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United States loses its AAA Credit rating from S & P

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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.
 
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/english2010/indepth/2011-08/06/c_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.
 
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
 
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/english2010/indepth/2011-08/06/c_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.
 
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/english2010/indepth/2011-08/06/c_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.
 
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
 
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.
 
It is all Bush's fault!!! I don't think so, but if the economy is an oak tree, Bush was the acorn that started the growth. The wild behavior and being out of control among both parties goes back to the Clinton impeachment, the point where we decided to divide the nation & pick which side our resentment for the other side would be on. Our silliness to listen to the experts who said we could have our cake (two wars) and eat it too (tax cuts in 2 wars). What were we thinking, or were we?
 
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.

Especially after they have shown that they are perfectly willing to be bought off.
 
It is all Bush's fault!!! I don't think so, but if the economy is an oak tree, Bush was the acorn that started the growth. The wild behavior and being out of control among both parties goes back to the Clinton impeachment, the point where we decided to divide the nation & pick which side our resentment for the other side would be on. Our silliness to listen to the experts who said we could have our cake (two wars) and eat it too (tax cuts in 2 wars). What were we thinking, or were we?

This problem started well before that.
 
Hands-down this is the scariest news stories of the week. Maybe the year. We're gonna be lucky if the Stock Market drops by anything less than 800 points Monday.

Is this the same Standard & Poor that assigned AAA ratings to junk bonds a few years ago? The junk bonds that Goldman Sach's bet against because they knew they were junk? I swear to god. Is there any avenue for appeal here? Lawsuit for acting in bad faith? Buehler? And what's up with their alleged two-TRILLION dollar error?

One diamond in the rough here--the other two credit rating agencies will not be making any similar moves.
 
They lowered it because congress didnt go far enough to shore up its finances. This is 100% on the fault of the Tea Party and Republicans. They needed to raise taxes on the wealthy and didnt. Now we have this!!!!!!!!!!! :soap

I agree with your first comment. It is because Congress didn't do enough. As far as the Tea Party and Repub comment, it is all political opinion. So in your view the Dems are blameless?, I don't think so. The financial mess has developed of many years. Besides, the Dems control the Senate.
 
This problem started well before that.

It's hard to imagine that it did. I have a vivid recollection of the Gulf War, that we were pretty much a united people, cept for the usual protesters. Today you judge your neighbors and those in the crowds by who they are politically, as you chose your circle of friends. Your family gatherings become divided into camps over these issues. I see the escalation in arrogance to think we can do as we please, including murder, torture & rape innocent chained & detained women & children, invade sovereign nations, and put the threat of economic sanctions on anyone who disagrees with us.
 
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It's hard to imagine that it did. I have a vivid recollection of the Gulf War, that we were pretty much a united people, cept for the usual protesters.

I'm not sure if you are old enough to remember the Bork and Thomas USSC hearings or not but they were every bit as venomous as any of the things you note.

That aside, I may have initially misunderstood your point as I was thinking it was about the financial mess but even now, I'll say the divide started well before the impeachment hearings.

Today you judge your neighbors and those in the crowds by who they are politically, as you chose your circle of friends. Your family gatherings become divided into camps over these issues. I see the escalation in arrogance to think we can do as we please, including murder, torture & rape innocent chained & detained women & children, invade sovereign nations, and put the threat of economic sanctions on anyone who disagrees with us.

I can honestly say that I've never lost or picked a friend over political issues.
 
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This rating evaluation is a recognition of the reality that we now have people entrusted with the power of governing who actually hate and despise government and would risk the health of the nation in order to pursue extremist ideological crusades simply based on a far right belief system.
 
:roll: well at least now we know what harry Reid's press release is going to say.



in realityland, however, S&P said they wanted a $4T deal. Republicans offered a $6T debt reduction, and then when that was rejected agreed to a $4T deal so long as no more than $800 Bn came in from increased Revenue. Obama came back and killed that by saying that $1.2T had to come from increased revenue at a minimum, and so we ended up with our current two-part "$2.5T" deal (that isn't - baselines are wonderful things). Meanwhile the President has offered one plan that was so ludicrous not a single Democrat was willing to vote for it and he reneged and called for a mulligan... and it's been coming up on 850 days since the Democrat-led Senate voted on a budget.

Even when Obama talks about the deficit, what does he say? "we have to look like we're fixing this debt thing so we can get back to more spending."


S&P was right to do what they did. The US has been irresponsibly profligate.
 
Ratings agencies...those same guys that rated all that junk mortgage crisis **** as AAA and nearly collapsed the global economy. Yeah, those guys.

What's worse, Italy that has government raid their ratings agencies when they don't play ball, or the U.S. ratings agencies that appear to throw darts at boards, and try curry favor with a political statement.

This rating evaluation is a recognition of the reality that we now have people entrusted with the power of governing who actually hate and despise government and would risk the health of the nation in order to pursue extremist ideological crusades simply based on a far right belief system.

Yeah haymarket. It's the Tea Parties fault we have massive debt, massive defecit spending, and a congress, president, and liberals that absolutely don't want to stop spending in defecit, or pay off the debt. Of course, the reality is that they are the only ones pushing seriously for reform of both debt, and defecit spending. How did you get that exactly opposite?

About damned time a minority has its views front and center in the otherwise routine mismanagement the two party system results in. Obama wanted changed, he got it, although not of his own doing. Granted, it's a terrible time to have to bite the bullet, but apparently thats what it takes, no? Scapegoat them all you want, that's what a third part is designed for via 2 party dominance. Let the third party bear the bad news, we'll moan and groan and blame the messenger, we'll get spending under control, then flush the third party leaving dems/repubs in their status quo of power. Spending cuts during a recession, should be a rough ride. Then again, control spending before it gets that way is the only practical answer.
 
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from Mach

Yeah haymarket. It's the Tea Parties fault we have massive debt, massive defecit spending, and a congress, president, and liberals that absolutely don't want to stop spending in defecit, or pay off the debt. Of course, the reality is that they are the only ones pushing seriously for reform of both debt, and defecit spending. How did you get that exactly opposite?

News Bulletin.. this just in: we have had debt for quite a while now.... we have had deficit spending for quite a while now .... we have had president who spends for quite a while now .... we have had a Congress which spends for quite a while now. Nothing fundamental in that reality has changed. What has changed is that for the first time in modern history we have a powerful group of people positioned within the government who actually hate and despise government and are more than willing to risk the health of the nation in order to purse extremist ideological crusades simply based on a far right belief system.

I see lots of people pushing for things which would help the budget of the nation but the ideological extremists such as Grover Norquist and his sycophants and toadies of this world have made sure that is not going to happen.
 
It all boils down that Congress and the President have a spending problem that exceeds revenue taken in. There is many ways to address this. Until the budget is balanced and the debt addressed the US will continue to degrade. What makes some believe that if Congress is given more revenue (tax increase) that it will actually be used for the debt. Congress track record is not so good in this area. Show me an approved plan first. Or we can go the way of Pelosi and pass the bill so we can see what is in it.:lol:
 
I see lots of people pushing for things which would help the budget of the nation but the ideological extremists such as Grover Norquist and his sycophants and toadies of this world have made sure that is not going to happen.

grover and his toadies---LOL!

from cuomo's state of the state (link above):

"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"
 
It all boils down that Congress and the President have a spending problem that exceeds revenue taken in. There is many ways to address this. Until the budget is balanced and the debt addressed the US will continue to degrade. What makes some believe that if Congress is given more revenue (tax increase) that it will actually be used for the debt. Congress track record is not so good in this area. Show me an approved plan first. Or we can go the way of Pelosi and pass the bill so we can see what is in it.:lol:

Exactly. I believe a tax increase as a general thing would hurt but I would support it if it was enacted in a way that also forced the government to not spend any new money. Any money brought in would go directly to the debt and nothing else.
 
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