"How do you expect the House to get anything through the Democrat controlled Senate and the House."
What is it that they would get through if they could? What ideas have they put forward to address the situation? As far as I can tell their ideas are: 1) cut taxes (which makes deficits worse); and 2) cut spending (which makes unemployment worse).
My point is that it is consistent with experience following recessions driven by housing busts. The extent of debt involved in the housing sector is enormous--indeed, at the height of the housing bubble, mortgage debt had briefly exceeded GDP. That debt will need to fall back toward more sustainable levels. Hence, household deleveraging remains underway. In turn, that deleveraging suppresses growth in personal consumption expenditures, which account for about 70% of U.S. GDP.
Following the end of the housing bubble, jobs that had existed in housing-related industries (mortgage finance, construction, etc.) will not return to previous levels anytime soon. That is a structural unemployment issue, as many from those industries cannot necessarily transition into new industries for which very different skillsets are required. In addition, given the intensity of global competition, many companies are not hiring the long-term unemployed out of concern that their skills are not up to date. That is also a structural issue. In short, both slow macroeconomic growth and structural unemployment issues will are leading to an anemic jobs recovery.
Longer-term, the nation faces very real challenges. IMO, it does not deserve a AAA rating.
1. Political dysfunctionality is a barrier. By political dysfunctionality, I mean that the nation's political leaders are unable to effectively reach agreements on tough issues related to fiscal consolidation. That raises medium- and long-term issues as to whether the U.S. can adopt a robust fiscal consolidation program to tackle its long-term imbalances, much less sustain such a program. Such a program won't be painless. It will, in the near-term, present an additional contractionary headwind.
2. Long-term macroeconomic outlook: The combination of current structural unemployment issues, relative decline in educational attainment, increased risk of a secular rise in the cost of capital, competitiveness gaps in key sectors, and lack of public-private investment in potential growth opportunities (energy to aerospace, etc.) suggest that the nation's long-term growth rate potential is less than it was in the past. 2.5% annualized growth over the next 10 years might be optimistic. 2.0% might be more realistic. That means less tax revenue growth.
3. Federal financial ratios, especially debt:GDP and debt:revenue have deteriorated. There is little evidence of a concrete program to address those issues. Political dysfunctionality reduces prospects of such a program.
4. States have enormous long-term fiscal problems. Despite balanced budget amendments in most states, state finances are weak in the long-term. The amendements have led to the illusion of balanced budgets only because the states significantly underfunded pension and health obligations. If the present value of changes in such obligations were required to be placed on the financial statements, most states would have been running chronic, significant budget deficits. Hence, the utility of such amendments is questionable at best.
5. Structural health system problems: Specifically, the excessive cost growth problem remains unresolved. U.s. health care costs continue to grow at a multiple of national income, even as a significant slice of the population lacks coverage, and one cannot reasonably expect foreigners to continue to finance the system. That multiple is well beyond what is explained by demographic change (population aging/life expectancy). Hospitals remain "inflation factories." Fundamental health reform to address those issues remains unlikely for the foreseeable future.
The result is that political, macroeconomic, and structural issues suggest that actual U.S. risk is greater than that suggested by a AAA rating. That the U.S. can currently meet its debt service obligations does not change the long-term outlook, which is decidedly more pessimistic than a AAA rating would suggest. A ratings downgrade will likely further increase the cost of capital and further damp macroeconomic growth. In turn, that means an even more aggressive fiscal consolidation program will be required to address the nation's long-term imbalances and, in the short-term, economic headwinds could be even stronger in the U.S.
I blame GWB - after all, he left office >2.5 yrs ago.
I also blame the GOP-controlled Congress - after all, they lost power >4.5 years ago.
As blatant as it is, you know this crap has a lot of people clapping and nodding their heads as they murmur to themselvs "that's right!". In fact, I'm willing to bet it resonates quite well with a good many of those DPrs who are constantly praised for their repeated, insightful "No, BOTH parties do it" proclamations (you know, the caps is crucial if you really want to get "Liked").Obama: I think that we can get some cuts going and I’ve shown a lot of flexibility, as you know, George. I’ve been criticized pretty fiercely in my own party. Saying that I’ve been compromising too much.
Yeah, both parties suck, both parties are corrupt, both parties are incompetent, both parties are stupid... if only people understood that at the center of all that sucky, corrupt, incompetent idiocy is the solution to all our problems. It's a bit like picking up an oozing, half-rotted orange caked in mold. Given how bad things look from the outside, very simple logic tells you that the good part of the orange must be in the middle. Only a blind partisan with no critical thinking skills could conclude otherwise.
“When buying and selling are controlled by legislation, the first things to be bought and sold are legislators.” - P. J. O’Rourke
“Socialism is great until you run out of someone elses money” Margaret Thatcher