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Thread: S&P cuts U.S. outlook to negative on fiscal worry

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    Re: S&P cuts U.S. outlook to negative on fiscal worry

    Quote Originally Posted by donsutherland1 View Post
    Following S&P's move to place the U.S. on negative outlook, the White House criticized the measure as a "political judgment." According to CNBC, Austin Goolsbee, the White House's top economist declared, "What the S&P is doing is making a political judgment and it is one that we don't agree with." The tendency by governments to dismiss ratings decisions with which they disagree is not new.

    For example, in December 2009, S&P downgraded Greece's debt drawing a quick reaction from the Greek Government. The Financial Times reported that Greece's Finance Minister, George Papaconstantinou stated that the downgrade did not 'reflect' the measures the Greek government was taking to stabilize its finances. On April 23, 2010, the Greek government formally requested EU/IMF assistance.

    IMO, rather than passing off S&P's decision as a political matter, the White House should have used the decision to highlight the increasing urgency of dealing with the nation's fiscal imbalances. Attempting to dismiss the decision as merely a "political judgment" does not create the image of a government that is working aggressively to address the nation's fiscal imbalances. In short, it is a bad public relations strategy that can only undermine the nation's credibility with respect to its fiscal challenges.
    I view comments by he likes of Goolsbee and if he any counterparts in the republican party nothing short of traitors to this country. I understand that sounds extreme. But this is a person who understands economics and yet uses his title and learning not to fix the problems of the country. Rather his loyalty is to a political party.

    Perhaps on an internet site called debate politics we should expect partisans. Nothing wrong wth that. But my sense is that this site os populated with unthinking partisans. So whatever nonsense comes out of the mouth of a leader from their respective side it gets parroted back ad naueum.

    I am not sure if anyone listened to the author of the S&P report. He tried to make it a non-partisan discussion, saying that it isn't one plan is good while the other bad, but the concern that nothing get done. This interview was on a business cable show. Yet the "reporter" tried to pull the person into the partisan debate by asking which plan would be better for the economy. The fellow from S&P refused to get sucked in ( Even by that reporter Erin, Jim's girl) and made no judgement on either plan. Just said it was time to get on with it.

    What don says makes some sense but what is the probability that this will be the result, nil. That is the problem. Doing just about anything is better than doing nothing about the debt, but that is where we are.

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    Re: S&P cuts U.S. outlook to negative on fiscal worry

    Simply put, there isn't a shell game left to put this off any further.

    The proverbial rubber has met the road.

    Socialism fails when you run out of other people's money to spend. And when half the country doesn't even pay income taxes, and there aren't any tricky ways left to borrow money and delay the inevitable further, the gig is up.

    The...gig...is...up.

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    Re: S&P cuts U.S. outlook to negative on fiscal worry

    Quote Originally Posted by Erod View Post
    Simply put, there isn't a shell game left to put this off any further.

    The proverbial rubber has met the road.

    Socialism fails when you run out of other people's money to spend. And when half the country doesn't even pay income taxes, and there aren't any tricky ways left to borrow money and delay the inevitable further, the gig is up.

    The...gig...is...up.
    What socialism? It is conservatism gone amok. It was Reagan and Bush jr that ballooned the debt... and are you calling them socialists?
    PeteEU

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    Re: S&P cuts U.S. outlook to negative on fiscal worry

    The U.S. certainly has fiscal problems, but The S&P lost all credibility when they gave AAA ratings to completely worthless mortgages. They shouldn't be taken any more seriously than a pathological liar after what they pulled.

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    Re: S&P cuts U.S. outlook to negative on fiscal worry

    Quote Originally Posted by washunut View Post
    I am not sure if anyone listened to the author of the S&P report. He tried to make it a non-partisan discussion, saying that it isn't one plan is good while the other bad, but the concern that nothing get done. This interview was on a business cable show. Yet the "reporter" tried to pull the person into the partisan debate by asking which plan would be better for the economy. The fellow from S&P refused to get sucked in ( Even by that reporter Erin, Jim's girl) and made no judgement on either plan. Just said it was time to get on with it.
    You are correct that the decision was not a partisan or political one. Some excerpts:

    We view President Obama's and Congressman Ryan's proposals as the starting point of a process aimed at broader engagement, which could result in substantial and lasting U.S. government fiscal consolidation. That said, we see the path to agreement as challenging because the gap between the parties remains wide. We believe there is a significant risk that Congressional negotiations could result in no agreement on a medium-term fiscal strategy until after the fall 2012 Congressional and Presidential elections. If so, the first budget proposal that could include related measures would be Budget 2014 (for the fiscal year beginning October 1, 2013), and we believe a delay beyond that time is possible.

    Standard & Poor's takes no position on the mix of spending and revenue measures the Congress and the Administration might conclude are appropriate. But for any plan to be credible, we believe that it would need to secure support from a cross-section of leaders in both political parties.
    The full text can be found at: CTV News | Read the text of S&P's statement

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    Re: S&P cuts U.S. outlook to negative on fiscal worry

    Quote Originally Posted by rathi View Post
    The U.S. certainly has fiscal problems, but The S&P lost all credibility when they gave AAA ratings to completely worthless mortgages. They shouldn't be taken any more seriously than a pathological liar after what they pulled.
    Based on past debt and financial crises, the problem wasn't that S&P and other ratings agencies were overly negative or too aggressive in lowering ratings. The problem was that they were too positive and too slow to respond to deterioration in underlying variables that had a material impact on creditworthiness.

    Hence, if there is a risk associated with the negative outlook, it is that the U.S. was placed on negative outlook too late, not prematurely. With the IMF noting that the U.S. had the third highest 10-year required fiscal adjustment and highest 20-year one (higher than Greece, for example), current absence of a credible fiscal consolidation path, and chronic significant current account deficits, the argument that the U.S. should not be on negative outlook is a strained one that relies largely on legacy.

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    Re: S&P cuts U.S. outlook to negative on fiscal worry

    the wave is irresistible, there's no stopping it

    Detroit Moves Against Unions - WSJ.com

    while madison was occupying all the air waves, the same fiscal phenomena were manifesting themselves thruout the rust belt, in ohio, indiana, illinois...

    and in michigan, snyder signed what the msm's described as martial law, rushed thru both assemblies in lansing, recently repainted red, provisions added to code to allow city managers and school superintendents to rip up unilaterally and rewrite contracts, public and otherwise

    well, the mayor, bing, and the emergency school manager, bobb, appointed by stabenow, are both RESORTING to the martial law provisions, unilaterally ripping up contracts and imposing austerity by fiat

    massive cuts are going down, and teacher tenure and collective bargaining are targeted

    this is detroit we're talking about, are you aware of the political culture in motown

    chicago's next, how long do you think rahm can resist

    cuomo's already caught on in new york, and in california jerry brown is bludgeoning TENS of billions

    these are scrappings of govt spending of such depth and width americans have never seen the like before, ever, nothing even close

    and neither of the two blue giants, new york and california, is even contemplating tax increases

    whether they SHOULD or not look at revenues simultaneous with such DEADLY cuts is, in this context, neither here nor there

    the fact is, they're NOT

    it's just the seascape

    it's not partisan, it's a tsunami

    a wave of realization

    cuomo's interminably long state of the state so much as said---we spend too much, it is that blunt and that simple; we just can't afford it; we don't get what we pay for; we have the worst business tax climate in the nation; new yorkers are voting with their feet; what made new york the empire state was a not a large government complex but a vibrant private sector that created jobs; pensions are exploding; we must relearn the lesson our founders knew and put up a sign that says new york is open for business, we are going to be a business friendly state; a fundamental economic realignment for our state; a radical reform; property taxes are killing new yorkers; highest property tax counties in the nation; it has to end, it has to end now; new york has no future as the tax capitol, our young 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 get it"

    GOVERNOR ANDREW M. CUOMO STATE OF THE STATE ADDRESS | Governor Andrew M. Cuomo

    do you?
    Last edited by The Prof; 04-18-11 at 06:34 PM.

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    Re: S&P cuts U.S. outlook to negative on fiscal worry

    Quote Originally Posted by donsutherland1 View Post
    Based on past debt and financial crises, the problem wasn't that S&P and other ratings agencies were overly negative or too aggressive in lowering ratings. The problem was that they were too positive and too slow to respond to deterioration in underlying variables that had a material impact on creditworthiness.

    Hence, if there is a risk associated with the negative outlook, it is that the U.S. was placed on negative outlook too late, not prematurely. With the IMF noting that the U.S. had the third highest 10-year required fiscal adjustment and highest 20-year one (higher than Greece, for example), current absence of a credible fiscal consolidation path, and chronic significant current account deficits, the argument that the U.S. should not be on negative outlook is a strained one that relies largely on legacy.
    I am not objecting to the fact that U.S. credit rating is starting to slip. I simply refuse to give the S&P any authority on the matter.

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    Re: S&P cuts U.S. outlook to negative on fiscal worry

    Quote Originally Posted by rathi View Post
    I am not objecting to the fact that U.S. credit rating is starting to slip. I simply refuse to give the S&P any authority on the matter.
    That is fair enough. S&P amd Moodys have not exactly done a great job the last several years.

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    Re: S&P cuts U.S. outlook to negative on fiscal worry

    Adding to my point concerning the slow speed at which ratings agencies have typically reacted to building crises, a post from almost a year ago when the Greek debt crisis had erupted and Portugal was sliding toward increased risk, provides additional insight worth repeating.

    http://www.debatepolitics.com/breaki...post1058716175

    The following excerpts are relevant:

    Ratings agencies are typically behind the curve when it comes to risk. There is a bias toward continuity. Hence, as the actual risk profile of an entity (state or firm) deteriorates, the gap between the actual risk and the risk implied by the ratings agencies grows. Unfortuntely, in behavioral studies, there is a pronounced human bias toward the status quo. Hence, when risk situations change, there is an invariable need to catch up. IMO, financial conservatism (erring on the side of assuming too much risk) would be better than maintaining a bias toward continuity.

    In that context, I believe Greece should have had its debt rating at junk status months ago. The combination of annual budget deficits > 8% of GDP, gross public debt > 120% of GDP/net government debt > 100% of GDP, a current account deficit of nearly 10% of GDP suggested a country at high risk of default consistent with numerous past sovereign debt crises. To date, even as the Greek government has tried to cast itself as taking 'heroic measures' to deal with its debt situation, it appears that its steps are rather timid and more will be expected by the IMF.

    With respect to the U.S., I believe the U.S. should already be on negative outlook (something I think probably won't happen until 2011 or 2012). The U.S. has no credible fiscal consolidation plan. The two political parties appear unwilling at present to consider the difficult choices necessary for such a plan. Domestic non-financial debt, gross public debt, net public debt are all rising. The current account deficit has ticked up in the recent quarter and is expected to rise further, though it remains well below the excessive current account imbalances for Greece and Portugal.

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