The Tea Party downgrade

[davelj]

[quote=Arraya]Yeah Dave, I’m sure that S&P is full of people really trying to give their best analysis of risk unaffected by politics or money. [/quote]

I assume they’re affected by both politics and money, although I can’t really tell who’s pulling the strings here… after all, both the left and the right are spinning S&P’s report and downgrade into a “See, Daddy likes me best” argument. Both sides are pointing at the other saying, “Look what you’ve done now!”

What’s your position? That we should (1) spend more money, and/or (2) not raise taxes? Personally, I think less spending (particularly on defense) and higher taxes (particularly on the top 1%) makes all kinds of sense. But that’s just me.

[briansd1]

[quote=davelj]
What’s your position? That we should (1) spend more money, and/or (2) not raise taxes? Personally, I think less spending (particularly on defense) and higher taxes (particularly on the top 1%) makes all kinds of sense. But that’s just me.[/quote]

Sounds pretty reasonable to me.

*

S&P rates sovereign debt on 5 criteria:

1) Political (disfunctional)
2) Economy (slowly growing)
3) Fiscal policy (not possible because of politics)
4) Monetary policy (politics is interfering into policy is that is supposed to be independent and run by experts, not partisans)
5) External Factors (uncertain)

S&P rates 126 central governments.

Notice that France, Germany and UK all have AAA ratings. Most the other AAA rated countries have more activist governments than our own. So S&P is not rating ideology as much as ability and willingness to repay debts.

I believe that the main reason for the downgrade is that our political system is flawed and disfuntional. We cannot come to an agreement to ensure our debts are paid.

The European countries have representative democracies ensuring that the majority gets its way. Not so in our system, where the minority can obstruct. The Republican have brought new meaning to obstruction since the election of President Obama.

http://money.cnn.com/2011/07/29/news/international/countries_with_aaa_rating/index.htm

http://abcnews.go.com/Video/videoLogin?id=14249457

The reason I’m pointing to political dysfuntion as the main reason for the downgrade is because:

– Nobody would argue that the American economy is worse now than it was at the height of the 2008 financial crisis. But S&P did not downgrade us back then.

– Back in 2008, the politicians were running scared and Bush was able to engineer a bailout of the banks.

– In 2009 Obama was able to pass a stimulus package.

– What’s difference now? Political obstruction is a lot worse.

I’m concluding that had Obama and Boener been able to reach a grand bargain, S&P would not have downgraded our debt.

Take the example of Britain and France. Despite their economic problems, their politicians are not talking about government shutdowns. In America, we have a fringe that wants to shutdown portions of the government. That fringe is willing to take the risks and face the consequences of government paralysis. They seem willing to sacrifice the economy to have it their way.

[briansd1]

[quote=davelj]
What’s your position? That we should (1) spend more money, and/or (2) not raise taxes? Personally, I think less spending (particularly on defense) and higher taxes (particularly on the top 1%) makes all kinds of sense. But that’s just me.[/quote]

Sounds pretty reasonable to me.

*

S&P rates sovereign debt on 5 criteria:

1) Political (disfunctional)
2) Economy (slowly growing)
3) Fiscal policy (not possible because of politics)
4) Monetary policy (politics is interfering into policy is that is supposed to be independent and run by experts, not partisans)
5) External Factors (uncertain)

S&P rates 126 central governments.

Notice that France, Germany and UK all have AAA ratings. Most the other AAA rated countries have more activist governments than our own. So S&P is not rating ideology as much as ability and willingness to repay debts.

I believe that the main reason for the downgrade is that our political system is flawed and disfuntional. We cannot come to an agreement to ensure our debts are paid.

The European countries have representative democracies ensuring that the majority gets its way. Not so in our system, where the minority can obstruct. The Republican have brought new meaning to obstruction since the election of President Obama.

http://money.cnn.com/2011/07/29/news/international/countries_with_aaa_rating/index.htm

http://abcnews.go.com/Video/videoLogin?id=14249457

The reason I’m pointing to political dysfuntion as the main reason for the downgrade is because:

– Nobody would argue that the American economy is worse now than it was at the height of the 2008 financial crisis. But S&P did not downgrade us back then.

– Back in 2008, the politicians were running scared and Bush was able to engineer a bailout of the banks.

– In 2009 Obama was able to pass a stimulus package.

– What’s difference now? Political obstruction is a lot worse.

I’m concluding that had Obama and Boener been able to reach a grand bargain, S&P would not have downgraded our debt.

Take the example of Britain and France. Despite their economic problems, their politicians are not talking about government shutdowns. In America, we have a fringe that wants to shutdown portions of the government. That fringe is willing to take the risks and face the consequences of government paralysis. They seem willing to sacrifice the economy to have it their way.

[briansd1]

[quote=davelj]
What’s your position? That we should (1) spend more money, and/or (2) not raise taxes? Personally, I think less spending (particularly on defense) and higher taxes (particularly on the top 1%) makes all kinds of sense. But that’s just me.[/quote]

Sounds pretty reasonable to me.

*

S&P rates sovereign debt on 5 criteria:

1) Political (disfunctional)
2) Economy (slowly growing)
3) Fiscal policy (not possible because of politics)
4) Monetary policy (politics is interfering into policy is that is supposed to be independent and run by experts, not partisans)
5) External Factors (uncertain)

S&P rates 126 central governments.

Notice that France, Germany and UK all have AAA ratings. Most the other AAA rated countries have more activist governments than our own. So S&P is not rating ideology as much as ability and willingness to repay debts.

I believe that the main reason for the downgrade is that our political system is flawed and disfuntional. We cannot come to an agreement to ensure our debts are paid.

The European countries have representative democracies ensuring that the majority gets its way. Not so in our system, where the minority can obstruct. The Republican have brought new meaning to obstruction since the election of President Obama.

http://money.cnn.com/2011/07/29/news/international/countries_with_aaa_rating/index.htm

http://abcnews.go.com/Video/videoLogin?id=14249457

The reason I’m pointing to political dysfuntion as the main reason for the downgrade is because:

– Nobody would argue that the American economy is worse now than it was at the height of the 2008 financial crisis. But S&P did not downgrade us back then.

– Back in 2008, the politicians were running scared and Bush was able to engineer a bailout of the banks.

– In 2009 Obama was able to pass a stimulus package.

– What’s difference now? Political obstruction is a lot worse.

I’m concluding that had Obama and Boener been able to reach a grand bargain, S&P would not have downgraded our debt.

Take the example of Britain and France. Despite their economic problems, their politicians are not talking about government shutdowns. In America, we have a fringe that wants to shutdown portions of the government. That fringe is willing to take the risks and face the consequences of government paralysis. They seem willing to sacrifice the economy to have it their way.

[briansd1]

[quote=davelj]
What’s your position? That we should (1) spend more money, and/or (2) not raise taxes? Personally, I think less spending (particularly on defense) and higher taxes (particularly on the top 1%) makes all kinds of sense. But that’s just me.[/quote]

Sounds pretty reasonable to me.

*

S&P rates sovereign debt on 5 criteria:

1) Political (disfunctional)
2) Economy (slowly growing)
3) Fiscal policy (not possible because of politics)
4) Monetary policy (politics is interfering into policy is that is supposed to be independent and run by experts, not partisans)
5) External Factors (uncertain)

S&P rates 126 central governments.

Notice that France, Germany and UK all have AAA ratings. Most the other AAA rated countries have more activist governments than our own. So S&P is not rating ideology as much as ability and willingness to repay debts.

I believe that the main reason for the downgrade is that our political system is flawed and disfuntional. We cannot come to an agreement to ensure our debts are paid.

The European countries have representative democracies ensuring that the majority gets its way. Not so in our system, where the minority can obstruct. The Republican have brought new meaning to obstruction since the election of President Obama.

http://money.cnn.com/2011/07/29/news/international/countries_with_aaa_rating/index.htm

http://abcnews.go.com/Video/videoLogin?id=14249457

The reason I’m pointing to political dysfuntion as the main reason for the downgrade is because:

– Nobody would argue that the American economy is worse now than it was at the height of the 2008 financial crisis. But S&P did not downgrade us back then.

– Back in 2008, the politicians were running scared and Bush was able to engineer a bailout of the banks.

– In 2009 Obama was able to pass a stimulus package.

– What’s difference now? Political obstruction is a lot worse.

I’m concluding that had Obama and Boener been able to reach a grand bargain, S&P would not have downgraded our debt.

Take the example of Britain and France. Despite their economic problems, their politicians are not talking about government shutdowns. In America, we have a fringe that wants to shutdown portions of the government. That fringe is willing to take the risks and face the consequences of government paralysis. They seem willing to sacrifice the economy to have it their way.

[briansd1]

[quote=davelj]
What’s your position? That we should (1) spend more money, and/or (2) not raise taxes? Personally, I think less spending (particularly on defense) and higher taxes (particularly on the top 1%) makes all kinds of sense. But that’s just me.[/quote]

Sounds pretty reasonable to me.

*

S&P rates sovereign debt on 5 criteria:

1) Political (disfunctional)
2) Economy (slowly growing)
3) Fiscal policy (not possible because of politics)
4) Monetary policy (politics is interfering into policy is that is supposed to be independent and run by experts, not partisans)
5) External Factors (uncertain)

S&P rates 126 central governments.

Notice that France, Germany and UK all have AAA ratings. Most the other AAA rated countries have more activist governments than our own. So S&P is not rating ideology as much as ability and willingness to repay debts.

I believe that the main reason for the downgrade is that our political system is flawed and disfuntional. We cannot come to an agreement to ensure our debts are paid.

The European countries have representative democracies ensuring that the majority gets its way. Not so in our system, where the minority can obstruct. The Republican have brought new meaning to obstruction since the election of President Obama.

http://money.cnn.com/2011/07/29/news/international/countries_with_aaa_rating/index.htm

http://abcnews.go.com/Video/videoLogin?id=14249457

The reason I’m pointing to political dysfuntion as the main reason for the downgrade is because:

– Nobody would argue that the American economy is worse now than it was at the height of the 2008 financial crisis. But S&P did not downgrade us back then.

– Back in 2008, the politicians were running scared and Bush was able to engineer a bailout of the banks.

– In 2009 Obama was able to pass a stimulus package.

– What’s difference now? Political obstruction is a lot worse.

I’m concluding that had Obama and Boener been able to reach a grand bargain, S&P would not have downgraded our debt.

Take the example of Britain and France. Despite their economic problems, their politicians are not talking about government shutdowns. In America, we have a fringe that wants to shutdown portions of the government. That fringe is willing to take the risks and face the consequences of government paralysis. They seem willing to sacrifice the economy to have it their way.

[EconProf]

The future deficits are far worse than we have been assuming for a couple of reasons. First, the newly weakened economy, as shown by worsening unemployment and GDP growth numbers, will hurt tax revenues for the next few years. Current deficit projections plugged in higher revenues than we are now going to experience.
Secondly, as KIBU mentioned, interest rates are now unnaturally low, dampening the servicing costs on our $14 trillion of debt. This is due, of course, to our Bernanke policy of aiming for near-zero interest rates. If government bond and T-bill rates return to their average of the last ten years or so, they the government’s interest expense will soar, thus worsening the deficit.
Finally, the S & P spokesmen I’ve seen on the news programs today readily admit that they took the recent political wrangling into account in making their decision. They quite reasonably decided, as did most citizens watching the circus, that our politicians had an awful time lowering the (future) deficit by a puny amount. Further, the so-called cuts were back-loaded toward the end of the ten-year period, with almost noting cut in the next year or two. And entitlements, which dwarf defense and other discretionary items, were not even touched.
S & P’s job is to evaluate risk, and they took economic trends and political realities both into account.

[EconProf]

The future deficits are far worse than we have been assuming for a couple of reasons. First, the newly weakened economy, as shown by worsening unemployment and GDP growth numbers, will hurt tax revenues for the next few years. Current deficit projections plugged in higher revenues than we are now going to experience.
Secondly, as KIBU mentioned, interest rates are now unnaturally low, dampening the servicing costs on our $14 trillion of debt. This is due, of course, to our Bernanke policy of aiming for near-zero interest rates. If government bond and T-bill rates return to their average of the last ten years or so, they the government’s interest expense will soar, thus worsening the deficit.
Finally, the S & P spokesmen I’ve seen on the news programs today readily admit that they took the recent political wrangling into account in making their decision. They quite reasonably decided, as did most citizens watching the circus, that our politicians had an awful time lowering the (future) deficit by a puny amount. Further, the so-called cuts were back-loaded toward the end of the ten-year period, with almost noting cut in the next year or two. And entitlements, which dwarf defense and other discretionary items, were not even touched.
S & P’s job is to evaluate risk, and they took economic trends and political realities both into account.

[EconProf]

The future deficits are far worse than we have been assuming for a couple of reasons. First, the newly weakened economy, as shown by worsening unemployment and GDP growth numbers, will hurt tax revenues for the next few years. Current deficit projections plugged in higher revenues than we are now going to experience.
Secondly, as KIBU mentioned, interest rates are now unnaturally low, dampening the servicing costs on our $14 trillion of debt. This is due, of course, to our Bernanke policy of aiming for near-zero interest rates. If government bond and T-bill rates return to their average of the last ten years or so, they the government’s interest expense will soar, thus worsening the deficit.
Finally, the S & P spokesmen I’ve seen on the news programs today readily admit that they took the recent political wrangling into account in making their decision. They quite reasonably decided, as did most citizens watching the circus, that our politicians had an awful time lowering the (future) deficit by a puny amount. Further, the so-called cuts were back-loaded toward the end of the ten-year period, with almost noting cut in the next year or two. And entitlements, which dwarf defense and other discretionary items, were not even touched.
S & P’s job is to evaluate risk, and they took economic trends and political realities both into account.

[EconProf]

The future deficits are far worse than we have been assuming for a couple of reasons. First, the newly weakened economy, as shown by worsening unemployment and GDP growth numbers, will hurt tax revenues for the next few years. Current deficit projections plugged in higher revenues than we are now going to experience.
Secondly, as KIBU mentioned, interest rates are now unnaturally low, dampening the servicing costs on our $14 trillion of debt. This is due, of course, to our Bernanke policy of aiming for near-zero interest rates. If government bond and T-bill rates return to their average of the last ten years or so, they the government’s interest expense will soar, thus worsening the deficit.
Finally, the S & P spokesmen I’ve seen on the news programs today readily admit that they took the recent political wrangling into account in making their decision. They quite reasonably decided, as did most citizens watching the circus, that our politicians had an awful time lowering the (future) deficit by a puny amount. Further, the so-called cuts were back-loaded toward the end of the ten-year period, with almost noting cut in the next year or two. And entitlements, which dwarf defense and other discretionary items, were not even touched.
S & P’s job is to evaluate risk, and they took economic trends and political realities both into account.

[EconProf]

The future deficits are far worse than we have been assuming for a couple of reasons. First, the newly weakened economy, as shown by worsening unemployment and GDP growth numbers, will hurt tax revenues for the next few years. Current deficit projections plugged in higher revenues than we are now going to experience.
Secondly, as KIBU mentioned, interest rates are now unnaturally low, dampening the servicing costs on our $14 trillion of debt. This is due, of course, to our Bernanke policy of aiming for near-zero interest rates. If government bond and T-bill rates return to their average of the last ten years or so, they the government’s interest expense will soar, thus worsening the deficit.
Finally, the S & P spokesmen I’ve seen on the news programs today readily admit that they took the recent political wrangling into account in making their decision. They quite reasonably decided, as did most citizens watching the circus, that our politicians had an awful time lowering the (future) deficit by a puny amount. Further, the so-called cuts were back-loaded toward the end of the ten-year period, with almost noting cut in the next year or two. And entitlements, which dwarf defense and other discretionary items, were not even touched.
S & P’s job is to evaluate risk, and they took economic trends and political realities both into account.

[Allan from Fallbrook]

[quote=EconProf]And entitlements, which dwarf defense and other discretionary items, were not even touched. [/quote]

Entitlements are sacrosanct, especially to the Dems, which view them now as almost a birthright.

I’m all for cutting the Defense budget, although I cannot see how this will be anything but a disaster in the midst of two wars.

Until we get serious about cutting entitlements, tax reform, and honest fiscal reform, we’re going to see this drama played out numerous times over the coming years.

If you take half the budget outlays and essentially make them off-limits, you’ll get exactly what we have now: Drastic cuts to the other half of the budget, including discretionary (which includes infrastructure), while ignoring the proverbial elephant in the room. This is a massive wealth transfer from the young(er) to the elderly and is completely unsustainable over the coming years.

[Allan from Fallbrook]

[quote=EconProf]And entitlements, which dwarf defense and other discretionary items, were not even touched. [/quote]

Entitlements are sacrosanct, especially to the Dems, which view them now as almost a birthright.

I’m all for cutting the Defense budget, although I cannot see how this will be anything but a disaster in the midst of two wars.

Until we get serious about cutting entitlements, tax reform, and honest fiscal reform, we’re going to see this drama played out numerous times over the coming years.

If you take half the budget outlays and essentially make them off-limits, you’ll get exactly what we have now: Drastic cuts to the other half of the budget, including discretionary (which includes infrastructure), while ignoring the proverbial elephant in the room. This is a massive wealth transfer from the young(er) to the elderly and is completely unsustainable over the coming years.

[Allan from Fallbrook]

[quote=EconProf]And entitlements, which dwarf defense and other discretionary items, were not even touched. [/quote]

Entitlements are sacrosanct, especially to the Dems, which view them now as almost a birthright.

I’m all for cutting the Defense budget, although I cannot see how this will be anything but a disaster in the midst of two wars.

Until we get serious about cutting entitlements, tax reform, and honest fiscal reform, we’re going to see this drama played out numerous times over the coming years.

If you take half the budget outlays and essentially make them off-limits, you’ll get exactly what we have now: Drastic cuts to the other half of the budget, including discretionary (which includes infrastructure), while ignoring the proverbial elephant in the room. This is a massive wealth transfer from the young(er) to the elderly and is completely unsustainable over the coming years.

[Allan from Fallbrook]

[quote=EconProf]And entitlements, which dwarf defense and other discretionary items, were not even touched. [/quote]

Entitlements are sacrosanct, especially to the Dems, which view them now as almost a birthright.

I’m all for cutting the Defense budget, although I cannot see how this will be anything but a disaster in the midst of two wars.

Until we get serious about cutting entitlements, tax reform, and honest fiscal reform, we’re going to see this drama played out numerous times over the coming years.

If you take half the budget outlays and essentially make them off-limits, you’ll get exactly what we have now: Drastic cuts to the other half of the budget, including discretionary (which includes infrastructure), while ignoring the proverbial elephant in the room. This is a massive wealth transfer from the young(er) to the elderly and is completely unsustainable over the coming years.

[Author]

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