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Thread: Moody's: Neither Debt Plan Protects the Nations' AAA Rating

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    Moody's: Neither Debt Plan Protects the Nations' AAA Rating

    CC&B would, mind you....

    but oooh, no. no no no. fiscal responsibility is way too far right wing fringe



    The "limited magnitude" of both debt plans put forward by congressional leaders would not put the nation's AAA credit rating back on solid footing, Moody's Investors Service announced Friday.

    "Reductions of the magnitude now being proposed, if adopted, would likely lead Moody's to adopt a negative outlook on the AAA rating," the credit rating agency said in a new report. "The chances of a significant improvement in the long-term credit profile of the government coming from deficit reductions of the magnitude proposed in either plan are not high."..

    [b\It also clarified that as far as it is concerned, the nation will only default if it misses an interest or principal payment on U.S. debt, not if it misses payments on other obligations like federal employee salaries or Social Security benefits.[/b]

    The report also gives credence to a claim popular among Republicans: that the government has enough cash to avoid a default even past the Aug. 2 deadline set by the Treasury Department.

    "If the debt limit is not raised before August 2, we believe that the Treasury would give priority to debt service payments and could thus postpone a potential debt default for a number of days," it said. "Revenues would be more than adequate for some period of time to meet those payments, although other outlays would be severely reduced as a result."...
    Last edited by cpwill; 07-30-11 at 07:04 PM.

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    Re: Moody's: Neither Debt Plan Protects the Nations' AAA Rating

    First of all, I'd like to point out that Moody's itself should be a junk bond. I mean, why does anyone still attach any credibility to them in the first place? A better measure of creditworthiness is the interest rates that investors demand on government bonds.

    Quote Originally Posted by cpwill View Post
    but oooh, no. no no no. fiscal responsibility is way too far right wing fringe
    There is nothing fiscally responsible about pushing the nation to the brink of default. 22 Republican congresspeople rejected even Boehner's plan as too warm and fuzzy, indicating that there is a certain bloc that will not vote for a debt ceiling hike under any circumstances. Furthermore, among those who DID vote for Boehner's plan, many did so only grudgingly and with an attached demand that they know will not happen (i.e. a balanced budget amendment).

    Then we can go into the fact that the supposedly responsible right-wing fringe (to borrow your terminology) has mainly focused on cuts to non-defense discretionary spending in the current debt ceiling debate...which is at historically normal levels, easily reversible by future congresses, and should certainly not be cut during a period of high unemployment. Any truly "fiscally responsible" proposal will mostly leave this alone, and instead focus on the four areas which actually ARE a problem and are driving our long-term deficit: Health care, social security, defense spending, and tax policy.

    So I agree with Moody's that neither debt plan is responsible...because they're focusing on entirely the wrong kind of cuts. With that said, I'm less concerned about what Moody's thinks than what bondholders think. Bondholders have been kind to the United States because they recognize that these problems are not as intractable, severe, or imminent as they are often portrayed...but this could all change if the government does not act to raise (or eliminate or ignore) the debt ceiling. The fiscal problems of the United States are long-term; we have time to correct our course and it's not going to happen in the next couple weeks. We need to get past the immediate threat of political default before we can focus on the long-term fiscal problems.

    I compare it to a ship getting blown off course: The captain knows that he'll need to veer slightly north in order to reach his destination in 1,000 miles. But there's an iceberg in his path in another mile...does it make more sense to go around the iceberg and THEN veer north, or to head directly for the iceberg?
    Last edited by Kandahar; 07-30-11 at 07:25 PM.
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    Re: Moody's: Neither Debt Plan Protects the Nations' AAA Rating

    Quote Originally Posted by Kandahar View Post
    First of all, I'd like to point out that Moody's itself should be a junk bond. I mean, why does anyone still attach any credibility to them in the first place? A better measure of creditworthiness is the interest rates that investors demand on government bonds.
    i agree with the caveat that that measure only works when you don't have an artificial buyer (rhymes with "ned") buying up 70% of issuance. but consider the direction of moody's; they are always the dumb money, the last to know.

    There is nothing fiscally responsible about pushing the nation to the brink of default
    i agree, however you will note that it wasn't the debt ceiling measure that has done this, but rather the lack of a fix to the long-term debt and continued deficits.

    22 Republican congresspeople rejected even Boehner's plan as too warm and fuzzy, indicating that there is a certain bloc that will not vote for a debt ceiling hike under any circumstances. Furthermore, among those who DID vote for Boehner's plan, many did so only grudgingly and with an attached demand that they know will not happen (i.e. a balanced budget amendment).

    Then we can go into the fact that the supposedly responsible right-wing fringe (to borrow your terminology) has mainly focused on cuts to non-defense discretionary spending in the current debt ceiling debate...which is at historically normal levels, easily reversible by future congresses, and should certainly not be cut during a period of high unemployment. Any truly "fiscally responsible" proposal will mostly leave this alone, and instead focus on the four areas which actually ARE a problem and are driving our long-term deficit: Health care, social security, defense spending, and tax policy.
    you think that a BBA is dead on arrival, but a Republican Plan to reduce Medicare and Social Security expenditures isn't? Republicans have given the Senate the most left-leaning plan that can pass the House, entitlement reform can pass the House (and already has), but can't pass the Senate and the President would veto it if it did.

    as for those issues you mention: Republicans fixed two of them in their 2012 Budget. You know, the one Senate Democrats declared dead on arrival?

    I agree with Moody's that neither debt plan is responsible...because they're focusing on entirely the wrong kind of cuts.
    yes and no. we need to drastically reduce future Medicare and largely reduce future Social Security expenditures; and it would be best if we did so in a way (with regards to Medicare) as to hold down medical costs so that those reduced expenditures still go further. however, a balanced budget amendment would be precisely the kind of structural change that would force an alteration in future spending and is therefore indeed a responsible measure.

    With that said, I'm less concerned about what Moody's thinks than what bondholders think. Bondholders have been kind to the United States because they recognize that these problems are not as intractable, severe, or imminent as they are often portrayed...but this could all change if the government does not act to raise (or eliminate or ignore) the debt ceiling
    both of those claims are inaccurate. bondholders have somewhat fled the even worse nightmare of Europe (temporarily driving the rate down) and have been operating in an environment where the Fed is massively intervening to drive the yield down even further. The US Bond yields could change extremely rapidly because the underlying economic logic of why they are currently low isn't stable.

    The fiscal problems of the United States are long-term; we have time to correct our course and it's not going to happen in the next couple weeks. We need to get past the immediate threat of political default before we can focus on the long-term fiscal problems.
    that is true and hence the speakers two-part-plan.


    which the President (who apparently disagrees with you) has promised to veto
    Last edited by cpwill; 07-30-11 at 09:43 PM.

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    Re: Moody's: Neither Debt Plan Protects the Nations' AAA Rating

    Quote Originally Posted by cpwill View Post
    CC&B would, mind you....

    but oooh, no. no no no. fiscal responsibility is way too far right wing fringe
    Only the right wing thinks fiscal responsibility is sole property of the right.
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    We’ll say what? Something like “nothing happened” ... Yeah, we might say something like that.

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    Re: Moody's: Neither Debt Plan Protects the Nations' AAA Rating

    Quote Originally Posted by cpwill View Post
    CC&B would, mind you....

    but oooh, no. no no no. fiscal responsibility is way too far right wing fringe



    The "limited magnitude" of both debt plans put forward by congressional leaders would not put the nation's AAA credit rating back on solid footing, Moody's Investors Service announced Friday.

    "Reductions of the magnitude now being proposed, if adopted, would likely lead Moody's to adopt a negative outlook on the AAA rating," the credit rating agency said in a new report. "The chances of a significant improvement in the long-term credit profile of the government coming from deficit reductions of the magnitude proposed in either plan are not high."..

    [b\It also clarified that as far as it is concerned, the nation will only default if it misses an interest or principal payment on U.S. debt, not if it misses payments on other obligations like federal employee salaries or Social Security benefits.[/b]

    The report also gives credence to a claim popular among Republicans: that the government has enough cash to avoid a default even past the Aug. 2 deadline set by the Treasury Department.

    "If the debt limit is not raised before August 2, we believe that the Treasury would give priority to debt service payments and could thus postpone a potential debt default for a number of days," it said. "Revenues would be more than adequate for some period of time to meet those payments, although other outlays would be severely reduced as a result."...
    You left out the part where Moodys' called for lifting the debt ceiling entirely

    Gee, I wonder why?
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    Quote Originally Posted by jaeger19 View Post
    the vast majority of folks that need healthcare are on Medicare.. both rich and poor..

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    Re: Moody's: Neither Debt Plan Protects the Nations' AAA Rating

    Quote Originally Posted by cpwill View Post
    i agree, however you will note that it wasn't the debt ceiling measure that has done this, but rather the lack of a fix to the long-term debt and continued deficits.
    Actually, it is the debt ceiling measure that has done this. Moodys has explicitely called for the debt ceiling to be eliminated, and cited the lengthy negotiations as part of the reason for possibly downgrading our credit rating

    Moody's warns again on U.S. debt: eliminate debt ceiling - Jul. 18, 2011
    Quote Originally Posted by matchlight View Post
    Justice Thomas' opinions consistently contain precise, detailed constitutional analyses.
    Quote Originally Posted by jaeger19 View Post
    the vast majority of folks that need healthcare are on Medicare.. both rich and poor..

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    Re: Moody's: Neither Debt Plan Protects the Nations' AAA Rating

    The debt ceiling was suppose to be the mechanism to get government spending under control, but as has already been pointed out by the President, Reagan raised it 18 times during his tenure, for example, and the nation never really knew anything about it. Yesterday, there was a chart in one of the threads illustrating how the deficit had risen enourmously when DC was ruled by Democrates in both Congress and the White House over the last 40 years. What I found interesting about that was how other charts illustrate that the deficit remained relatively in check until 1080 when Reagan took office. So, what accounts for the sudden rapid increase in spending?

    Answer: President Obama attempting to preserve the economy via the Stimulus, payroll tax credits, unemployment compensation and extending the Bush tax cuts.

    Now, Conservatism says that tax cuts create jobs. We're still waiting for the jobs to come about in abundance. Instead, what we're seeing is federal and public employees being kicked off payroll and very little private sector job growth. Of course, cutting payroll is the easiest way to reduce operational costs. But I digress; we'll not go through that tax argument again as it's been argued to death. As I see it, the prove is already out there right before our eyes in the unemployment numbers, numbers that were already high before the Stimulus was enacted but did come down afterwards, yet are threatening to rise again now the Stimulus funds have been exhausted. So, you be the judge was to what works and what doesn't. The proof is right before our very eyes.

    As to this debt limit deal, Washington Post columnist, Ezra Klien outlines the deal perfectly in his opinion piece here. The key is the "trigger" which would go into affect if Congress does not embrace deficit reduction measures as recommended by the deficit reduction Commission as outlined in the debt limit deal. And that "trigger" is massive cuts in across the board defense cuts, half of which Republicans have already agreed to.

    So, the bottom line is this: neither side got everything they wanted, but both sides agreed to the lowest common denominators their party could take. If Republicans don't accept the Commission's recommendations, their sacred cow - defense spending - will get massively cut. And for the defenders of the homeland to accept such a thing to happen knowing full well that they agreed to accept whatever the Commission outlines would be renigging on their promise to "compromise" for the sake of the country. As for the President's stance on including revenue into the mix, he'll get them; it just won't happen until January 1, 2013.

    Both sides won...sorta...but the country will still have to muddle through for atleast another 16 months.

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    Re: Moody's: Neither Debt Plan Protects the Nations' AAA Rating

    Please read this column (Wake up GOP: Smashing system doesn't fix it - CNN.com) Its from a conservative who actually lives in reality.
    "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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    Re: Moody's: Neither Debt Plan Protects the Nations' AAA Rating

    NEITHER party is fiscally responsible. Republicans amassed massive debt. Democrats couldnt even bother to submit a budget and ran up 5 trillion in 4 years. We wouldnt even be HAVING these discussions if it wasnt for the Tea Party. Yes...the evil tea party...NOT the people that have dug the country into a now 15.5 trillion dollar hole- Republicans and democrats and their mindless shills.

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    Re: Moody's: Neither Debt Plan Protects the Nations' AAA Rating

    Quote Originally Posted by Mr. Invisible View Post
    Please read this column (Wake up GOP: Smashing system doesn't fix it - CNN.com) Its from a conservative who actually lives in reality.
    OUT-FREAKIN-STANDING article!!! Tells the truth and nothing but the truth...100% on the money!!!

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