Moody's Issues a Warning About Giving A Warning

[jillian]

Seems Moody's is reviewing U.S. AAA rating if we default, even short term,...

In what effectively was a warning about issuing a warning, Moody’s said it would place the U.S. government’s rating under review for possible downgrade on the “very small but rising risk of a short-lived default.” The Treasury Department said it would exhaust all funds by Aug. 2 if the debt ceiling is not lifted by then, in which case a default on existing obligations becomes a possibility.

Moody

seems to me that they care more about a short-term default ithan they are about immediate cuts. (and yes, i know they want the deficit to come down, too... as it should).

but can someone who actually knows something about this subject explain to me how anyone is even considering not raising the debt ceiling?

 

[California Girl]

Mo chara, no one can explain it to you, because the answer will always be swayed by that person's political opinion. Even economists - and they are the ones who know the most about it - don't agree. When experts don't agree, that says there is no real fact based answer, it's too open to hypotheticals.

I personally (under sufferance) would support raising the ceiling.... IF we cut one dollar from the spend for every dollar we raise it. That, to me, is the only way we can keep this under control.

It is time to face facts, just like many other countries are doing, we simply cannot afford to be all things to all Americans. We cannot help everyone. We cannot save everyone's lives with Obamacare. A simple but hard decision lays ahead.

 

[sparky]

It is time to face facts, just like many other countries are doing, we simply cannot afford to be all things to all Americans. We cannot help everyone. We cannot save everyone's lives with Obamacare. A simple but hard decision lays ahead.

very true, although the means to that end are quite the debate.....

 

[jillian]

Mo chara, no one can explain it to you, because the answer will always be swayed by that person's political opinion. Even economists - and they are the ones who know the most about it - don't agree. When experts don't agree, that says there is no real fact based answer, it's too open to hypotheticals.

I personally (under sufferance) would support raising the ceiling.... IF we cut one dollar from the spend for every dollar we raise it. That, to me, is the only way we can keep this under control.

It is time to face facts, just like many other countries are doing, we simply cannot afford to be all things to all Americans. We cannot help everyone. We cannot save everyone's lives with Obamacare. A simple but hard decision lays ahead.

i agree in part. but i also think there are people who take a middle view and aren't nutbars on either side who can give perspective on this.

it seems to me, and i'm not an expert, so why it isn't obvious to the people who need to make these decisions, is that we have no choice but to raise the debt ceiling. the undermining of the full faith and credit of the U.S. government for partisan purposes is unforgivable. To get things BACK in order where they were when Clinton was president should then, to my mind, require a combination of cuts and a return to our previous tax rates. But you can't cut without cutting military spending, too and just dump the painful parts on the middle class.

I don't think it's rocket science. I'm not an economist, not a financier, and it seems like there isn't any other choice.

 

[sparky]

the crux of the problem is a capitalist system only sees in capitalist colors, and only has capitalist fixes Jill....

 

[California Girl]

Mo chara, no one can explain it to you, because the answer will always be swayed by that person's political opinion. Even economists - and they are the ones who know the most about it - don't agree. When experts don't agree, that says there is no real fact based answer, it's too open to hypotheticals.

I personally (under sufferance) would support raising the ceiling.... IF we cut one dollar from the spend for every dollar we raise it. That, to me, is the only way we can keep this under control.

It is time to face facts, just like many other countries are doing, we simply cannot afford to be all things to all Americans. We cannot help everyone. We cannot save everyone's lives with Obamacare. A simple but hard decision lays ahead.

i agree in part. but i also think there are people who take a middle view and aren't nutbars on either side who can give perspective on this.

it seems to me, and i'm not an expert, so why it isn't obvious to the people who need to make these decisions, is that we have no choice but to raise the debt ceiling. the undermining of the full faith and credit of the U.S. government for partisan purposes is unforgivable. To get things BACK in order where they were when Clinton was president should then, to my mind, require a combination of cuts and a return to our previous tax rates. But you can't cut without cutting military spending, too and just dump the painful parts on the middle class.

I don't think it's rocket science. I'm not an economist, not a financier, and it seems like there isn't any other choice.

There really isn't another choice. Except for HOW we raise it. Do we allow politicians who have already proved to be incompetent at spending our money free reign to spend yet more without any kind of control? I would say no.

If you gave your child a credit card - to use in emergencies - and that kid ran the card up to the limit, do you take the card away or raise the limit? If you raise the limit, and he maxes out that limit too, do you take the card away or raise the limit? If you raise the limit, and he maxes that out too, do you raise it again or take the card away? At some point, a dutiful parent will take that child in hand and teach it some financial responsibility.... namely, that you do not spend money you don't have, and you don't spend other people's money.

That is basically what we have here. A bunch of kids who ran around - for decades - spending other people's money. At what point do we say 'enough is enough'? Because right now, your child, and your grandchildren will be paying off your debt. And that is not fair. Since it is the liberals who are obsessed with 'fair', why are you supporting such an unfair practice?

Seriously, if they want the ceiling raised, then can we not insist that they cut a buck for every buck they want to raise? That would at least keep up vaguely in some control of it.

 

[Valerie]

Two well informed articles...

There has been a lot of hyperbole surrounding the raising of the debt limit, with talk of Armageddon if the U.S. defaults on its debt. However, this depends entirely on what one considers a "debt". After reading about the issue, it seems that there is a mix of issued Treasury bonds that trade in financial markets vs. accumulated debts within the government, such as in the Social Security system.

In simple terms, the U.S. government is a long way from a bond default. Interest payments on the debt are sizable, but it is a manageable portion of the federal budget. In April, May and June of this year, interest expenses are projected to be $5 billion, $37 billion and $8 billion, respectively -- hardly an immediate problem for a government collecting more than $100 billion a month in revenues.

There is no financial reason for the U.S. government to miss a bond payment, and failure to raise the debt ceiling will not stop the federal government from rolling over existing debt. The Treasury could also print more U.S. dollars and pay off the bonds with cash; however, there could be serious repercussions if Treasury took that route, but it is an available option. Therefore, if the U.S. government were to outright default on its bonds, it would be a choice, not a necessity.

Where the issue becomes cloudy is with obligations, such as Social Security. Currently, the U.S. federal government is borrowing $0.40 out of every $1.00 it spends, and mandatory spending accounts for 56% of the budget. Mandatory spending includes Social Security, Medicare and other benefit programs whose spending is set by law. Congress can change these laws, but in most years, it spends the bulk of its time debating the level and allocation of discretionary spending.

What are the implications for investors if the debt ceiling is not hiked? There is no way that Treasury Secretary Geithner or President Obama will allow the U.S. to default on interest payments. Therefore, the outlook on U.S. Treasuries would be very bullish. First, supply would be cut because no additional bonds would be issued. Demand for Treasuries remains high, and the Federal Reserve is still buying them due to QE2.

To Raise or Not Raise the Debt Ceiling - TheStreet

While divisive rhetoric makes for good talk show banter, in the heat of the debate, everyone is overlooking a key fact: The limit, as currently defined, is meaningless. Even if Congress balanced the budget, the debt limit would eventually be reached. The limit does not need to be raised; it needs to be reformed.

White House Council of Economic Advisors Chairman Austan Goolsbee recently accused lawmakers who are reluctant to raise the limit of "insanity" and "playing chicken" with government finances.

Because the limit has been increased 10 times in the last decade, it is generally perceived as having no binding consequence on government finance. Nevertheless it is always a difficult vote for Congress, because it is perceived as an endorsement of deficit spending. Raising the limit is usually a partisan issue regardless of who controls the majority.

Many among the freshman class in the 112th Congress campaigned vigorously for fiscal austerity, and some have pledged to vote against an increase in the limit. Others have stated that they will not vote for a debt limit increase without significant accompanying spending cuts. But there may not be adequate time for Congress to craft large spending cuts before the limit is reached, likely in or around April.

Fortunately there is another option. Debt limit reform could make the limit more economically meaningful and avoid the risk of defaulting on government debt in the near term.


As currently defined the debt limit includes debt held by the public and intragovernmental borrowing, such as the borrowing of surplus payroll taxes by the general fund from the Social Security trust fund. This intragovernmental borrowing by one federal account from another is nothing more than the left hand borrowing from the right hand, and it has no real economic consequence. As a result some policies that would be positive steps toward addressing our fiscal challenges would not be measured as progress toward fiscal sustainability according to the current definition of the debt limit.


To illustrate the foolishness of the current debt limit construction........

Reform, Don't Raise, The Debt Limit - Forbes.com

 

[BenNatuf]

Seems Moody's is reviewing U.S. AAA rating if we default, even short term,...

In what effectively was a warning about issuing a warning, Moody’s said it would place the U.S. government’s rating under review for possible downgrade on the “very small but rising risk of a short-lived default.” The Treasury Department said it would exhaust all funds by Aug. 2 if the debt ceiling is not lifted by then, in which case a default on existing obligations becomes a possibility.

Moody

seems to me that they care more about a short-term default ithan they are about immediate cuts. (and yes, i know they want the deficit to come down, too... as it should).

but can someone who actually knows something about this subject explain to me how anyone is even considering not raising the debt ceiling?

1. Moody's doesn't care a whit about whether we cut or increase spoending or leave it the same. I's none of their concern. The only concern they have is whether we pay our debts.

2. Not raising the debt limit will not cause a default, using the money the government does take in for something other than servicing the debt will. The government takes in more than enough money to service the debt, they spend it on things other than servicing the debt. It's not raising the debt ceiling thats a problem, it's where the government chooses to spend the money it does take in.

 

[RetiredGySgt]

Mo chara, no one can explain it to you, because the answer will always be swayed by that person's political opinion. Even economists - and they are the ones who know the most about it - don't agree. When experts don't agree, that says there is no real fact based answer, it's too open to hypotheticals.

I personally (under sufferance) would support raising the ceiling.... IF we cut one dollar from the spend for every dollar we raise it. That, to me, is the only way we can keep this under control.

It is time to face facts, just like many other countries are doing, we simply cannot afford to be all things to all Americans. We cannot help everyone. We cannot save everyone's lives with Obamacare. A simple but hard decision lays ahead.

i agree in part. but i also think there are people who take a middle view and aren't nutbars on either side who can give perspective on this.

it seems to me, and i'm not an expert, so why it isn't obvious to the people who need to make these decisions, is that we have no choice but to raise the debt ceiling. the undermining of the full faith and credit of the U.S. government for partisan purposes is unforgivable. To get things BACK in order where they were when Clinton was president should then, to my mind, require a combination of cuts and a return to our previous tax rates. But you can't cut without cutting military spending, too and just dump the painful parts on the middle class.

I don't think it's rocket science. I'm not an economist, not a financier, and it seems like there isn't any other choice.

The political problem is that the Democrats have proven just recently they are not interested in lowering the deficit. Obama keeps asking for trillions in his budgets and the democrats had a shit fit over 60 billion in what was actually no cut at all.

Obama keeps submitting budgets for 3 trillion dollars. We simply can't afford that. The democrats are opposed to every cut the republicans bring up.

My personal opinion is that the only way to get the dems to even consider cuts is to not approve a debt ceiling raise until the commit in good faith to cut the Budget. In real programs and real dollars, no promises of later or next year or not that program.

 

[Valerie]

I think they should raise it in the short term and then go to work on reforming it for the long term...

On Monday, the United States officially hit its debt limit, meaning that the government is no longer legally able to borrow. However, Treasury Secretary Tim Geithner has tools at his disposal to delay the U.S. defaulting on its obligations until about August 2.

House Republicans, for months, have been saying that they are willing to raise the debt ceiling, with Speaker of the House John Boehner (R-OH) admitting that failure to do so would be “irresponsible,” while House Budget Committee Chairman Paul Ryan (R-WI) said that not raising the debt ceiling is “unworkable.”

But Rep. Devin Nunes (R-CA) this week let the cat out of the bag, outright calling for the U.S. to default. “By defaulting on the debt, in the short and long term, it could benefit us to go through a period of crisis that forces politicians to make decisions” on major policies that affect the budget,” he said.


Actually allowing the U.S. to default on its debt would have widespread consequences for the U.S. and world economies, including potentially pushing the U.S. back into a recession or, in the words of Princeton Professor Alan Blinder, “reignit[ing] the world financial crisis.” And as the Wall Street Journal noted today, failure to raise the debt ceiling would force draconian spending cuts that would wipe out all of the anticipated 2011 economic growth in just 95 days:

Failing To Raise The Debt Ceiling Would Wipe Out All Of 2011′s Estimated Growth In 95 Days | ThinkProgress

 

[CrusaderFrank]

Obama's annual trillion deficits are to blame

 

[Valerie]

Obama's annual trillion deficits are to blame

The debt limit has increased "ten times in the past decade" and way beyond........



Back in 1983, conservative icon Ronald Reagan warned of “incalculable damage” if the debt ceiling were not raised. Today’s Republicans would do well to take heed.

http://thinkprogress.org/economy/2011/05/16/173953/reagan-debt-limit-flashback/

 

[BenNatuf]

Obama's annual trillion deficits are to blame

The debt limit has increased "ten times in the past decade" and way beyond........



Back in 1983, conservative icon Ronald Reagan warned of “incalculable damage” if the debt ceiling were not raised. Today’s Republicans would do well to take heed.

FLASHBACK: In 1983, Reagan Warned Of ‘Incalculable Damage’ If Debt Ceiling Wasn’t Raised | ThinkProgress

Quoting progressive talking points does nothing to support the argument, using "appeals to autrhority" by quoting progressive sites who are quoting conservatives from 40 years ago does even less. That reagan said it, does not make it true. Not raising the debt limit only does damage to our credit rating if we choose to continue to spend the money we do take in for things other than servicing the debt.

 

[iamwhatiseem]

Or we could keep doing what we have been doing.

When you pile enough shit in your backyard...eventually...you start smelling it in your front yard.

 

[jillian]

Mo chara, no one can explain it to you, because the answer will always be swayed by that person's political opinion. Even economists - and they are the ones who know the most about it - don't agree. When experts don't agree, that says there is no real fact based answer, it's too open to hypotheticals.

I personally (under sufferance) would support raising the ceiling.... IF we cut one dollar from the spend for every dollar we raise it. That, to me, is the only way we can keep this under control.

It is time to face facts, just like many other countries are doing, we simply cannot afford to be all things to all Americans. We cannot help everyone. We cannot save everyone's lives with Obamacare. A simple but hard decision lays ahead.

i agree in part. but i also think there are people who take a middle view and aren't nutbars on either side who can give perspective on this.

it seems to me, and i'm not an expert, so why it isn't obvious to the people who need to make these decisions, is that we have no choice but to raise the debt ceiling. the undermining of the full faith and credit of the U.S. government for partisan purposes is unforgivable. To get things BACK in order where they were when Clinton was president should then, to my mind, require a combination of cuts and a return to our previous tax rates. But you can't cut without cutting military spending, too and just dump the painful parts on the middle class.

I don't think it's rocket science. I'm not an economist, not a financier, and it seems like there isn't any other choice.

The political problem is that the Democrats have proven just recently they are not interested in lowering the deficit. Obama keeps asking for trillions in his budgets and the democrats had a shit fit over 60 billion in what was actually no cut at all.

Obama keeps submitting budgets for 3 trillion dollars. We simply can't afford that. The democrats are opposed to every cut the republicans bring up.

My personal opinion is that the only way to get the dems to even consider cuts is to not approve a debt ceiling raise until the commit in good faith to cut the Budget. In real programs and real dollars, no promises of later or next year or not that program.

well, you can take that position. but when the right is saying they won't consider reversing the bush tax cuts and won't address the military's bloated budget, it's unreasonable to ask the middle class to sacrifice. your partisan rant notwithstanding, we can't afford to balance the budget on the backs of the middle class which can afford it least.

 

[jillian]

Or we could keep doing what we have been doing.

When you pile enough shit in your backyard...eventually...you start smelling it in your front yard.

it was doing pretty well until the bush tax cuts and two wars that we shouldn't be fighting.

how about talking about those things FIRST and then dealing with whatever other issues we have?

 

[The Rabbi]

Seems Moody's is reviewing U.S. AAA rating if we default, even short term,...

In what effectively was a warning about issuing a warning, Moody’s said it would place the U.S. government’s rating under review for possible downgrade on the “very small but rising risk of a short-lived default.” The Treasury Department said it would exhaust all funds by Aug. 2 if the debt ceiling is not lifted by then, in which case a default on existing obligations becomes a possibility.

Moody

seems to me that they care more about a short-term default ithan they are about immediate cuts. (and yes, i know they want the deficit to come down, too... as it should).

but can someone who actually knows something about this subject explain to me how anyone is even considering not raising the debt ceiling?

Who is not considering raising the debt ceiling? No one. Both sides want to raise it.
The difference is that the Democrats want to raise it with vague promises that they will cut spending 10 years down the road. Maybe. Look at Obama's budget proposals. Not one has any immediate spending cuts. He is not serious.
The GOP is willing to raise the ceiling but only in exchange for draconian cuts that will get the defiict down to some reasonable level. Many economists and money managers are saying that even a temporary default with assurances to cut spending down the road wouldn't be a bad thing. They would rather have assurances they will get their money back in the future.
Reagan supported raising the debt ceiling back when debt was a much smaller proportion of GDP, the only meaningful measurement of debt. That isn't germane to today's discussion.

 

[The Rabbi]

Or we could keep doing what we have been doing.

When you pile enough shit in your backyard...eventually...you start smelling it in your front yard.

it was doing pretty well until the bush tax cuts and two wars that we shouldn't be fighting.

how about talking about those things FIRST and then dealing with whatever other issues we have?

How about shutting your pie hole about things you don't understand?
What was the ratio of debt to GDP when Bush left office? What is it now? WHere has Obama cut back on spending on two wars? He hasn't HE has even added a third. If tax cuts were such an issue why did the Democratic Congress pass an extension of them signed by Obama?

 

[iamwhatiseem]

Or we could keep doing what we have been doing.

When you pile enough shit in your backyard...eventually...you start smelling it in your front yard.

it was doing pretty well until the bush tax cuts and two wars that we shouldn't be fighting.

how about talking about those things FIRST and then dealing with whatever other issues we have?

If you seriously think the reason the economy tanked is Bush tax cuts and the Iraq war...well then there is no reason to consider your posts beyond eye candy.

 

[BenNatuf]

I think they should raise it in the short term and then go to work on reforming it for the long term...

On Monday, the United States officially hit its debt limit, meaning that the government is no longer legally able to borrow. However, Treasury Secretary Tim Geithner has tools at his disposal to delay the U.S. defaulting on its obligations until about August 2.

House Republicans, for months, have been saying that they are willing to raise the debt ceiling, with Speaker of the House John Boehner (R-OH) admitting that failure to do so would be “irresponsible,” while House Budget Committee Chairman Paul Ryan (R-WI) said that not raising the debt ceiling is “unworkable.”

But Rep. Devin Nunes (R-CA) this week let the cat out of the bag, outright calling for the U.S. to default. “By defaulting on the debt, in the short and long term, it could benefit us to go through a period of crisis that forces politicians to make decisions” on major policies that affect the budget,” he said.


Actually allowing the U.S. to default on its debt would have widespread consequences for the U.S. and world economies, including potentially pushing the U.S. back into a recession or, in the words of Princeton Professor Alan Blinder, “reignit[ing] the world financial crisis.” And as the Wall Street Journal noted today, failure to raise the debt ceiling would force draconian spending cuts that would wipe out all of the anticipated 2011 economic growth in just 95 days:

Failing To Raise The Debt Ceiling Would Wipe Out All Of 2011′s Estimated Growth In 95 Days | ThinkProgress

There are several possibilities

1. Raise the limit to support spending at current levels and we'll be OK next year, but the future is bleak. As those who purchase our debt are not going to do it for ever, in fact, they may not do it for much longer at all. If they stop the only way to keep it up is through monetization (which the fed is already doing through qualitative easing). That is a dangerous game as the attendent crash at the end of the monetization rainbow will make the actual great depression look like a time of plenty.

2. Raise the debt limit some and cut spending some. Same problem, slower death. It does buy time, but who realy thinks given more time politicians will be able to stop spending money we don't have that isn't theirs. I would support this only if there is a solid commitment from both parties to solve the problem without demogogic attacks to prevent solutions from happenning. I'm a conservative, and I tend to agree with the GOP that revenue shortfalls do not cause deficits, spending more than you take in does. You cannot vote yourself a raise if you spend more in your houshold budget than you make, you must control your spending to match your income. The government is no different. There is nothing wrong with borrowing that's within your budget, but when you have to borrow money to just to keep up with your debt payments your in a world of trouble that will continue to spiral into a deepr and deeper problem if you don't control your other spending. Borrowing money to pay for large expenditures which will eventually be paid off (like a house) is a wize investment, borrowing money so you have enough to pay your monthly expenses is stupid.... cut your expenses.

3. Shock and awe. Don't raise the debt ceiling and force the federal government to come to terms with it's spending habits. There will be a short term problem, and it won't be pretty. I would support this only if option 2 cannot be achieved. It would force a lot of spending the federal government does now in the states to be shifted back to the states where it belongs anyway. But the sheer magnitude of it is incomprehansible. The adjustment states would have to make immediately would be painful, and likely not very pleasant or fair to foist on them all at once. The upheaval would be dramatic and if we can avoid it by acting like the adults option 2 provides we should. If we can't agree on option 2... let the games commence. There will be protests, there will be riots, there will be upheaval, the entire nature of the federal government may be redefined and the country may not survive. If it does, we'll be much better off for it, much quicker. But the pain will be intense and will leave a mark on our national history for all time.