S&P considering US AAA rating

[Broomstick]

Nope, I'm saying the Republicans and the Tea Party deserve more than an even share of the blame, more than 50% on this one. There's fault to find with Obama on this one, but he's not the worst player in THIS particular event.

I think it spreads around equally, no one, not a single person in the entire US government put forth a workable plan for meeting the target set by S&P. Some were closer than others but none of them were even in the ballpark, or the county, they were all two states over in the wrong direction. The Obama/Reid plan was better than the one proposed by Boehner, though frankly that's much like comparing horse & elephant droppings; they're both big smelly piles of crap.

Well, fuck, what you're saying is that if we couldn't have a perfect plan we should let the Tea Party shoot the hostage and everyone's economy go down the shitter, because THAT disaster is preferable to a plan that avoid an immediate default and leaves open at least the possibility that this mess can be weathered. That is ludicrous, absolutely ludicrous.

Sure, if a corner of your garage is on fire the best solution is a professional fire department, but if you can't get that at least get a bucket brigade going, don't just throw up your hands and not even try to mitigate a bad situation.

If 4 trillion in cuts was impossible to achieve then it was Obama's obligation to get as much cut as he could. Could he have done better? Yeah, probably. But what did happen was better than him simply not trying in truth and letting the US government actually default, actually shut down, and actually stop paying its bills. If the Tea Party had been willing to actually compromise we still may not have gotten 4 trillion in cuts, but we would have gotten better and a demonstration they weren't batshit crazy uncompromising nutbjobs ideologues would have done much to mitigate any remaining concerns about stability and reliability.

Your "they're all equally at fault" is the Republican/Tea Party line which they throw out to handwave away the fact that they were the main drivers in this crisis.

[Flagg]

Don't most first world countries just pass the budget and take out debt then, rather than having a ceiling? That's the method I'd go with, anyway. And the GOP already takes the budget hostage, remember the threatened government shutdown?

[Broomstick]

BTW, re broomstick: don't forget another way to close a deficit is to raise taxes. It doesn't all have to be cuts. But nobody seems particularly keen on that idea, on either side of the aisle.

Oh, I remembered about raising taxes - but given today's political nuttery that was even more of a non-starter than 4 trillion in cuts.

If we HAD increased revenues that also might have mitigated some of the issues with cutting less than 4 trillion. Wasn't going to happen, though.

[J]

Well, fuck, what you're saying is that if we couldn't have a perfect plan we should let the Tea Party shoot the hostage and everyone's economy go down the shitter, because THAT disaster is preferable to a plan that avoid an immediate default and leaves open at least the possibility that this mess can be weathered. That is ludicrous, absolutely ludicrous.

The $4 trillion in reductions (done through whatever combination of taxing & spending is desired) being asked of by S&P would still result in an eventual debt default so it's still not anywhere close to being a "perfect plan", a perfect plan is balancing the budget and running a surplus within 5 years. $4 trillion over 10 years can be seen as the minimum required to preserve America's AAA rating and hold things together for a little while longer while working towards something better. We didn't even get that. Thus the downgrade, which makes things very, very dicey.

Is it better than an outright default? Sure. But only if everyone uses the time wisely and works real fast (like forget your summer break fast, get your butts back in there and work 24/7 till it's done fast) to come up with a proper fix to avoid a default. Otherwise it's just kicking the can and when the default eventually takes place it'll be a lot worse than if it happened on August 2nd. I don't see anyone doing that work though which leaves me quite concerned.

[Flagg]

BTW, re broomstick: don't forget another way to close a deficit is to raise taxes. It doesn't all have to be cuts. But nobody seems particularly keen on that idea, on either side of the aisle.

Oh, I remembered about raising taxes - but given today's political nuttery that was even more of a non-starter than 4 trillion in cuts.

If we HAD increased revenues that also might have mitigated some of the issues with cutting less than 4 trillion. Wasn't going to happen, though.

They just wanted $4 trillion in deficit reduction, it didn't matter if it were all cuts or all taxes, though they would have preferred both.

[Lord Zentei]

Repeatedly throughout this thread. You said "that merely defers the problem (the debt limit) until later". So by that logic every single debt ceiling vote has simply been kicking the can down the road for the next congress or President to worry about. So the only solution is to end the debt ceiling altogether.

That is another hyperbolic statement. Besides which, raising the debt ceiling is not the only way to deal with this, reducing deficit spending is. And two years is not "long term".

Having no debt ceiling is hardly conductive to good fiscal responsibility.

But all else didn't fail. He had a deal, even though it was shitty. And I really don't want to have to live through the impeachment of another Democratic president, thanks.

The shitty deal you refer to didn't impress S&P, apparently. Momentum had been building for a 14th amendment solution, and if they would go the route of impeachment as a result, they'd fuck themselves over politically even more than they've already done. Besides, at that point, the debt ceiling would have been fixed.

And Obama fought them almost to the point of a default.

He didn't fight for the full 4 trillion from the start, his starting position was less than what he would have needed, so his fight was from a disadvantageous position from the get go. This is what he always does: proposes a compromise as his initial position, and then sees it watered down waters it down to appease the opposition as the Republicans refuse to negotiate anything. The Republicans have come to expect this, as I pointed out they have learned it from past experience. In other words, I'm also blaming Obama's record as an executive. Face it: he sucks at negotiating with Congress.

[Flagg]

Repeatedly throughout this thread. You said "that merely defers the problem (the debt limit) until later". So by that logic every single debt ceiling vote has simply been kicking the can down the road for the next congress or President to worry about. So the only solution is to end the debt ceiling altogether.

That is another hyperbolic statement. Besides which, raising the debt ceiling is not the only way to deal with this, reducing deficit spending is. And two years is not "long term".

Long term enough to avoid having 2 of the 3 US Credit agencies downgrade our AAA rating.

But all else didn't fail. He had a deal, even though it was shitty. And I really don't want to have to live through the impeachment of another Democratic president, thanks.

The shitty deal you refer to didn't impress S&P, apparently. Momentum had been building for a 14th amendment solution, and if they would go the route of impeachment as a result, they'd fuck themselves over politically even more than they've already done. Besides, at that point, the debt ceiling would have been fixed.

But it did impress the other 2 debt agencies who aren't planning on downgrading US Credit any time soon to my knowledge. And the 14th Amendment option would have still resulted in a downgrade because it would have only upped the debt ceiling, it wouldn't have had any deficit reduction at all.

And Obama fought them almost to the point of a default.

He didn't fight for the full 4 trillion from the start, his starting position was less than what he would have needed, so his fight was from a disadvantageous position from the get go. This is what he always does: proposes a compromise as his initial position, and then sees it watered down waters it down to appease the opposition as the Republicans refuse to negotiate anything. The Republicans have come to expect this, as I pointed out they have learned it from past experience. In other words, I'm also blaming Obama's record as an executive. Face it: he sucks at negotiating with Congress.

I don't disagree with this, however it would be unfair to portray the negotiations as being anything close to good faith on congress' end.

[Lord Zentei]

Long term enough to avoid having 2 of the 3 US Credit agencies downgrade our AAA rating.

That remains to be seen. And one is bad enough.

But it did impress the other 2 debt agencies who aren't planning on downgrading US Credit any time soon to my knowledge. And the 14th Amendment option would have still resulted in a downgrade because it would have only upped the debt ceiling, it wouldn't have had any deficit reduction at all.

He could have reached the 4 trillion dollar mark, though; and he can simply say that he'll veto budgets that are too high, being President. In any case, he didn't even use it as a threat in any serious capacity.

I don't disagree with this, however it would be unfair to portray the negotiations as being anything close to good faith on congress' end.

I doubt very much that you'll see me defending Congress' behavior in this matter any time soon.

[J]

The shitty deal you refer to didn't impress S&P, apparently. Momentum had been building for a 14th amendment solution, and if they would go the route of impeachment as a result, they'd fuck themselves over politically even more than they've already done. Besides, at that point, the debt ceiling would have been fixed.

But it did impress the other 2 debt agencies who aren't planning on downgrading US Credit any time soon to my knowledge.

For now. But they're going over the numbers and watching things closely. If they don't like what they see, well...

http://seekingalpha.com/article/284131- ... onger-term

Fitch Ratings does not rule out the possibility that it could downgrade US sovereign debt when it completes its review by the end of this month, but indicates it may give the US the benefit of the doubt, at least in the short term, as the “fundamental economic and financial underpinning of the United States’ ‘AAA’ status remains strong.” But longer term, Fitch warns that current trends are “not consistent with the United States retaining its ‘AAA’ sovereign rating.”

http://www.bloomberg.com/news/2011-08-0 ... ncern.html

Moody’s Investors Service and Fitch Ratings affirmed their AAA credit ratings for the U.S. while warning that downgrades were possible if lawmakers fail to enact debt reduction measures and the economy weakens.

The outlook for the U.S. grade is now negative, Moody’s said in a statement yesterday after President Barack Obama signed into law a plan to lift the nation’s borrowing limit and cut spending following months of wrangling between Democratic leaders and Republican lawmakers.

[Uraniun235]

I was about to say "pfft, whatever, the feds won't do anything and it'll all just nosedive into the ground", but between Obama, the corporatist Democrats, and the Republicans, maybe we'll see them actually pass a law abolishing Social Security and Medicare. "It had to be done to save the economy!" They could probably get away with it, too.

[SirNitram]

The credibility of the people who marked every sub-prime peice of horseshit AAA is somewhat shot, in my mind. But my my. This, with the stated fact one of the reasons is the GOP won't raise taxes, coupled with the flight to safety in T-bills makes things.. EXCITING, don't you think?

And by exciting this is horrible.

[Zaune]

The credibility of the people who marked every sub-prime peice of horseshit AAA is somewhat shot, in my mind. But my my. This, with the stated fact one of the reasons is the GOP won't raise taxes, coupled with the flight to safety in T-bills makes things.. EXCITING, don't you think?

And by exciting this is horrible.

I don't know, actually. Maybe this will finally force the smarter Republicans to re-evaluate some of their ideology in the light of cold, hard facts. I daresay a number of previously enthusiastic donors to Republican campaign funds are going to lose money over this as well.

[Flagg]

The credibility of the people who marked every sub-prime peice of horseshit AAA is somewhat shot, in my mind. But my my. This, with the stated fact one of the reasons is the GOP won't raise taxes, coupled with the flight to safety in T-bills makes things.. EXCITING, don't you think?

And by exciting this is horrible.

I don't know, actually. Maybe this will finally force the smarter Republicans to re-evaluate some of their ideology in the light of cold, hard facts. I daresay a number of previously enthusiastic donors to Republican campaign funds are going to lose money over this as well.

I have my doubts. I think it's a situation where ideology trumps money to alot of these fuckers. I mean they give tons and tons to the Republicans just so things won't get done.

[Starglider]

I'm slightly impressed that they went through with it, I didn't think they had the balls. The cries of 'shoot the messenger' are as predictable and idiotic as the ones in the EU about the agencies (belatedly) downgrading euro peripheral soveregins. It's pretty funny that the UK now has a stronger credit rating than the US, will be interesting to see if France gets downgraded before we do.

The credibility of the people who marked every sub-prime peice of horseshit AAA is somewhat shot, in my mind.

The fact that they consistently over-rate things as AAA simply means that the stability of the US is also over-rated. The same kind of politics is in play; power brokers desperately pleading to be rated AAA, while spewing propaganda about how everything is fine, while actually trying to keep the lid on their massive barrel of toxic crap.

Some time in the last decade the entire USA became subprime.

[Broomstick]

And by exciting this is horrible.

I prefer "interesting times", as in cursing someone to "live in interesting times".

[Simon_Jester]

I have my doubts. I think it's a situation where ideology trumps money to alot of these fuckers. I mean they give tons and tons to the Republicans just so things won't get done.

I honestly think there's a significant chunk of Republican congressmen who would vote for a tax increase rather than let the economy sink due to default or (more subtly) due to a ratings crash. It's mostly a question of whether they're willing to take the electoral risk of doing so, in light of the fact that they will get gallon after gallon of boiling Tea poured over them in the next Republican primary. Because that presents a huge target of opportunity to the Norquist school of economics.

Also, am I the only one who's bothered by a system in which AA+ is "bad" and only AAA is "good?" Talk about grade inflation...

[cosmicalstorm]

This gem is from April, it bears to keep in mind when these people go on stage and make promises.

(Reuters) - U.S. Treasury Secretary Timothy Geithner, going on the offensive one day after Standard & Poor's threatened to lower its top-tier rating on U.S. government debt, said on Tuesday there was "no risk" of a downgrade.

Prospects for a deficit-reduction deal were improving, Geithner said on Tuesday as he appeared in a morning blitz of television shows. He said in one appearance that he did not have to reassure foreign buyers of U.S. debt in the wake of S&P's warning.

Geithner said Democrats and Republicans now agree on the need to put in place "enforceable" targets to slash deficits by some $4 trillion over the next decade or so.

"If you listen carefully now, you see the leadership of the United States of America ... recognizing now this is the right thing to do for the economy," he told Fox Business Network.

Standard & Poor's on Monday threatened to downgrade its AAA rating on U.S. Treasury debt unless the Obama administration and Congress find a way to slash the staggering federal budget deficit within two years.

A downgrade would erode the status of the United States as the world's most powerful economy and diminish the dollar's role as the dominant global currency. It also would likely raise borrowing costs, potentially hurting economic recovery as investors demand higher returns for holding U.S. debt.

Geithner disputed S&P's finding that the U.S. credit outlook was negative, and said it was difficult for people outside Washington to cut through partisan political rhetoric.

"Actually, I think things are better than they've been if you want to think about the prospects for improving our long-term fiscal position," he said on CNBC.

"If you're looking very carefully at what's happening in Washington, you see people on both sides -- Democrats and Republicans -- agreeing with the president that we have to put in place some reforms now to bring down our long-term deficits," he added.

Prices for U.S. government debt were little changed after Geithner's remarks, but later rose modestly as worries about euro-zone debt bolstered a safety bid for Treasuries. The benchmark 10-year note rose 4/32 in price, while its yield of 3.36 percent, fell slightly for a second straight day.

LOCKING IN TARGETS

Geithner told Bloomberg Television there was no need to reassure foreign buyers of U.S. debt in the wake of S&P's revised outlook, noting investors still had confidence in U.S. debt and the growth prospects of the U.S. economy.

"You can see that in the price at which we borrow every day, but we have to earn that confidence," he said.

President Barack Obama and Republican lawmakers have laid out competing visions for how to tackle the deficit, which is projected to hit $1.4 trillion this fiscal year.

Obama wants wealthy Americans to shoulder a greater share of the tax burden and has also proposed cuts in spending on domestic programs and the military. Republicans are pushing for deeper spending cuts and want to make permanent Bush-era tax cuts for families earning more than $250,000 a year.

Geithner said he believed it was possible for the Obama administration to secure a deal with Congress to "lock in" targets and mechanisms to cut deficits by $4 trillion over the next 10 to 12 years.

Entitlement programs such as Social Security and Medicare would have to be part of the discussions, he said.

Long-term deficit reduction also will require some "modest" tax hikes for wealthier Americans, Geithner said.

Obama, speaking at a student forum in Virginia, said he also believed that Republicans and Democrats can reach a deal to cut the deficits, but it won't be easy.

"There will be some fierce disagreements," Obama said.

(Reporting by David Lawder; Editing by Jan Paschal)

[aerius]

This gem is from April, it bears to keep in mind when these people go on stage and make promises.

Which leads to this. The entire debt situation summed up in just under 4 minutes.

[Surlethe]

The credibility of the people who marked every sub-prime peice of horseshit AAA is somewhat shot, in my mind. But my my. This, with the stated fact one of the reasons is the GOP won't raise taxes, coupled with the flight to safety in T-bills makes things.. EXCITING, don't you think?

The fact that they marked subprime mortgages as AAA and then got severely burned would seem to me to indicate that they're going to be much, much more careful and conservative with their ratings now and in the future.

[Teebs]

Also, am I the only one who's bothered by a system in which AA+ is "bad" and only AAA is "good?" Talk about grade inflation...

Well it's not really that AA+ is bad. It's all relative. Many countries would be delighted to have AA+ ratings, but when you have been considered the safest bestest destination for bond holders it's bad to go down. Just like grades really, many/most people would be delighted with B grades, but if you've been getting A+s all your life then you won't be happy to get a B.

[Surlethe]

My take is,
AAA is like, "Will never default. Ever."
AA+ is like, "Slight chance of default in several decades."

[Patrick Degan]

The credibility of the people who marked every sub-prime peice of horseshit AAA is somewhat shot, in my mind. But my my. This, with the stated fact one of the reasons is the GOP won't raise taxes, coupled with the flight to safety in T-bills makes things.. EXCITING, don't you think?

And by exciting this is horrible.

I don't know, actually. Maybe this will finally force the smarter Republicans to re-evaluate some of their ideology in the light of cold, hard facts. I daresay a number of previously enthusiastic donors to Republican campaign funds are going to lose money over this as well.

Unfortunately, it's the Very Stupid Republicans who are in control of Congress and they won't reevaluate a fucking thing —except, perhaps, to spin the bond downgrade as being due to NOT CUTTING SPENDING ENOUGH!

[CJvR]

Unfortunately, it's the Very Stupid Republicans who are in control of Congress and they won't reevaluate a fucking thing —except, perhaps, to spin the bond downgrade as being due to NOT CUTTING SPENDING ENOUGH!

Well that isn't entirely incorrect, it doesn't matter how the deficit is reduced only that it is reduced - so eliminating spending down to the Mad Max level would work just as well as increasing taxes; at least in theory.

[Simon_Jester]

Strictly speaking, cutting spending by a huge amount probably would prevent the debt downgrade. So would raising revenues by a huge amount, or doing both by a medium amount. Any of those would show that the US government takes the debt issue seriously, is not using it as a political bargaining chip, and is unlikely to default.

When we cut spending by a small amount, raise revenues by zero, and let the whole thing fester until the last possible minute at which we can avoid a catastrophic government shutdown... that shows the opposite. It shows that both parties are unwilling or unable to deal with the US national debt as a serious problem in itself. Which is what matters to creditors. They don't care how you raise the money to pay them. They care if you raise the money, or care enough to do so.


The Republicans aren't taking the problem seriously because they aren't willing to contemplate revenue increases, and are willing to actively court default on the debt. Both these things make creditors nervous, or should. You do not reassure your creditors by parading up and down on your lawn, howling into the sky "NO! Fuck you! You can live on Ramen noodles! I won't work overtime to bring in more money! Fuck you! Bankruptcy? BRING IT, BITCH!"

And that's basically what the Republicans have been doing for the past month. Even if, given the power, they'd actually cut expenses enough to balance the budget... that kind of behavior calls their ability to govern into question. From the point of view of a foreigner who isn't caught up in the vortex, how much faith would you have in the Republicans' ability to govern the country well enough to pay off the debt?


At the same time, the Democrats may or may not be taking the problem seriously- who knows what they'd do given the power. Would they raise taxes enough to actually make a real dent in the problem? Probably not, who knows? Maybe, but the fact remains that by all appearances they lack the ability to do anything decisive about the debt, and who'd bet on them getting it in the near future?


If I were a man thinking about loaning the US money at the moment, I'd have some serious misgivings, I tell you that.

[aerius]

Strictly speaking, cutting spending by a huge amount probably would prevent the debt downgrade. So would raising revenues by a huge amount, or doing both by a medium amount. Any of those would show that the US government takes the debt issue seriously, is not using it as a political bargaining chip, and is unlikely to default.

When we cut spending by a small amount, raise revenues by zero, and let the whole thing fester until the last possible minute at which we can avoid a catastrophic government shutdown... that shows the opposite. It shows that both parties are unwilling or unable to deal with the US national debt as a serious problem in itself. Which is what matters to creditors. They don't care how you raise the money to pay them. They care if you raise the money, or care enough to do so.

Yep, and this was explicitly covered by S&P in their press release which was posted earlier. They spent a good chunk of the thing explaining why they believed the US government isn't taking things seriously, can't get shit done, and is basically acting like a bunch of spoiled misbehaved kids. No one's talking about a solution, they're all still trying to pin the shit on each other so they can get themselves elected again.

When Canada got downgraded in the 90's we took it seriously. As in double digit spending cuts, higher taxes, nearly 1/4 of public sector workers getting laid off, lots of subsidy cuts & eliminations. Rammed it right through, got the shit done. We went from a massive deficit to a surplus in about 3 or 4 years. Not long after that we got our AAA rating back.