Tax package may threaten U.S. top-notch credit rating—Moody's

[donsutherland1]

Moody's warned Monday that it could move a step closer to cutting the U.S. Aaa rating if President Obama's tax and unemployment benefit package becomes law...

"From a credit perspective, the negative effects on government finance are likely to outweigh the positive effects of higher economic growth," Moody's analyst Steven Hess said in a report sent late on Sunday.

U.S. top-notch credit rating at risk

I agree with Moody's. Without provisions for years 3 and beyond to claw back the excess debt that results from the package, not to mention the risk of further renewals without the addition of adequate provisions to assure at least budget neutrality, the package adds to medium- and long-term U.S. credit risk. As the package is coming in the wake of another ritual waiving of an extremely modest Medicare savings mechanism, there remains a real question as to whether U.S. policy makers are willing to address the nation's long-term fiscal challenges. Both actions suggest that, at present, they are not.

Needless to say, it was a welcome development that both commissions charged with looking at U.S. fiscal policy actually provided constructive fiscal consolidation suggestions. However, at this time, those commissions remain far ahead of the bipartisan consensus in Washington that continues to largely ignore the need for medium- and long-term fiscal consolidation, except when it comes to largely meaningless campaign rhetoric.

 

[MaggieD]

U.S. top-notch credit rating at risk

I agree with Moody's. Without provisions for years 3 and beyond to claw back the excess debt that results from the package, not to mention the risk of further renewals without the addition of adequate provisions to assure at least budget neutrality, the package adds to medium- and long-term U.S. credit risk. As the package is coming in the wake of another ritual waiving of an extremely modest Medicare savings mechanism, there remains a real question as to whether U.S. policy makers are willing to address the nation's long-term fiscal challenges. Both actions suggest that, at present, they are not.

Needless to say, it was a welcome development that both commissions charged with looking at U.S. fiscal policy actually provided constructive fiscal consolidation suggestions. However, at this time, those commissions remain far ahead of the bipartisan consensus in Washington that continues to largely ignore the need for medium- and long-term fiscal consolidation, except when it comes to largely meaningless campaign rhetoric.

Is this the same Moody's that rated junk mortgages as AAA? (That's my snide part.)

Unsnide: I'm glad to see this warning and hope somebody is paying attention....especially the Chinese, as they have the ability to, shall we say, "influence" some of our run-away spending.

 

[cpwill]

:lamo


THIS???


THIS is what they finally latch on to?


not the massive unfunded liabilities; not the budgets that intentionally add in over a trillion in debt per year for the next decade, not state and local liabilities that could very likely be nationalized, capsizing the whole boat, not our moves to monetize the debt.....

but if you extend unemployment benefits and keep tax rates the same!!!

:lamo


wow, Moody's, welcome to the game. :lol: right conclusion, wrong reasons, dummies.

 

[donsutherland1]

:lamo


THIS???


THIS is what they finally latch on to?


not the massive unfunded liabilities; not the budgets that intentionally add in over a trillion in debt per year for the next decade, not state and local liabilities that could very likely be nationalized, capsizing the whole boat, not our moves to monetize the debt.....

Moody's is considering the unfunded liabilities (largely Medicare). This report, though, focused on the incremental addition to the nation's debt that the package is projected to produce. Clearly, if there were no long-term imbalances associated with Social Security, Medicare, and Medicaid, then the 2-year increase in the nation's debt would not be viewed so unfavorably by Moody's. As I've stated before, IMO, the U.S. should already be on negative outlook. Unless there are some significant policy changes e.g., a credible fiscal consolidation program that would begin in the not-too-distant future (slowly at first given continuing economic fragility), one should presume that the bipartisan consensus against fiscal responsibility remains intact. Policy actions, not campaign rhetoric, will determine whether that consensus has shifted. For now, it has not. The waiving (yet again) of very modest Medicare savings demonstrates how low the political appetite is for sacrifice. Meanwhile, across the Pond so to speak, the UK has actually embarked on what appears to be a credible fiscal consolidation path.

 

[Deuce]

:lamo


THIS???


THIS is what they finally latch on to?


not the massive unfunded liabilities; not the budgets that intentionally add in over a trillion in debt per year for the next decade, not state and local liabilities that could very likely be nationalized, capsizing the whole boat, not our moves to monetize the debt.....

but if you extend unemployment benefits and keep tax rates the same!!!

:lamo


wow, Moody's, welcome to the game. :lol: right conclusion, wrong reasons, dummies.

Present deficit forecast is not 1 trillion per year for the next decade.

 

[apdst]

U.S. top-notch credit rating at risk

I agree with Moody's. Without provisions for years 3 and beyond to claw back the excess debt that results from the package, not to mention the risk of further renewals without the addition of adequate provisions to assure at least budget neutrality, the package adds to medium- and long-term U.S. credit risk. As the package is coming in the wake of another ritual waiving of an extremely modest Medicare savings mechanism, there remains a real question as to whether U.S. policy makers are willing to address the nation's long-term fiscal challenges. Both actions suggest that, at present, they are not.

Needless to say, it was a welcome development that both commissions charged with looking at U.S. fiscal policy actually provided constructive fiscal consolidation suggestions. However, at this time, those commissions remain far ahead of the bipartisan consensus in Washington that continues to largely ignore the need for medium- and long-term fiscal consolidation, except when it comes to largely meaningless campaign rhetoric.

Just imagine the extra tax revenue that would be generated, if the government stopped hammering the crap out of the private sector with over-reaching legislation.

 

[danarhea]

U.S. top-notch credit rating at risk

I agree with Moody's. Without provisions for years 3 and beyond to claw back the excess debt that results from the package, not to mention the risk of further renewals without the addition of adequate provisions to assure at least budget neutrality, the package adds to medium- and long-term U.S. credit risk. As the package is coming in the wake of another ritual waiving of an extremely modest Medicare savings mechanism, there remains a real question as to whether U.S. policy makers are willing to address the nation's long-term fiscal challenges. Both actions suggest that, at present, they are not.

Needless to say, it was a welcome development that both commissions charged with looking at U.S. fiscal policy actually provided constructive fiscal consolidation suggestions. However, at this time, those commissions remain far ahead of the bipartisan consensus in Washington that continues to largely ignore the need for medium- and long-term fiscal consolidation, except when it comes to largely meaningless campaign rhetoric.

I find it ludicrous to assume that the US has a good credit rating at all. It doesn't take a rocket scientist to conclude that this massive debt will NEVER be paid off.

 

[Simon W. Moon]

U.S. Macro Outlook: Compromise Boosts Stimulus

The Obama administration and congressional Republicans have agreed to a wide range of tax cuts and benefit extensions.

The proposals will boost growth in 2011, likely ensuring enough new jobs to measurably reduce unemployment by this time next year.

Of the package's provisions, extending unemployment insurance benefits provides the biggest economic bang for the buck.

The plan to continue current marginal tax rates at all income levels is prudent, given the current economic environment.

The deal lessens pressure on the Federal Reserve to engage in additional quantitative easing.

The federal deficit will grow this year and next, but debt markets should take this in stride as the recovery accelerates.​

 

[Simon W. Moon]

interesting

seems more or less in line with the cbo

 

[The Prof]

you think the obama/clinton/bush/mcconnell/boehner tax plan is more deleterious to our borrowing ability than, for instance:

Fed to Buy $600 Billion of Treasurys - WSJ.com

even before the "modest" adjustment to medicare's outlays, willing doctors were becoming hard to find:

http://www.nytimes.com/2009/04/02/business/retirementspecial/02health.html

obama, who since sotu (state of the union) has been relying most irresponsibly on bowles-simpson, just last week became the LEADER OF NO:

Deficit summit? Not in the cards - John Maggs - POLITICO.com

it's too bad, mere INTEREST ALONE on our national debt is to approach A TRIL PER YEAR very soon

Wave of Debt Payments

the big loser---john maynard keynes

 

[cpwill]

Present deficit forecast is not 1 trillion per year for the next decade.

sorry. $940 Billion-ish per year. i'll assume a rounding error and another "emergency" such as the SEIU bouncing a check and call it a trillion even.

 

[PeteEU]

Moody's and all ratings agencies are a joke.