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Thread: United States loses its AAA Credit rating from S & P

  1. #151
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    Re: United States loses its AAA Credit rating from S & P

    Quote Originally Posted by The Giant Noodle View Post
    I must disagree. The GOP got 98% of what they wanted. Its not the Dems fault. If the GOP got what they wanted then why did this happen? Ill tell you! No new revenue coming in. This is 100% on the Tea-Publicans. Dont get me wrong.... I like what they wanted BUT they played politics. I also like what the Gang of 6 wanted BUT.... because of bull crap politics the GOP didn't go for it. It was a dog and pony show - just like every other "budget cut", the accounting is a scam, and typically the cuts never happen.

    Even in this deal, the spending is over the next two years, but the "cuts" would be over 10 years, and would still add over $10 trillion to the national debt. So after two years, where do they get the cuts for the next debt ceiling increase?

    Take a step back and look at the big picture - it is another smoke and mirrors trick that only kicks the can down the road.
    Again, not sure why we have to go there but... isn't it a bit ignorant to say that any side got 98% of what they wanted. $2 trillion over 10 years or about 3% of spending. No fixing of the tax code which is still a mess. No balanced amendment ( I do think we should have one), no real caps or real spending restrictions in the future so this deal makes no sense on it's face.

    Perhaps all this site is good for is to allow people to recite talking points from cable TV folks and pat themselves on the back as if they know something about a very complicated topic.

  2. #152
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    Re: United States loses its AAA Credit rating from S & P

    This only matters if institutions have to sell out to meet their investment criteria.
    "If your opponent is of choleric temperament, seek to irritate him." - Sun Tzu

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    Re: United States loses its AAA Credit rating from S & P

    Over the next few days, the finger-pointing and blame-shifting in Washington will likely be intense. Already, it has started. The Sunday shows will probably be filled with it. Lost amid the noise will be two things:

    1. A failure to accept responsibility for the current situation and a commitment to forge a credible fiscal consolidation agreement
    2. Recognition that overseas lenders have slowly growing concerns

    S&P has already spoken on the first point regarding the prospects for credible fiscal consolidation. It even all but handed the U.S. a detailed "upside case" by which it can regain its AAA rating over time (meets macroeconomic assumptions of 3% real growth rate/2% inflation, meets the terms of its more modest deficit package that was recently enacted, and generates at least $950 billion in additional savings (S&P cited that figure in suggesting that some of the 2001 and 2003 tax cuts be permitted to expire, but there are many ways that the nation could generate such savings). Quite frankly, with its enormous domestic nonfinancial debt overhang and structural economic challenges, the 3% real growth rate may be too high. To put things in context, if the economy grew at 2.5% per year over the next 10 years, real GDP would be just over $800 billion less than it would be in 10 years at a 3% real growth rate. If tax revenue came to 18%-20% of GDP, the government would be taking in $144 billion to $160 billion less in annual tax revenue within 10 years than would be the case for 3% growth. IMO, a credible deficit reduction package should go beyond the minimum parameters currently being cited by S&P, as such parameters would be insufficient were growth to average less than 3%. Consistent with fiscal consolidation experience, the program should include discretionary spending cuts, mandatory/entitlement spending reform, and some revenue increases.

    On the second point, Xinhua's editorial has highlighted China's concerns. Although no Chinese leader has yet responded publicly, behind the scenes China's leaders have been pressing the U.S. for some time to begin to address the nation's fiscal challenges. Moreover, Xinhua's commentary has often reflected official Chinese thinking. Some excerpts from Xinhua's editorial follow:

    Though the U.S. Treasury promptly challenged the unprecedented downgrade, many outside the United States believe the credit rating cut is an overdue bill that America has to pay for its own debt addition and the short-sighted political wrangling in Washington...

    The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone.

    It should also stop its old practice of letting its domestic electoral politics take the global economy hostage and rely on the deep pockets of major surplus countries to make up for its perennial deficits.
    http://news.xinhuanet.com/english201..._131032986.htm

    What this means is that China may increase its efforts to diversify away from Treasury securities, a long and slow process. Other leading creditors might follow suit. The impact will probably first be seen on the long-end of the yield curve, with little or no impact on the short-end. A rise in long-term rates would add to headwinds affecting the U.S. economy.

    Whether U.S. policy makers would be galvanized by such developments to begin to address the nation's fiscal imbalances remains to be seen. The recent dysfunction in Washington is worrisome. There is a danger that U.S. political leaders, like many in other countries that ultimately experienced debt crises, could be seduced by the siren song of low short-term yields and seek to escape rising long-term yields by shortening the average maturity of U.S. debt. Such debt would need to be rolled over more and more frequently leading to growing risk of a failed auction. In addition, growing issuance of short-term debt would begin to push short-term yields higher. In sum, such a shift would provide short-term respite in the absence of credible fiscal reform.

    In the end, fiscal reform--not excuse-making, finger-pointing, blame-shifting, or fiscal gimmicks--is needed. Absent fiscal reform, more ratings downgrades will likely occur and eventually capital flight could develop.

  4. #154
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    Re: United States loses its AAA Credit rating from S & P

    Quote Originally Posted by AdamT View Post
    anyone with a foot on planet earth understands that the deficit situation can only realistically be addressed wtih a combination of spending cuts and revenu hikes
    GOVERNOR ANDREW M. CUOMO STATE OF THE STATE ADDRESS | Governor Andrew M. Cuomo

    "we have the worst business tax climate in the nation, period, our taxes are 66% higher than the national average"

    "the costs of pensions are exploding... a 476% increase and its only getting worse"

    "the state of new york spends too much money, it is that blunt and it is that simple"

    "an unsustainable rate of growth and it has been for a long time"

    "not only do we spend too much, but we get too little in return"

    "the large government we have is all too often responsive to the special interests over the people"

    "new yorkers are voting with their feet, two million new yorkers have left the state over the past decade"

    "what does this say, it says we need radical reform, it says we need a new approach, we need a new perspective and we need it now"

    "this is a fundamental realignment for the state"

    "the old way wasn't working anyway, let's be honest"

    "we want a government that puts the people first and not the special interests first"

    "what made new york the empire state was a not a large government complex, it was a vibrant private sector that was creating great jobs"

    "and that's what's going to make us the empire state again"

    "at the heart of this state is business"

    "we have to relearn the lesson our founders knew and we have to put up a sign that says new york is open for business, we get it, and this is going to be a business friendly state"

    "we are going to have to confront the tax situation in our state, property taxes in this state are killing new yorkers, thirteen of the sixteen highest tax counties are in new york when assessed by home value"

    "westchester county has the highest property taxes in the united states, nassau county has the second highest"

    "it has to end, it has to end this year"

    "we have to hold the line on taxes for now and reduce taxes in the future, new york has no future as the tax capital of the nation, our young people will not stay, our business will not come"

    "put it simply, the people of this state simply cannot afford to pay any more taxes, period"

    "we have to start with an emergency financial plan to stabilize our finances, we need to hold the line and we need to institute a wage freeze in the state of new york, we need to hold the line on taxes, we need a state spending cap and we need to close this $10 billion gap without any borrowing"

    Cuomo budget: $10 billion deficit cut, no new taxes, layoffs likely

    Andrew Cuomo approval sky-high, new poll suggests - Jennifer Epstein - POLITICO.com

  5. #155
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    Re: United States loses its AAA Credit rating from S & P

    Quote Originally Posted by donsutherland1 View Post
    Over the next few days, the finger-pointing and blame-shifting in Washington will likely be intense. Already, it has started. The Sunday shows will probably be filled with it. Lost amid the noise will be two things:

    1. A failure to accept responsibility for the current situation and a commitment to forge a credible fiscal consolidation agreement
    2. Recognition that overseas lenders have slowly growing concerns

    S&P has already spoken on the first point regarding the prospects for credible fiscal consolidation. It even all but handed the U.S. a detailed "upside case" by which it can regain its AAA rating over time (meets macroeconomic assumptions of 3% real growth rate/2% inflation, meets the terms of its more modest deficit package that was recently enacted, and generates at least $950 billion in additional savings (S&P cited that figure in suggesting that some of the 2001 and 2003 tax cuts be permitted to expire, but there are many ways that the nation could generate such savings). Quite frankly, with its enormous domestic nonfinancial debt overhang and structural economic challenges, the 3% real growth rate may be too high. To put things in context, if the economy grew at 2.5% per year over the next 10 years, real GDP would be just over $800 billion less than it would be in 10 years at a 3% real growth rate. If tax revenue came to 18%-20% of GDP, the government would be taking in $144 billion to $160 billion less in annual tax revenue within 10 years than would be the case for 3% growth. IMO, a credible deficit reduction package should go beyond the minimum parameters currently being cited by S&P, as such parameters would be insufficient were growth to average less than 3%. Consistent with fiscal consolidation experience, the program should include discretionary spending cuts, mandatory/entitlement spending reform, and some revenue increases.

    On the second point, Xinhua's editorial has highlighted China's concerns. Although no Chinese leader has yet responded publicly, behind the scenes China's leaders have been pressing the U.S. for some time to begin to address the nation's fiscal challenges. Moreover, Xinhua's commentary has often reflected official Chinese thinking. Some excerpts from Xinhua's editorial follow:



    http://news.xinhuanet.com/english201..._131032986.htm

    What this means is that China may increase its efforts to diversify away from Treasury securities, a long and slow process. Other leading creditors might follow suit. The impact will probably first be seen on the long-end of the yield curve, with little or no impact on the short-end. A rise in long-term rates would add to headwinds affecting the U.S. economy.

    Whether U.S. policy makers would be galvanized by such developments to begin to address the nation's fiscal imbalances remains to be seen. The recent dysfunction in Washington is worrisome. There is a danger that U.S. political leaders, like many in other countries that ultimately experienced debt crises, could be seduced by the siren song of low short-term yields and seek to escape rising long-term yields by shortening the average maturity of U.S. debt. Such debt would need to be rolled over more and more frequently leading to growing risk of a failed auction. In addition, growing issuance of short-term debt would begin to push short-term yields higher. In sum, such a shift would provide short-term respite in the absence of credible fiscal reform.

    In the end, fiscal reform--not excuse-making, finger-pointing, blame-shifting, or fiscal gimmicks--is needed. Absent fiscal reform, more ratings downgrades will likely occur and eventually capital flight could develop.
    Hasn't the Fed government already relied extensively on the short end of the debt spectrum? Why not issue more 30 year paper as long as it stays in the 3.5% range. Even if that went to 5%, it would still be cheap as we continue to print more dollars. The problem is twofold. First interest expense would rise in the short term, and a treasury secretary could care less about financing costs 5-10 years from now. Also putting more pressure on the long end would probably have an impact on mortgage rates, having them rise a bit while we are trying to keep prices from falling further.

  6. #156
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    Re: United States loses its AAA Credit rating from S & P

    a political disfunction like washington dc, 2011, starts at the top

    President's budget sinks, 97-0 - TheHill.com

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    Re: United States loses its AAA Credit rating from S & P

    Quote Originally Posted by donsutherland1 View Post
    Over the next few days, the finger-pointing and blame-shifting in Washington will likely be intense. Already, it has started. The Sunday shows will probably be filled with it. Lost amid the noise will be two things:

    1. A failure to accept responsibility for the current situation and a commitment to forge a credible fiscal consolidation agreement
    2. Recognition that overseas lenders have slowly growing concerns

    S&P has already spoken on the first point regarding the prospects for credible fiscal consolidation. It even all but handed the U.S. a detailed "upside case" by which it can regain its AAA rating over time (meets macroeconomic assumptions of 3% real growth rate/2% inflation, meets the terms of its more modest deficit package that was recently enacted, and generates at least $950 billion in additional savings (S&P cited that figure in suggesting that some of the 2001 and 2003 tax cuts be permitted to expire, but there are many ways that the nation could generate such savings). Quite frankly, with its enormous domestic nonfinancial debt overhang and structural economic challenges, the 3% real growth rate may be too high. To put things in context, if the economy grew at 2.5% per year over the next 10 years, real GDP would be just over $800 billion less than it would be in 10 years at a 3% real growth rate. If tax revenue came to 18%-20% of GDP, the government would be taking in $144 billion to $160 billion less in annual tax revenue within 10 years than would be the case for 3% growth. IMO, a credible deficit reduction package should go beyond the minimum parameters currently being cited by S&P, as such parameters would be insufficient were growth to average less than 3%. Consistent with fiscal consolidation experience, the program should include discretionary spending cuts, mandatory/entitlement spending reform, and some revenue increases.

    On the second point, Xinhua's editorial has highlighted China's concerns. Although no Chinese leader has yet responded publicly, behind the scenes China's leaders have been pressing the U.S. for some time to begin to address the nation's fiscal challenges. Moreover, Xinhua's commentary has often reflected official Chinese thinking. Some excerpts from Xinhua's editorial follow:



    http://news.xinhuanet.com/english201..._131032986.htm

    What this means is that China may increase its efforts to diversify away from Treasury securities, a long and slow process. Other leading creditors might follow suit. The impact will probably first be seen on the long-end of the yield curve, with little or no impact on the short-end. A rise in long-term rates would add to headwinds affecting the U.S. economy.

    Whether U.S. policy makers would be galvanized by such developments to begin to address the nation's fiscal imbalances remains to be seen. The recent dysfunction in Washington is worrisome. There is a danger that U.S. political leaders, like many in other countries that ultimately experienced debt crises, could be seduced by the siren song of low short-term yields and seek to escape rising long-term yields by shortening the average maturity of U.S. debt. Such debt would need to be rolled over more and more frequently leading to growing risk of a failed auction. In addition, growing issuance of short-term debt would begin to push short-term yields higher. In sum, such a shift would provide short-term respite in the absence of credible fiscal reform.

    In the end, fiscal reform--not excuse-making, finger-pointing, blame-shifting, or fiscal gimmicks--is needed. Absent fiscal reform, more ratings downgrades will likely occur and eventually capital flight could develop.
    Hasn't the Fed government already relied extensively on the short end of the debt spectrum? Why not issue more 30 year paper as long as it stays in the 3.5% range. Even if that went to 5%, it would still be cheap as we continue to print more dollars. The problem is twofold. First interest expense would rise in the short term, and a treasury secretary could care less about financing costs 5-10 years from now. Also putting more pressure on the long end would probably have an impact on mortgage rates, having them rise a bit while we are trying to keep prices from falling further.

  8. #158
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    Re: United States loses its AAA Credit rating from S & P

    The federal government's financial condition deteriorated rapidly last year, far beyond the $1.5 trillion in new debt taken on to finance the budget deficit, a USA TODAY analysis shows.

    The government added $5.3 trillion in new financial obligations in 2010, largely for retirement programs such as Medicare and Social Security. That brings to a record $61.6 trillion the total of financial promises not paid for.

    Medicare alone took on $1.8 trillion in new liabilities, more than the record deficit prompting heated debate between Congress and the White House over lifting the debt ceiling.

    Social Security added $1.4 trillion in obligations, partly reflecting longer life expectancies. Federal and military retirement programs added more to the financial hole, too.
    U.S. funding for future promises lags by trillions - USATODAY.com

    at 61.6T, growing 5.3 per year, there's simply not enough revenue in the galaxy to make it right

    IRS: 235,413 million-dollar earners - Jennifer Epstein - POLITICO.com

    if something isn't done imminently to fundamentally restructure our budgets, then our big 3 federal programs (as well as state pensions) will simply cease to exist as we've come to know them

    trying to address liabilities like these with revenues is like spitting in the ocean

  9. #159
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    Re: United States loses its AAA Credit rating from S & P

    those darn wingnuts and all their disfunction are once again threatening the very stability of our institutions

    US Postal Service warns it could default - Yahoo! News

  10. #160
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    Re: United States loses its AAA Credit rating from S & P

    I think that its legitimately f'ed up when sovereign nations allow credit rating agencies to shove them around and tell them what to do.
    "And in the end, we were all just humans, drunk on the idea that love, only love, could heal our brokenness."

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