Is the U.S. Credit Rating a Victim of GOP Sabotage?

[scandal 951]

No. Obama the Socialist wanted to keep spending and having another record deficit at any cost. The Moron could have at anytime in his admin shown to be fiscally responsible but chose not to be. He had brought himself up to the second worst president of all time by the killing of Bin Laden but he seemed to want that distinction so much he is now the worst with more time to make sure he stays there forever.

You have a toilet mouth. Your mother didn't raise you right, not one bit.

[bigdog 376]

The fiscal clown show continues. A few days after Congress and the White House agreed to raise the debt ceiling and cut spending, Standard & Poor's has downgraded the United States of America's credit rating from AAA to AA+.

S&P, which covered itself in a substance other than glory during the mortgage crisis, may have a poor record and strange methodology when it comes to sovereign ratings. France, which has a far higher debt per capita ratio than the U.S., still enjoys a AAA rating. And a downgrade, alone, doesn't mean U.S. interest rates will spike -- on Monday or at any time in the future. Japan's credit rating was downgraded several years ago, when the interest rates its government paid on bonds was already extremely low, and they've generally trended lower in the years since.

Market conditions, the trajectory of economic growth and relative value can play as big -- if not a bigger -- of a role in determining interest rates than a rating.

But that doesn't mean we should ignore S&P's Friday evening shot across the bow. In downgrading the U.S.'s credit rating, S&P points out what has long been obvious: Washington's inability to come to an agreement on how to close the large fiscal gaps that have emerged since the recession began is troubling. Recent events have sapped the agency's confidence that the government can and will do what is necessary to align revenues with spending commitments. And it's difficult to escape the conclusion that America's credit rating was intentionally sabotaged by Congressional Republicans.

It has long been obvious to all observers -- to economists, to politicians, to anti-deficit groups, to the ratings agencies -- that closing fiscal gaps will require tax increases, or the closure of big tax loopholes, or significant tax reform that will raise significantly larger sums of tax revenue than the system does now. Today, taxes as a percentage of GDP are at historic lows. Marginal rates on income and investments are at historic lows. Corporate tax receipts as a percentage of GDP are at historic lows. Perhaps taxes don't need to rise this year or next, but they do need to go up in the future.

Otherwise, the math of deficit reduction simply doesn't work. And that's how the deficit reduction deals signed off on by Republican presidents like Ronald Reagan and George H.W. Bush came about.

Yet the action in Washington in the past year has all gone in the opposite direction. President Obama deserves some of the blame. Several months ago, he struck a deal with Congress to make the fiscal situation worse -- extending the Bush tax cuts for two more years and enacting a temporary cut in the payroll tax.

But Congressional Republicans deserve much more of the blame. For this calamity was entirely man-made -- even intentional. The contemporary Republican Party is fixated on taxes. It possesses an iron-clad belief that the existing tax rates should never go up, that loopholes shouldn't be closed unless they're offset by other tax reductions, that the fact that hedge fund managers pay lower tax rates than school teachers makes complete sense, that a reversion to the tax rates of the prosperous 1990's or 1980's would be unacceptable.

In the past two years, this attitude has combined with a general hostility to playing ball with Democrats on large legislative issues, a near-blanket refusal to conduct business with President Obama, and, since the arrival of the raucous Tea Party freshman, a cavalier attitude toward the nation's obligations. It was common to hear duly elected legislators argue that it wouldn't be a big deal if the government were to pierce the debt ceiling and default on its debts.

This downgrade is the logical outcome, to a degree, of the long-running "Deal or No Deal" dynamic in Washington. For much of the last two years, President Obama and various fiscal reform groups have urged a grand bipartisan deal that would make a dent in the short- and long-term deficits. Every group -- from the bipartisan Bowles-Simpson Commission on down -- argued that a large package of spending cuts and tax increases or reforms would be the way to go. Polls showed that American voters generally endorsed a mix of spending cuts and tax increases. And plenty of neutral observers thought that the approach of the debt ceiling expiration would help forge a grand bargain.

Many observers (including this one) argued that such efforts were doomed to failure. For President Obama, all the incentives weighed toward making a big deal, even one that would upset his base. It would show an ability to work on a bipartisan basis and make concrete progress and take the issue off the table for 2012. But for Republicans, all the incentives weighed against a big deal. By definition, anything that is acceptable to President Obama and Democrats is unacceptable to today's Congressional Republicans. It almost doesn't matter what the substance is. Why would they sign off on any measure that would include revenue increases that the president wanted? Congressional Republicans don't believe in higher revenues as a matter of ideology, as a matter of economics or, most importantly, as a matter of political tactics. Top Congressional Republicans have expressed a desire to deny victories to the president.

And so, in a completely predictable pattern, every time the discussions got around to revenue increases, Republicans pulled back. House Speaker John Boehner was willing to entertain the possibility of several hundred billion dollars of increased revenues, until he realized he couldn't sell it to his own caucus. The anti-tax radicalism of the Congressional GOP took revenues off the table and made a large deal impossible. The result was a lengthy manufactured crisis and a small deal that relied solely on spending cuts, and even that was opposed by a big chunk of the House GOP caucus.

Judging by S&P's release, this needless brinksmanship and effort to take the debt ceiling hostage seriously influenced the agency's thinking. It didn't like the theatrics, and it didn't like the outcome. While the deal took default off the table, the agreement "falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade." In other words, S&P downgraded in the U.S. in large measure because the recent debt deal didn't do enough to stabilize finances.

The irony, of course, is that the very attribute that pushed S&P to downgrade -- the inability of the U.S. political system to agree on large topics -- may help improve the fiscal situation. At the end of 2012, the Bush tax cuts are slated to expire. If the two parties fail to agree on some very controversial issues in the midst of an election year, taxes will rise across the board, on income and on investments, producing trillions of dollars in revenues over the coming decade.

Daniel Gross is economics editor at Yahoo! Finance.

http://finance.yahoo...-021622372.html

Obama economics.

Edited August 7, 2011 by bigdog

[Gary and Alla 3,694]

Want to know if the downgrade is political and driven by the far Right and Tea Psrty? Faux News has yet to remove it's banner line regarding the downgrade since it was announced. I imagine there will be no other banner until after the 2012 election on Faux.

PS S & P was hugely at fault during the initial financial meltdown and events leading up to it. Curious that...

More proof we needed to shut down the government, get them out of anything they are not absolutely essential for, use a weed burner if necessary, and start over.

[Mr. Big Dog 10,747]

What you write.

No. Obama the Socialist wanted to keep spending and having another record deficit at any cost. The Moron could have at anytime in his admin shown to be fiscally responsible but chose not to be. He had brought himself up to the second worst president of all time by the killing of Bin Laden but he seemed to want that distinction so much he is now the worst with more time to make sure he stays there forever.

What I read.

No. Obama the Socialist

You could save yourself a lot of time.

[Gary and Alla 3,694]

What you write.

What I read.

You could save yourself a lot of time.

So I am wondering.

Three years into this, two of which were with a slam dunk dual chamber majority...how are you guys feeling about Obama? Really. The economy is only going further in the toilet, we have been downgraded for the first time in about...ever. More than 1 trillion dollars was lost in the stock market in the last few days (how are you going tax rich people when you destroy all their wealth?) no healthcare, wars ongoing with the biggest single day loss of life coming last week, Gitmo is still open, nothing done about climate change...NOTHING!

Are you guys still going to vote for Obama? I know you won;t vote for Repubs, but maybe the Dems will boot out Obama and run someone else for the nomination? What do you think? They did it for Carter in 1980 and Obama is much worse.

How are the Obama supporters feeling now? You still think he just needs more time?

[I AM NOT THAT GUY 5,715]

Paul Krugman: "In short, S&P is just making stuff up — and after the mortgage debacle, they really don't have that right... So this is an outrage — not because America is A-OK, but because these people are in no position to pass judgment."

Paul Krugman is an idiot.

http://www.youtube.com/watch?v=fWe3jyqRo-4

Edited August 7, 2011 by Crusty Old Perv

[Gary and Alla 3,694]

Paul Krugman is an idiot.

Your avatar looks like Steven. I thought you were Steven.

[dalegg 143]

Your avatar looks like Steven. I thought you were Steven.

Looks like one of his old ones, but he's going with the hippie thing now.

[I AM NOT THAT GUY 5,715]

Your avatar looks like Steven. I thought you were Steven.

You are losing it, Gary.

[luckytxn 2,263]

Obama sets another precedent! First President to succeed in downgrading the credit rating of the entire country! What a guy!

Who would vote for this guy again?

He has a lot of sheep that are dying to vote for him again and the TOTAL destruction of this country to be completed.

[one...two...tree 2,762]

Your avatar looks like Steven. I thought you were Steven.

All black and white photos of old men look the same to you, eh? Apparently your facial recognition skills are lacking.

Google, Henry Wadsworth Longfellow and you'll find my old avatar. You do know who he is, right?

[I AM NOT THAT GUY 5,715]

All black and white photos of old men look the same to you, eh? Apparently your facial recognition skills are lacking.

Google, Henry Wadsworth Longfellow and you'll find my old avatar. You do know who he is, right?

Google "Crusty Old Pervert" and you will find mine.