Salt Jones
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- Mar 22, 2011
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Is the lowering of the U.S. credit rating as valid as the AAA credit rating for trillions of dollars in mortgage bonds?
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hey, they were imho one of the indicted co-conspirators of the whole mess.......well, not that anyone was indicted but you get the drift.
What does the S&P credit rating have to do with anything, if the Fed still keeps interest rates artificially low anyways?
hey, they were imho one of the indicted co-conspirators of the whole mess.......well, not that anyone was indicted but you get the drift.
That helps explain why one major credit rating agency -- Standard & Poor's -- has downgraded the United States, while another -- Moody's -- has chosen to affirm its credit rating with caveats. Both agencies had the same essential set of facts about U.S. debt: There's a lot of it now. There's a lot more of it to come. And there's very little in the way of actual policy today that looks likely to seriously change that outlook. Where the agencies differ, however, is in their degree of skepticism that Congress will follow through on meaningful debt reduction.
S&P is pessimistic. It points to the reckless debt ceiling debate, which artificially tied the longer term need to reduce the debt with the immediate need to raise the borrowing limit to ensure the United States makes good on all its bills. "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." S&P said Friday in downgrading the United States to AA+ from AAA.
In some ways, it's easy to see why S&P is so pessimistic. Throughout the struggle to raise the debt ceiling, some lawmakers repeatedly suggested it would be better to risk default and not raise the ceiling until Congress passed a spending-cuts-only plan to reduce debt. "We clearly pose more of a risk to investors than we did previously. We're the only developed nation in the world that talks openly about default," said Donald Marron, a former acting director of the Congressional Budget Office.
The deal that lawmakers eventually struck did remove the risk that the United States would default by raising the debt ceiling. It also called for at least $2.1 trillion in debt reduction over a decade. More than half of those cuts will be determined by a new joint committee in Congress. If the committee process fails, automatic cuts of $1.2 trillion would be triggered.
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Oh, AAA credit rating -- we never knew how much we loved you until we lost you. Just one more chance, please! It's like a bad breakup. The warning signs were there. He starts to nitpick and then complain so much more than when the romance began. Remember when you could do no wrong? He went along when you demanded all the luxuries in life even though you couldn't afford them. What's a few overextended credit cards when you are having a good time?
And then, he started issuing those self-important warnings? Who does he think he is? But you never really believed he would walk. Just like that. And he even has the nerve to compare you unfavorably to German, Canadian, British and French girls (all of whom were still rated AAA in his book). The indignity of it all. No question: This hurts. But still you can't let go. What will it take to get him back?
Pick a fiscal goal: We know where we need to get. The rating agencies have made it clear, as have other outside groups (including the Peterson-Pew Commission on Budget Reform, on which I served). Here it is: We need to generate enough savings to stabilize the federal debt so that it is no longer growing faster than the economy.
I wish I could say the goal was to "balance the budget." It's clearly a better bumper stick slogan than "stabilize the debt." But the truth is that we are so far from balance it will probably take decades to get there. So stabilize the debt it is. It would be best to get it back to about 60% of GDP (historically, it has been below 40%). But that might be tough in the next decade. The outer limit should be 65%, and that will take at least $4 trillion to $5 trillion in savings over the next decade. Nothing less will suffice.
Put a multiyear plan in place:
What does the S&P credit rating have to do with anything, if the Fed still keeps interest rates artificially low anyways?
Is the lowering of the U.S. credit rating as valid as the AAA credit rating for trillions of dollars in mortgage bonds?
They had no choice if they wanted to do ANYTHING to even begin to restore their credibility after the criminal lack of truthfullness in the mortgage ponzi scheme.
hey, they were imho one of the indicted co-conspirators of the whole mess.......well, not that anyone was indicted but you get the drift.