ourselves in may be due to weaknesses in the conventional wisdom about how to manage governmental finances during an economic depression, as opposed to handling governmental finances during a more typical recession.

I don't think Obama has done significantly different things since being in office than Bush would have done had he stayed in office (other than health care reform, but Bush gave us a Medicare prescription drug benefit with no way to pay for it, so who knows what he would have done on the health care front during a third term).

IMHO, the real problem is collapsing tax revenue without any mechanism (or desire) to quickly scale back government spending (assuming scaling back government spending under such circumstances would even be a good idea--it hasn't been historically; see 1937 for an example).

[melveyr]

Buffet's take is worth noting.

http://www.foxbusiness.com/markets/2011 ... ake-sense/

[cabronjames]

A transpartisan idea that I think near everyone agrees on.

Timmeh Geithner is incompetent & a Wall $treet Whore

[TBV]

Growth in funds earmarked for "recovery" has been more than the fall-off in revenue.  Even that, however, is just part of the pie.  The administration is on record as being willing to run large deficits for the next ten years or more.  In the midst of all this, it also seeks out new ways to spend, such as expanding benefits and services to those in the country illegally.  A move to ultimately credit their concealed/misidentified wages toward Social Security and Medicare entitlement would be consistent with that mindset.  Given the perilous state of Medicare/Medicaid/Social Security finances, and our mounting interest payments, no amount of revenue enhancements could relieve such pressure, with or without a quick return to full employment. And there appears to be little inclination to slash/delay benefits as an alternative.  Entitlement reform buck-passing has been going on for years.  But the looming prospect that no one will ever be able fix it, even if they wanted to, is perhaps the most frightening of all recent developments.

[gizmo_rat]

Why now? Whilst it's not difficult to see who will be the losers, I can't see who would benefit.

[AdamA]

Buffet's take is worth noting.

http://www.foxbusiness.com/markets/2011 ... ake-sense/

I think that's the same kind of answer most PPers would give.

[doodle]

Sounds like Buffet might have a little ax to grind with S&P.

"Remember, this is the same group that downgraded Berkshire."

 

[Storm]

I heard the downgrade had more to do with the political outlook and the current intransigence in congress to address problems than with our ability to pay.

If you read their statement, they pretty much come right out and say it.  I'd like to thank the Tea Party for their "help" with our credit rating...  Next, could I get a couple freshmen congressmen to take a look at my credit report?  I think I have some unpaid bills from back in college I'd like them to take care of... 

[Storm]

This is definitely a large blemish on Obama's reputation. This happened under his watch and therefore he owns it. He is the one that refused to even face up to this issue as he kept spending like a drunken sailor (while printing trillions of additional dollars) and submitted a budget that was voted down 97-0 in the Senate this very year. We have not even seen the implications of Obamacare yet on our already precarious situation. He has never taken our financial woes seriously and he will pay a severe price for this next year....Just sayin!

Obama has nothing to do with it.  Look at your congressmen and elected officials - they are the ones that write the laws that get put on Obamas desk.  All he can do is either sign it or veto it.  Obama does not print any money.  You might want to try turning off the talk radio and studying the 3 branches of government sometime.

[Storm]

Sure there is blame to go around. But Obama has accelerated and exacerbated our out of control spending to levels never before seen. He earns the ultimate blame.

Yes, all $14 Trillion is listed there, above. We can see.

Thank you for showing us some facts and information here, Gumby.

[Storm]

The chart is a predictably partisan piece seeking to obscure who spent the money and when.  I hope this doesn't become too political, but spin like this can't go unchallenged.....

I think it's completely unfair to Obama to try to place debts for policies enacted under Bush on him.  The Bush tax cuts have added $3 Trillion, this is not debated.  Is Obama to blame for the portion of cuts that continues while he is PotUS, simply because Congress has not repealed them?  What about the wars in Iraq and Afghanistan?  I think we all agree it would be irresponsible to completely halt them, yet somehow Obama is to blame for the continued spending as he does his best to wind them down?

Unbelievable.  Progressives like me were warning anyone who would listen that Bush and a completely Republican congress were spending like drunken sailors and that we would be paying for generations, yet now the blame goes completely to Obama for Bush's policies?  I suppose it's the same way everything that happened while Bush was in office gets blamed on Clinton.

Remember when the Republicans controlled all 3 branches of government (from 2000-2006)?  I said at the time "at least they'll have nobody but themselves to blame when the country turns to shit."  Apparently revisionist history is still popular with the right-wing.  It's all Clinton/Obama's fault...

[Storm]

It is worth reading the full text of the S&P Downgrade:

http://www.zerohedge.com/news/sp-downgr ... -full-text

Here is part of it, quoted:

The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective,  and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year's wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently. Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures. It appears that for now, new revenues have dropped down on the menu of policy options. In addition, the plan envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability.

I take that as a direct repudiation of the Tea Party's "no new taxes" mandate.  There are many tax loopholes that both sides agree should be closed, and would generate much needed revenue, but to the Tea Party, even closing a loophole is considered a new tax, and they have taken the entire congress hostage because even the house majority cannot get a majority without the Tea Party members vote.

Look, I agree that government spends way too much and spending needs to be cut, but without revenue increases we have only solved one half of the problem.  S&P is basically coming right out and saying "you need to not only cut, but also raise revenue as well."

[doodle]

The Chinese are banging their drums: http://www.nytimes.com/2011/08/07/busin ... me.html?hp

This is something the Japanese didn't have to worry about as they were stacking up the debt.

[Jan Van]

The Big Picture brings up some interesting questions, 10 Questions About S&P Downgrade

And some more observations here The Case for Going Global Is Stronger Than Ever
[quote= John Mauldin]So, if the Fed, which doesn’t issue credit and can print money, can be downgraded because it holds AA+ debt, then why and how in hell can the ECB, which holds hundreds of billions of euros of the junk debt of Greece and Ireland and insolvent banks not be downgraded on Monday? And the Bank of Japan? REALLY? What are these guys smoking? Do we now downgrade GNMA? Of course. And the FDIC? What the hell will repos do on market open? The NY Fed says it won’t affect anything. Don’t ask me, I just work here. And how can you rate France AAA? And still give AA or more to Italy when the market is saying they are getting close to junk?[/quote]

And like Buffett said (see link above) [quote=Warren Buffett]”?Think about it. The U.S., to my knowledge owes no money in currency other than the U.S. dollar, which it can print at will. Now if you’re talking about inflation, that’s a different question.”?[/quote]

So does S&P rate politics instead of ability to pay debt? Do they downgrade cigarette makers because they think smoking is bad? Or brewers because they think alcohol is evil?

[Reub]

Storm, thank you for your civics lesson.

Methinks thou dost protest too much.

[Lonestar]

As for the politicians, a society cannot ask its politicians to be more enlightened than the general population.  That's one of the many problems our country is facing--we are living in a collective fantasyworld fueled by successes in the distant past, like the aging athlete trying to regain past glory.  Do you see any Andrew Jacksons or Dwight Eisenhowers anywhere on the horizon?  Neither do I.  We no longer have the type of society that generates this type of person.  What we have become is a nation of people who like silly low brow entertainment, gazing into small electronic devices and having our conceptions of reality shaped by fools on cable news channels.

You Sir, hit the nail on the head with this comment!  I used to feel that getting older made one automatically doubt the wisdom of modern society.  I don't feel that way anymore.  I look back to the days of 40 -50 years ago and see a different culture, an era in which our actions provided much better results.  Many books will be written about where we went wrong, but for those of us that have seen yesterday and today we already know the answer.  Let's hope we can find the Andrew Jacksons or Dwight Eisenhowers before it is too late.

Jerry

[Gumby]

I suppose it's the same way everything that happened while Bush was in office gets blamed on Clinton.

The Clinton years seem like a dream now...

http://clinton5.nara.gov/WH/Accomplishm ... rs-01.html

It's like somehow a few string of events pushed us to some dark alternate universe.

Personally, I blame the designer of the butterfly ballot (used in the Florida 2000 Presidential election) for all our problems. Makes you wonder how the world might look if those senior citizens in Florida had actually voted properly.

[MediumTex]

One part of the problem is that Osama bin Laden's strategy to harm the U.S. has worked better than anyone wants to admit.

Look at all the blood and treasure that has been spent on chasing a relatively small number of non-state actors around the world these last 10 years.

[Maestro G]

The chart is a predictably partisan piece seeking to obscure who spent the money and when.  I hope this doesn't become too political, but spin like this can't go unchallenged.....

I think it's completely unfair to Obama to try to place debts for policies enacted under Bush on him.  The Bush tax cuts have added $3 Trillion, this is not debated.  Is Obama to blame for the portion of cuts that continues while he is PotUS, simply because Congress has not repealed them?  What about the wars in Iraq and Afghanistan?  I think we all agree it would be irresponsible to completely halt them, yet somehow Obama is to blame for the continued spending as he does his best to wind them down?

Unbelievable.  Progressives like me were warning anyone who would listen that Bush and a completely Republican congress were spending like drunken sailors and that we would be paying for generations, yet now the blame goes completely to Obama for Bush's policies?  I suppose it's the same way everything that happened while Bush was in office gets blamed on Clinton.

Remember when the Republicans controlled all 3 branches of government (from 2000-2006)?  I said at the time "at least they'll have nobody but themselves to blame when the country turns to shit."  Apparently revisionist history is still popular with the right-wing.  It's all Clinton/Obama's fault...

Storm,

Thank you, thank you, thank you for lending some perspective here!

+1000

Maestro G

[Maestro G]

One part of the problem is that Osama bin Laden's strategy to harm the U.S. has worked better than anyone wants to admit.

Look at all the blood and treasure that has been spent on chasing a relatively small number of non-state actors around the world these last 10 years.

I agree somewhat.  But the Bush administration's adventure in Iraq went way beyond Osama's wildest dreams.  All these years later, I still can't believe the cooperation of the media and government in dragging us into that unnecessary war.  Osama must have been giggling with glee. 

One part of the problem is that Osama bin Laden's strategy to harm the U.S. has worked better than anyone wants to admit.

Look at all the blood and treasure that has been spent on chasing a relatively small number of non-state actors around the world these last 10 years.

I agree somewhat.  But the Bush administration's adventure in Iraq went way beyond Osama's wildest dreams.  All these years later, I still can't believe the cooperation of the media and government in dragging us into that unnecessary war.  Osama must have been giggling with glee. 

Exactly!

Yes Hussein was ousted, but at an enormous price in "blood and treasure" that we are still paying for, and will be for a long time to come, not to mention Afghanistan!

Having said that, I agree with MT's insight relative to the difficulty in acknowledging bin laden's strategy success, whether he planned it that way (not likely) or not.

Maestro G

[doodle]

I always thought the easiest way to prevent absurd military escapades is to simply add a war tax above and beyond our regular taxes for every year that we are engaged in some absurd conflict overseas. I think we would have ended these wars a long time ago if every taxpayer had to pay for this rather than put it on the credit card for our children to pay. Of course that Idea would make sense and therefore must be eliminated if for only that reason.

[stone]

A couple of years ago they had some Al Quiada foot soldiers interviewed on TV. They were saying that they had defeated World communism by dragging USSR into the 1980s Afghan war. They said that their mission was to do the same for World capitalism too in the same way. Basically as far as I can see, you can not overcome a nihlist movement by fighting. You can only beat them by walking away. Very very hard to do I agree BUT Ghandi claimed that Hitler could have been defeated by non-violent means and fewer people would have died that way??

[cabronjames]

One part of the problem is that Osama bin Laden's strategy to harm the U.S. has worked better than anyone wants to admit.

Look at all the blood and treasure that has been spent on chasing a relatively small number of non-state actors around the world these last 10 years.

True.

Also, the negative effects of what Republican Eisenhower called the MIC (Military Industrial Complex) cannot be underestimated.  Perhaps the worst cartel/special interest in the US.

The neo-cons like Dick Cheney that ran things under Bush 43 loved to expand unfunded wars.  "Nobel Peace Prize winner" Obama maybe less warmongerish than Bush 43, but still warmongerish, starting new wars in Libya, Yemen, etc.

The successful model for killing/capturing Bin Laden & Al Qaeda, would have been a huge scale "police action" version of killing Pablo Escobar in Colombia.  You get the elite ninja-ish special forces, use the CIA to get information, etc.  The US did not occupy Colombia for 10 years, just to kill Pablo Escobar.

The US fought against possible actual existential enemies like Nazi Germany or the USSR.  Doing so did not mean we had to defy the Constitution on civil liberties, like Bush 43 & Obama have done in the "War on Terror" with warantless wiretapping, etc.

Once the USSR collapsed, there should've been a "peace dividend" & the US should have reduced the portion of GDP spent on the military.  But defense spending soared under Bush 43, & is maintained under Obama.  The US military spends near half of the world total defense budget, & another 20% is our NATO allies.  The US spends 6X the next highest spending nation, China.

Could we go to 2X the spending of China, & put the savings directly towards the debt?

Of course, this is one of the obvious solutions that the Republicans & DLC Conservative Democrats like Obama never discuss.  Because to them, the only allowed budget cuts are those that would hurt 90-99%+ of the population, the Average Janes & Joes.  A budget cut that would hurt a special interest? Not allowed.  Eg no "shared sacrifice", despite their propaganda.

I understand MediumTex's notion that the US military is backing the USD as the reserve currency, & US access to oil, etc.  But I sense that this expense has atrociously poor ROI & the costs far exceed the benefits.