A bipartisan debt deal just about impossible now - CBS News
I gotta go make some popcorn, so I can watch the fallout.
what is being demostrated at WO is no party can lead. They are all too set in their political views to do what is right for the country. Yes they need to raise the debt ceiling. Congress needs to get our financial house in order. I am not willing to just give more to WO for them to spend. Over the years WO has shown they cannot spend what we give them effectivley. Balance the budget, then tell us what more they would like to do, what it will cost and maybe then.
My response to my elected officals is if the US goes back on its debt, I will remember come election time.
"I can explain it to you but, I can't understand it for you"
As I just got back from vacation, just a few quick thoughts:
The spectacle in Washington is really quite extraordinary. Although the political leaders from both parties were elected to solve problems, they have increasingly put political grandstanding ahead of their fiduciary responsibility to the American public. The stunning dysfunctionality--both from the Congress and the White House--is something that one could point to in some of the past debt crises in developing countries in which a breakdown of leadership expedited the way to such crises. That a failure to raise the debt ceiling on a timely basis would spark a self-inflicted crisis of global proportions seems lost on the political leaders, their rhetoric notwithstanding. That numerous outsiders ranging from the Fiscal Commissions to the IMF have discussed in some detail what the U.S. needs to do to begin to put itself on a fiscally sustainable course also seems to have gone over the heads of the political leaders.
In my opinion, even when the debt ceiling is raised--and I still expect it to be done prior to August 2--the political dysfunctionality problem by itself suggests that the U.S. is not worthy of a AAA rating. Hence, I would not be surprised that at least one of the major Ratings organizations would lower the U.S. credit rating even if the debt ceiling is raised on a timely basis. After all given the political risk involved, confidence that the U.S. would make the decisions that need to be made, much less implement them, would be challenged to say the least.
Furthermore, by then, it is not implausible that Washington's failures would have led to at least some market adjustments (lower equities prices and higher yields for the U.S.). One should be careful to watch for signs of an onset of destructive market co-movements (higher yields and lower equities prices) should the impasse continue. Should such co-movements begin to take hold, things could spiral out of control. If so, even a plan with $4 trillion to $6 trillion in savings over the next 10 years might no longer be viewed as credible, especially if higher yields dramatically raise the nation's long-term debt service costs. The lessons of the financial panic of September-October 2008 in which the entire lending process began freezing up illustrate how things could spiral out of control.
If the full faith and credit is diminished and the country cannot borrow money to pay its debts or if the value of our nation's currency is lowered because other countries no longer have confidence that the dollar is worth as much now as it once did and that lack of confidence holds true for a significant duration of time, Congress will be to blame because it is written in the Constitution that maintaining the full faith and credit of the United States is one of their enumerated powers. Thus, it is their responsibility to maintain the nation's credit worthiness.The Congress shall have Power To borrow money on the credit of the United States.
Last edited by Objective Voice; 07-24-11 at 11:35 PM.