S&P Downgrades US To AA+, Outlook Negative

[Pengwuino]

Actually, aren't the Federal Reserve and Social Security (combined) the single largest holder of US debt at this point?

I believe China is the largest sovereign entity holder of US debt. I think you're right in regards to who holds the largest debt period.

 

[Astronuc]

IMO - the credit rating of the US will not be restored until we elect a new, experienced, and competent Chief Executive - perhaps a time-proven Governor (experience comparable to Bill Clinton or Ronald Reagan), plus Congressional leadership that is willing to focus on details (not stuff everything and the kitchen sink into 2,000+ page Bills whose final version are unread prior to voting), develop a long term plan that addresses (with legislation) all known and projected liabilities, and require all regulatory action be scored and approved by Congress.

and raise taxes appropriately, and reduce spending appropriately, and pay down the debt.

The US economy has to reduce imports and increase exports for a positive trade balance.

Current trade deficit (rate) is about $600 billion/yr after shrinking to near $360 billion/yr in May 2009.
http://www.census.gov/indicator/www/ustrade.html

Short term deficits (federal government or trade) would not be a problem IF they were offset by comparable surpluses - but they are not - and haven't been for some time.

The republicans and democrats are equally culpaple.

Why not just take the debt, divide it up equitably, send a statement to each taxpayer (or tax paying entity), and arrange a plan to pay off their share?

 

[WhoWee]

I believe China is the largest sovereign entity holder of US debt. I think you're right in regards to who holds the largest debt period.

Yes, and they've been cutting down for a few months.
http://english.peopledaily.com.cn/90001/90778/90859/7383435.html

"China trimmed its holdings of US Treasury bonds for a fifth month in a row in March, lowering the amount of those assets to $1.145 trillion, according to data released by the US Treasury Department on Monday.

The biggest buyer of US Treasury debt cut the amount of its holdings by $9.2 billion, less than 1 percent of the total it possesses, a month after it had unloaded $600 million worth of the bonds.

Throughout the same period, China bought long-term Japanese treasury bonds worth 234.5 billion yen ($2.9 billion), the biggest purchase of debt China has made within a single month in more than six years."

 

[WhoWee]

and raise taxes appropriately, and reduce spending appropriately, and pay down the debt.

The US economy has to reduce imports and increase exports for a positive trade balance.

Current trade deficit (rate) is about $600 billion/yr after shrinking to near $360 billion/yr in May 2009.
http://www.census.gov/indicator/www/ustrade.html

Short term deficits (federal government or trade) would not be a problem IF they were offset by comparable surpluses - but they are not - and haven't been for some time.

The republicans and democrats are equally culpaple.

Why not just take the debt, divide it up equitably, send a statement to each taxpayer (or tax paying entity), and arrange a plan to pay off their share?

I agree with you - with 1 stipulation - stop spending without a specific funding plan (and a definitive strategy to repay). Is that unreasonable?

As for the bill for each taxpayer - why not hand them out at the border as well?

 

[Pengwuino]

To your point - if nothing changes in 6 months - expect another downgrade.

I don't even think we'll need to wait months. Enough things have happened over the past couple of years and especially the last month or two for everyone to downgrade the US. Unless the S&P decision was grossly flawed, I believe Moody's will be next to downgrade.

@DevilsAvacado

No one 'ranks' ratings agencies (I have a feeling you are curious as to who oversees them). Would any investor feel confident investing in US Treasuries if the US government oversaw the ratings agency that told you US T-bills are AAA quality? Ha. Why not have dairies be in charge of inspecting and reporting on their own facilities? Or have people in charge of their own credit scores?

 

[Astronuc]

I agree with you - with 1 stipulation - stop spending without a specific funding plan (and a definitive strategy to repay). Is that unreasonable?

I think that is the crux of the matter at hand. What is reasonable?

And a bigger question is - "How can we make it (the US economy) work for everyone?"

IF those corporations, which are currently hoarding cash, were to invest that cash (capital) in wages and salaries, some portion would then go to tax revenues (federal, state, local). But what would those jobs do in terms of developing long term wealth?

As I see it, the US economy is imbalanced by virtue of being heavily dependent on consumption and services. I heard sometime ago, a claim (by Sen. Bernie Sanders, IIRC) that 40% of profits in the economy came from the financial sector (or banks). The financial sector doesn't create wealth, but rather shifts it around.

If we take a hard look at the economy, particularly the exploitation and utilization of natural resources, it appears to me that the aggregate wealth of the country is decreasing. As a result, because some are becoming increasingly wealthy, such wealth must come at the expense of a greater share becoming less wealthy. And that has been a trend for the last 3 decades.

As for the bill for each taxpayer - why not hand them out at the border as well?

Entry fee? Tariff? Those arriving haven't received any benefit from the US economy, unless they exported to the US.

 

[WhoWee]

I think that is the crux of the matter at hand. What is reasonable?

And a bigger question is - "How can we make it (the US economy) work for everyone?"

IF those corporations, which are currently hoarding cash, were to invest that cash (capital) in wages and salaries, some portion would then go to tax revenues (federal, state, local). But what would those jobs do in terms of developing long term wealth?

As I see it, the US economy is imbalanced by virtue of being heavily dependent on consumption and services. I heard sometime ago, a claim (by Sen. Bernie Sanders, IIRC) that 40% of profits in the economy came from the financial sector (or banks). The financial sector doesn't create wealth, but rather shifts it around.

If we take a hard look at the economy, particularly the exploitation and utilization of natural resources, it appears to me that the aggregate wealth of the country is decreasing. As a result, because some are becoming increasingly wealthy, such wealth must come at the expense of a greater share becoming less wealthy. And that has been a trend for the last 3 decades.
Entry fee? Tariff? Those arriving haven't received any benefit from the US economy, unless they exported to the US.

Immigration fee - instead of providing welfare.

IMO - the biggest threat to economic recovery at this point is the Government.

When I hear politicians talking about a "new WPA", investments in infrastructure, and jobs bills - it makes my skin crawl. The first thought they have is SPEND MORE - rather than find a way to encourage the private sector to re-invest and grow.

When they do talk about encouraging investment - they try to manipulate the investments into "green energy" (for instance) - which are nearly impossible to develop due to regulation. Actually, regulations are used quite often to achieve a political result - IMO. It seems when they can't push legislation like "cap and trade" or "card check" they try to do an end run with EPA or Labor regulations.

Additionally, the Government needs to restore confidence in the investment community by removing itself from both the auto industry and the financial sector. When they took over GM - rather than trust the federal court system to do it's job with respect to contracts and investors - indulged in "cash for clunkers", sold assets to China, and provided a $45Billion tax credit they undermined the entire system of Capitalism and free enterprise.

How many here on PF have rushed out to buy an electric vehicle from GM - in spite of tax incentives?

Personally, I think the next President should spend his entire first term undoing all of the unfair and restrictive (politically motivated crap - not life and death) regulations and eliminating duplication and waste across the entire Government. As for the current President - the less he does at this point - the better.

 

[Vanadium 50]

Bush Tax cuts - 11.5 trillion dollars

Nonsense. Between 2001 and 2010 (when the Bush tax cuts expired), the US collected about $7.6T in total income tax. You cannot argue that a cut in the top marginal rate from 39.6 to 35% could cost 60% of the income. It's mathematically impossible. And posting things that are mathematically impossible does not strengthen your argument.

 

[Proton Soup]

And here I would say your 'analysis' differ from most professionals. It doesn’t matter if Tea Terrorists thinks that they can make up their own rules – if no one else believes in them. Default is default, no matter what Sen. Rand Paul thinks. You cannot just decide to "take default off table" – that’s only an option for the kids in the sandpit. The can do whatever they like – in fantasyland.

It doesn’t make it any better to pretend to be a "doomsday financial analyst" – It’s not our fault! It’s going to hell no matter what we do!

Investors are generally not impressed by this conception of life ...


https://www.youtube.com/watch?v=dpIKf7t4FWA

... and not many buy the "truth" the everything is President Obama’s fault, no matter what happens in congress ...

a few points. first, your violent rhetoric is irresponsible. holding out for a balanced budget amendment is not a violent act, but your use of that rhetoric just may lead in that direction.

about the supposed "default", i can only assume you have a purposeful misunderstanding of what Rand said there. and that point was that we wouldn't end up defaulting on debts, we'd just have to cut out a bunch of government. I'm sure you know how that works, states do it all the time. where i live it's called "proration" usually. and what it has meant is that we haven't been able to keep as many courthouses open, people may have to drive a bit further to renew their driver's license, etc.

and about saying everything is Obama's fault, Rand didn't actually say that. in fact, what he did say is that the overspending is a bipartisan problem. yes, it's gotten worse under Obama, but he didn't say it was all his fault.

so how about you tone down the partisanship and the Breivik-inspired rhetoric, and stop misrepresenting what people say.

 

[256bits]

This may be off topic, but since everyone ( I say that loosely so do not take offense )here is taking the debt problem as being made in USA blaming Bush, Obama, Congress.
Did not the US government attempt to get the Chinese to re-arrange their finances and let the yen float or achieve a more realistic value in the years past if I remember correctly. Perhaps it is really a made in China problem, that could have been alleviated years ago if the Chinese had played ball in the financial arena more responsibly. Just wondering.

 

[jreelawg]

my bold
The debt deal was an agreement to allow an ADDITIONAL $8Trillion to be spent - when we can't pay the current spending without borrowing $.43 per $1.00 nor do we have a plan to pay the existing debt of $14Trillion or the unfunded long term liabilities of potentially $125Trillion. Blaming the only people who are trying to solve the problem is - silly.

I agree with you that debt is at the heart of the problem. This doesn't change the fact that it was the the debt limit fiasco which resulted in this specific decision to downgrade the US credit rating. Maybe, it is possible that the people who caused this to happen were trying to solve the problem. The winners of this fiasco declared the process that took place a historic victory and a template for future political aggression. If Sarah Palin was the head of S&P, then this fiasco and how it played out would have been a positive factor rather than a negative. As it stands, this fiasco, in the eyes of the S&P was not a positive thing, and is in fact, as they claim, what made the difference between being downgraded and not being downgraded.

Of course S&P are not perfect. They have their views and others have other views.

While I observed the fiasco, and observed the positions and tactics being used, I had the opinion all along that this will result in a negative economic impact for the US. The economy is based on confidence. They may have wanted budget cuts, but they went about it by threatening the country with default. It is not rocket science to realize that such as threat and a last minute decision on wether this would happen, will be a confidence killer. I remember hearing Wolf Blitzer saying something like, he thinks we will avert default, but that at this point you can't be sure. And one side of the debate made it clear that they were willing to default if they didn't get their way.

And, it was obvious all along by the positions that were being taken, that it would be a last minute ditch to prevent default, or that there would be a default. They stood on there principals so firm, knowing in full how it would play out politically. They were either too stubborn careless or stupid to realize the economic impact it would cause. If they are competent then my verdict is that they were protecting their special interests even when it would hurt their country. And then they call it a historic victory for great american patriots. More like great american idiots.

 

[WhoWee]

I agree with you that debt is at the heart of the problem. This doesn't change the fact that it was the the debt limit fiasco which resulted in this specific decision to downgrade the US credit rating. Maybe, it is possible that the people who caused this to happen were trying to solve the problem. The winners of this fiasco declared the process that took place a historic victory and a template for future political aggression. If Sarah Palin was the head of S&P, then this fiasco and how it played out would have been a positive factor rather than a negative. As it stands, this fiasco, in the eyes of the S&P was not a positive thing, and is in fact, as they claim, what made the difference between being downgraded and not being downgraded.

Of course S&P are not perfect. They have their views and others have other views.

While I observed the fiasco, and observed the positions and tactics being used, I had the opinion all along that this will result in a negative economic impact for the US. The economy is based on confidence. They may have wanted budget cuts, but they went about it by threatening the country with default. It is not rocket science to realize that such as threat and a last minute decision on wether this would happen, will be a confidence killer. I remember hearing Wolf Blitzer saying something like, he thinks we will avert default, but that at this point you can't be sure. And one side of the debate made it clear that they were willing to default if they didn't get their way.

And, it was obvious all along by the positions that were being taken, that it would be a last minute ditch to prevent default, or that there would be a default. They stood on there principals so firm, knowing in full how it would play out politically. They were either too stubborn careless or stupid to realize the economic impact it would cause. If they are competent then my verdict is that they were protecting their special interests even when it would hurt their country. And then they call it a historic victory for great american patriots. More like great american idiots.

Did the leader of the House Republicans - John Boehner ever threaten default? If so, please post a link. It's also not rocket science to realize the media hyped this to the max and painted the Republicans and the TEA PArty specifically as the villans.

 

[jreelawg]

Did the leader of the House Republicans - John Boehner ever threaten default? If so, please post a link. It's also not rocket science to realize the media hyped this to the max and painted the Republicans and the TEA PArty specifically as the villans.

Like Obama, he may be a leader, but the power to lead is not in his control. Unless you expect them to inspire their piers to do their will somehow. Maybe they should get to work on a poem.

 

[mheslep]

I got to laugh when I hear Republicans blame Democrats for the debt.

Hence the Tea Party.

 

[CAC1001]

The US economy has to reduce imports and increase exports for a positive trade balance.

Current trade deficit (rate) is about $600 billion/yr after shrinking to near $360 billion/yr in May 2009.
http://www.census.gov/indicator/www/ustrade.html

Well I don't think we want a positive trade balance. There is a misconception that a trade "deficit" is bad, and that a trade "surplus" is a good thing. But those are just the terms. It's like how some believe a "strong" dollar is good and a "weak" dollar is bad. There is nothing wrong with a trade deficit. It is a sign of the country's wealth and prosperity. It has been shrinking as of late because the country is not prospering right now. It always tends to shrink during bad recessions. It is a sign of poorer country when it exports more then it imports. It is a sign of a wealthier country when it imports more then it exports; also, a good chunk of the U.S. trade deficit is due to importing oil.

Remember, during the Great Depression, the U.S. ran a very tiny trade deficit and a trade surplus for some of the years of the Depression. The trade deficit is just the result of the millions of voluntary exchanges that take place between businesses and individuals within the U.S. with businesses and individuals outside of the U.S. Such voluntary exchanges will not occur unless both parties benefit in the process.

Short term deficits (federal government or trade) would not be a problem IF they were offset by comparable surpluses - but they are not - and haven't been for some time.

I agree on the budget deficits. But remember there's a difference between a budget deficit and a trade deficit. The federal government doesn't control the trade deficit. That is just the result of the market. They could try to influence it maybe by trying to increase or decrease free trade overall, but otherwise, it's just the natural play of the free market. Whereas a budget deficit, the government directly controls that to a good deal. Short-term budget deficits due to a recession the government doesn't control, but in general, if the country is running constant deficits, even in good times, then the government is spending too much money for what it takes in in tax revenues.

The republicans and democrats are equally culpaple.

Yup.

Why not just take the debt, divide it up equitably, send a statement to each taxpayer (or tax paying entity), and arrange a plan to pay off their share?

You mean divide it up among the American people? That would create a whole slew of problems I would think. Certain politicians and pundits would start yelling it is unfair to make the guy making $30K a year pay the same debt load as the guy making $300K a year, and we'd have more class warfare. Also, remember some of the debt is owned by the American people themselves! The debt doesn't need to be paid off, it just needs to be reduced.

This itself may not even really require paying down the debt, so much as returning the country to a healthy level of economic growth and running a constant balanced budget. This way, as the GDP increases, the debt, as a percentage of the GDP, will shrink year-after-year. If it is viewed that the debt is too large to the point it is hamstringing achieving a healthy level of economic growth, I could see paying it down some perhaps.

 

[ParticleGrl]

There is a misconception that a trade "deficit" is bad, and that a trade "surplus" is a good thing. But those are just the terms.

If you believe household debt is bad AND you believe government debt is bad, then you must also believe a trade deficit is bad.

A trade deficit means that on average, the country is buying more expensive products then it sells. To do this, it must be accumulating debt. It is impossible to run a trade deficit without government deficits or increasing household debt.

 

[SixNein]

I realize it is a chicken or egg problem, but the way I see it, businesses are hoarding cash largely because of long term debt uncertainty, which keeps unemployment up and stalls the recovery.

Another name for it is a liquidity trap.

 

[SixNein]

If you believe household debt is bad AND you believe government debt is bad, then you must also believe a trade deficit is bad.

A trade deficit means that on average, the country is buying more expensive products then it sells. To do this, it must be accumulating debt. It is impossible to run a trade deficit without government deficits or increasing household debt.

Stop talking so much sense =P

 

[Astronuc]

Well I don't think we want a positive trade balance. There is a misconception that a trade "deficit" is bad, and that a trade "surplus" is a good thing. But those are just the terms. It's like how some believe a "strong" dollar is good and a "weak" dollar is bad. There is nothing wrong with a trade deficit. It is a sign of the country's wealth and prosperity. It has been shrinking as of late because the country is not prospering right now. It always tends to shrink during bad recessions. It is a sign of poorer country when it exports more then it imports. It is a sign of a wealthier country when it imports more then it exports; also, a good chunk of the U.S. trade deficit is due to importing oil.

Then it would appear that the US is not as wealthy as many perceive. One solution to the trade deficit would be to significantly reduce oil imports and replace by domestically developed resources, e.g., natural gas (assuming it can be done without polluting the environment, particuarly drinking water supplies), wind, solar, hydro and nuclear energy.

Remember, during the Great Depression, the U.S. ran a very tiny trade deficit and a trade surplus for some of the years of the Depression. The trade deficit is just the result of the millions of voluntary exchanges that take place between businesses and individuals within the U.S. with businesses and individuals outside of the U.S. Such voluntary exchanges will not occur unless both parties benefit in the process.

A tiny or intermittent deficit would not be necessarily bad or problematic - IF there was a corresponding surplus.

I agree on the budget deficits. But remember there's a difference between a budget deficit and a trade deficit. The federal government doesn't control the trade deficit. That is just the result of the market. They could try to influence it maybe by trying to increase or decrease free trade overall, but otherwise, it's just the natural play of the free market. Whereas a budget deficit, the government directly controls that to a good deal. Short-term budget deficits due to a recession the government doesn't control, but in general, if the country is running constant deficits, even in good times, then the government is spending too much money for what it takes in in tax revenues.

The federal debt/deficit is structually linked to the trade deficit (which are substantial, not tiny). The trade deficit represents money leaving the US economy, significant loss of tax revenue, significant expenditures to cover the unemployment associated with the job loss, . . .

The money associated with the trade deficit is invested in those countries from which the US imports. Some of that money is then spent on US exports, e.g., aircraft, military hardware, technology, etc. But a subtantial amount of that money is lent back to the US. Chronic deficits lead to accumulated debt/obligations. Defaulting on debt is problematic because of the loss of confidence in the process.

You mean divide it up among the American people? That would create a whole slew of problems I would think. Certain politicians and pundits would start yelling it is unfair to make the guy making $30K a year pay the same debt load as the guy making $300K a year, and we'd have more class warfare. Also, remember some of the debt is owned by the American people themselves! The debt doesn't need to be paid off, it just needs to be reduced.

I indicated equitable division. The person earning $30 K might pay $1K, while the person earning $300K might pay $10K. Basically, the federal debt is owned by the people - it is money borrowed in the name of the American people.

This itself may not even really require paying down the debt, so much as returning the country to a healthy level of economic growth and running a constant balanced budget. This way, as the GDP increases, the debt, as a percentage of the GDP, will shrink year-after-year. If it is viewed that the debt is too large to the point it is hamstringing achieving a healthy level of economic growth, I could see paying it down some perhaps.

The debt has to be paid down, because it is unmanageable as it is! The economy/GDP has rarely, if ever, grown at the rates required to reduce the debt, i.e., eliminate the deficit. Supposedly it did during the latter years of the Clinton administration. Modern US federal deficits have exceeded 8% of GDP, and in 2010 it was about 10% of the GDP. The GDP growth is rarely above 5%, and more recently has been around a rolling average of ~3%.

http://www.tradingeconomics.com/united-states/gdp-growth-annual (adjust the beginning of the scale to 1948)

However, the GDP growth should be adjusted for the federal deficit, and I believe that it is not. Buried in the GDP is the US government expenditures, which have become increasingly laden with deficits. Subtracting the government deficits from the GDP would give a more realistic assessment of the state of the US economy. And I believe one will find it rather poor.

 

[WhoWee]

Like Obama, he may be a leader, but the power to lead is not in his control. Unless you expect them to inspire their piers to do their will somehow. Maybe they should get to work on a poem.

In response to your post:

"I remember hearing Wolf Blitzer saying something like, he thinks we will avert default, but that at this point you can't be sure. And one side of the debate made it clear that they were willing to default if they didn't get their way. "

Again, the Republican Leader - Speaker of the House John Boehner did not threaten to allow default. Also, the media hyped a possible default - and blamed Republicans throughout the debate.

 

[WhoWee]

I indicated equitable division. The person earning $30 K might pay $1K, while the person earning $300K might pay $10K. Basically, the federal debt is owned by the people - it is money borrowed in the name of the American people.

The debt has to be paid down, because it is unmanageable as it is!

Let's not forget the people earning less than $30K astro - will the Politicians give them money so they can pay their fair share? (sorry)

 

[Astronuc]

Let's not forget the people earning less than $30K astro - will the Politicians give them money so they can pay their fair share? (sorry)

I didn't pick a limit on income. I merely stated an equitable division of debt allocation - to be determined.

As for the poor paying taxes - don't they already pay taxes in the sense that they pay exhorbitant fees (interest) to pay-day lenders? I see folks in the check-cashing store across from my office paying excessive fees on every bill they pay. They don't earn enough to have a bank account, so they often borrow to pay for food, rent, . . . before payday.

But there are some that cash their federal and state subsidies. I would expect federal and state subsidies would be reduced to manageable levels.

Then there are those on EITC. I read somewhere, and probably have the link buried in my library of files, that a substantial portion of those in the EITC program are military families (mostly families of enlisted ranks).
http://www.irs.gov/individuals/article/0,,id=177571,00.html


My main point is, and has been, the systemic problems with the US economy, including the chronic federal and trade deficits, burgeoning debt, . . . . We've reached a point where the only solutions seem to be drastic, but not all viable solutions need to be drastic. However, we seem to lack the necessary leadership to resolve what has become a crisis.

 

[Vanadium 50]

I indicated equitable division. The person earning $30 K might pay $1K, while the person earning $300K might pay $10K. Basically, the federal debt is owned by the people - it is money borrowed in the name of the American people.

Here are the numbers.

A person (strictly speaking, a tax filer - so married filed jointly is one "person") making $30K would have to pay $51,900. A person making $300K would have to pay $519,000. (Calculated from $14.5T in national debt and $8.4T in adjusted gross income)

 

[DevilsAvocado]

Total crap! How much spending is attributed to the TEA Party?

I don’t think you get it.

Yes, there are problems in the U.S. economy, as in most other western countries. We were on the brink to global depression in 2008/2009, remember? But the U.S. is nowhere near the full-blown crises in Europe, where Greece, Italy, Spain and Portugal are on the edge to bankruptcy.

In this situation, to just get hysterical fixated with the trillion dollars in national debt + the ridicules aversion for current President, is not going to fix the problem. Everybody has to act like adults and take responsibility for their actions, and not make up fantasy rules that the market does not believe in.

I hope you know that most important factor when it comes to the national debt is the relation to GDP. If you have $15 trillion dollars in GDP and $14 trillion dollars in national debt, it’s not good, but still manageable. If you have $10 trillion dollars in GDP and $14 trillion dollars in national debt, you’re in a "Greece situation", with bankruptcy knocking on the door.

My question to you:
– Do you really think that if you and the Tea Extremists hits the all brakes all the way down in a "historical" situation like this, U.S. companies ('sitting' on $1.5 trillion dollars) will wake up and start investing and hiring people, just like that?

If the answer is yes, please back it up with some professional financial facts – personal fantasyland won’t do.

And before answering, maybe you should read this:
http://economix.blogs.nytimes.com/2011/07/12/are-we-about-to-repeat-the-mistakes-of-1937/"

Please consider this:
Would anyone be surprised if a global public corporation hired a CEO with no business or executive experience at a time of extreme financial distress - and the value of the stock dropped after the new hires policies failed to solve the problems and shareholders took steps to place problem solvers on the board?

Talking about crap, this woman is a "problem solver"??


https://www.youtube.com/watch?v=mSPYC2NFYyY

That’s just hilarious. She’s the dysfunctional root of "the problem", as S&P points out.

 

[DevilsAvocado]

Yep. Obama and Boehner could have cut a $4 trillion dollar deal - just what S&P wanted to see. But the requirement that we can't raise taxes under any circumstances, no matter how many cuts were made, even when facing a downgrade, drove this into the dirt.

Yeah, I know, the tea drinkers humiliated Boehner in public:

Tea Party’s War on America
http://www.nytimes.com/2011/08/02/opinion/the-tea-partys-war-on-america.html

I’m wondering... for how long are the (true) Republicans going to tolerate this destructive behavior from the tea sandpit?

The problem isn't the debt. The problem is the gridlock caused by the tea party. But many tea drinkers want the economy to collapse so we can start from scratch, so there you go.

Wow... it’s seems crazy and very dangerous to the whole global economy... no wonder they accuse them for waging jihad on the American people...

Isn’t it time for the (true) Republicans and Democrats to form some kind of "crisis alliance", to 'bypass' this immature and dangerous behavior, until we get out of this crisis??

 

[DevilsAvocado]

I don't even think we'll need to wait months. Enough things have happened over the past couple of years and especially the last month or two for everyone to downgrade the US. Unless the S&P decision was grossly flawed, I believe Moody's will be next to downgrade.

I sure hope you are wrong...

@DevilsAvacado

No one 'ranks' ratings agencies (I have a feeling you are curious as to who oversees them). Would any investor feel confident investing in US Treasuries if the US government oversaw the ratings agency that told you US T-bills are AAA quality? Ha. Why not have dairies be in charge of inspecting and reporting on their own facilities? Or have people in charge of their own credit scores?

I don’t know what I was asking for... but it would be real interesting to see both the names & faces of the clients who paid for this rating report... i.e. if "global hell" breaks out on Monday...

Today, it’s already chaotic in Israel: http://news.yahoo.com/tel-aviv-exchange-halts-trade-6-fall-082839508.html"

 

[DevilsAvocado]

and raise taxes appropriately, and reduce spending appropriately, and pay down the debt.

Yep, that’s the way to do it!

And a bigger question is - "How can we make it (the US economy) work for everyone?"

Extremely good question, when 46 million Americans live on food stamps...

As I see it, the US economy is imbalanced by virtue of being heavily dependent on consumption and services. I heard sometime ago, a claim (by Sen. Bernie Sanders, IIRC) that 40% of profits in the economy came from the financial sector (or banks). The financial sector doesn't create wealth, but rather shifts it around.

My personal guess is that whit 1.3 billion Chinese and 1.2 Indians willing to work in the industry at very low salaries, the only way to compete is thru technology, knowledge and innovations.

 

[DevilsAvocado]

a few points. first, your violent rhetoric is irresponsible. holding out for a balanced budget amendment is not a violent act, but your use of that rhetoric just may lead in that direction.

I’m not quite sure I’m able to follow your 'logic'...? My "violent rhetoric" is going to cause violence? Where and by whom??

we'd just have to cut out a bunch of government. I'm sure you know how that works, states do it all the time. where i live it's called "proration" usually. and what it has meant is that we haven't been able to keep as many courthouses open, people may have to drive a bit further to renew their driver's license, etc.

That’s some real piece of innovative economics you’ve got there, dude. All we have to do is to close down a few courthouses, get in the car, drive around, and bada bing bada boom! You just saved $14 trillion dollars!

Amazing, why didn’t anyone think of that before...

Dumb question: These 46 million Americans on food stamps... eh... how are they going to participate in this solution of yours...?

so how about you tone down the partisanship and the Breivik-inspired rhetoric

Give me a call when you return to earth, I miss the old Proton Soup, very much.

 

[xAstronomer]

This is what happens in the United States of Corporate America.

 

[DoggerDan]

This is what happens in the United States of Corporate America.

We the Incorporated.

I'm surprised it wasn't downgraded years ago. No corporation, much less a country, can be healthy while maintaining such a high debt ratio.

Apple's debt ratio: 0%. There's a reason Apple is very healthy Fortune 500 company, and it's innovative products are only a small part of its success. Other Fortune 500 companies lack Apple's eye-catching products, yet share in Apple's debt-free, Fortune 500 success because they know how to govern themselves responsible.

That's a skill America lost a long time ago.

 

[WhoWee]

I didn't pick a limit on income. I merely stated an equitable division of debt allocation - to be determined.

As for the poor paying taxes - don't they already pay taxes in the sense that they pay exhorbitant fees (interest) to pay-day lenders? I see folks in the check-cashing store across from my office paying excessive fees on every bill they pay. They don't earn enough to have a bank account, so they often borrow to pay for food, rent, . . . before payday.

But there are some that cash their federal and state subsidies. I would expect federal and state subsidies would be reduced to manageable levels.

Then there are those on EITC. I read somewhere, and probably have the link buried in my library of files, that a substantial portion of those in the EITC program are military families (mostly families of enlisted ranks).
http://www.irs.gov/individuals/article/0,,id=177571,00.html


My main point is, and has been, the systemic problems with the US economy, including the chronic federal and trade deficits, burgeoning debt, . . . . We've reached a point where the only solutions seem to be drastic, but not all viable solutions need to be drastic. However, we seem to lack the necessary leadership to resolve what has become a crisis.

This discussion probably belongs in the other thread regarding raising tax rates. The solution to this problem is clearly going to require multiple components including cost controls, tax increases and a wider base, entitlement reform (as David Beers of S&P described in an interview this morning with Chris Wallace - can't find a link yet), GDP growth, and a major reduction of unemployment.

However, the US Government is currently borrowing $.43 per $1.00 it spends - the first step of the solution can't be another spending program without cutting first. The last "stimulus" was poorly conceived as evidenced by the President's comment about projects not being "shovel ready" as thought.

Worse yet, some of the spending went to states to continue their bloated spending programs and to expand Medicaid - when they should have been making cuts instead. Now the states are making cuts. I think it's possible all the stimulus accomplished was to delay recovery at the state level. The same argument can be made for trying to prop up real estate prices - the market won't recover until it bottoms - why delay it?

Again, we can address repayment of the debt in the other thread. I think we need a plan to deal with not only the $14.3+Trillion debt but the other $100Trillion+ unfunded liabilities that are in our future. This is the time to do it - not when we start chasing higher interest rates.

 

[WhoWee]

I don’t think you get it.

Yes, there are problems in the U.S. economy, as in most other western countries. We were on the brink to global depression in 2008/2009, remember? But the U.S. is nowhere near the full-blown crises in Europe, where Greece, Italy, Spain and Portugal are on the edge to bankruptcy.

In this situation, to just get hysterical fixated with the trillion dollars in national debt + the ridicules aversion for current President, is not going to fix the problem. Everybody has to act like adults and take responsibility for their actions, and not make up fantasy rules that the market does not believe in.

I hope you know that most important factor when it comes to the national debt is the relation to GDP. If you have $15 trillion dollars in GDP and $14 trillion dollars in national debt, it’s not good, but still manageable. If you have $10 trillion dollars in GDP and $14 trillion dollars in national debt, you’re in a "Greece situation", with bankruptcy knocking on the door.

My question to you:
– Do you really think that if you and the Tea Extremists hits the all brakes all the way down in a "historical" situation like this, U.S. companies ('sitting' on $1.5 trillion dollars) will wake up and start investing and hiring people, just like that?

If the answer is yes, please back it up with some professional financial facts – personal fantasyland won’t do.

And before answering, maybe you should read this:
http://economix.blogs.nytimes.com/2011/07/12/are-we-about-to-repeat-the-mistakes-of-1937/"



Talking about crap, this woman is a "problem solver"??


https://www.youtube.com/watch?v=mSPYC2NFYyY

That’s just hilarious. She’s the dysfunctional root of "the problem", as S&P points out.

It's quite clear to me we picked the wrong time to elect a President with absolutely ZERO financial or executive experience. I find it easy to make an argument that he allowed Harry Reid and Nancy Pelosi to take the lead legislatively - while he has toured the globe giving speeches, "earning" a Nobel, closing Gitmo(?), holding terrorist trials in NY(?), holding a "beer summit", lobbying for the Olympics in Chicago (failed), working as a "rain maker" for GE in India, supporting oil production in South America (but working against drilling and production in the US?), creating and saving a few million jobs (yet unemployment is still over 9%?), entering into yet another war in Libya, (I'm honestly not sure what he's doing in) Egypt, and continues to blame Bush (even for tax cuts that he adopted as his own a few months ago?) - as the media continues to praise him. I think this is much more relevant than whatever Michele Bachman is talking about in Iowa. Please label this post - IMO.

 

[Proton Soup]

I’m not quite sure I’m able to follow your 'logic'...? My "violent rhetoric" is going to cause violence? Where and by whom??
That’s some real piece of innovative economics you’ve got there, dude. All we have to do is to close down a few courthouses, get in the car, drive around, and bada bing bada boom! You just saved $14 trillion dollars!

Amazing, why didn’t anyone think of that before...

Dumb question: These 46 million Americans on food stamps... eh... how are they going to participate in this solution of yours...?
Give me a call when you return to earth, I miss the old Proton Soup, very much.

you're calling people terrorists. there is something wrong with you. it's simply politics. and everybody has been holding out to get their way. tea party only makes up about 12% of congress. they simply don't have the numbers to force anything. the real problem, which you can't seem to bring yourself to address, is that we simply spend too much, democrats and republicans. but the major parties do not want to compromise or give in on anything. it is a bipartisan failure. 88% of congress acts like spoiled children.

as for food stamps, is that really what you think needs to be cut?

 

[russ_watters]

If you believe household debt is bad AND you believe government debt is bad, then you must also believe a trade deficit is bad.

A trade deficit means that on average, the country is buying more expensive products then it sells. To do this, it must be accumulating debt. It is impossible to run a trade deficit without government deficits or increasing household debt.

That would only necessarily be true if imports and exports were the only components of the economy.

 

[WhoWee]

We the Incorporated.

I'm surprised it wasn't downgraded years ago. No corporation, much less a country, can be healthy while maintaining such a high debt ratio.

Apple's debt ratio: 0%. There's a reason Apple is very healthy Fortune 500 company, and it's innovative products are only a small part of its success. Other Fortune 500 companies lack Apple's eye-catching products, yet share in Apple's debt-free, Fortune 500 success because they know how to govern themselves responsible.

That's a skill America lost a long time ago.

Not to be a wet blanket - but Apple was "saved" by Microsoft a few years ago.