S&P Downgrades US To AA+, Outlook Negative

[DevilsAvocado]

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

http://www.cnbc.com/id/44039103"

"More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011," S&P said in a statement.​

Result of extreme partisan Tea Terrorists implementing a dysfunctional democracy?

 

[AwwYeaa44]

Result of extreme partisan Tea Terrorists implementing a dysfunctional democracy?

I hope you're not playing the devil's avocado here because I love guacamole.

The tea party did agree to raise the debt ceiling if an amendment was included to balance the budget within 8 years.

Given that we've raised spending in real, inflation-adjusted dollars by 60% since 2000, and could run a surplus on that budget, that doesn't seem too much to ask for.

I certainly don't notice any more benefits from the government than I did in 2000 so that budget is A-OK for me.

A $1.5 trillion/ year deficit for 0 noticed benefits is just unacceptable.

Threats not to raise the debt ceiling had little impact on this credit rating drop. We pull in more than 10 times enough revenue to cover interest on the debt and the president is legally obligated to pay debt interest before anything else. This is just like how corporations must pay bondholders first.

So, there was never any danger of default. Anyone talking about it was just trying to scare people into supporting their plan or scare people into watching their TV show. It was another WMD-in-Iraq-OMG-INVADE-SCARE-TACTICS or omg-pass-10000-page-multitrillion $-legislation-without-reading-it-or-world-economy-will-end-4ever tactic.

The downgrade is mostly because of a failure to cut spending. The fear is that we'll inflate our way out of increasing government obligations - and S&P is probably right.

Mainstream republicans really didn't want to cut spending. Neither did democrats. At least, neither wanted to cut spending enough. The tea party was the only political faction that had a plan that would have avoided a downgrade.

 

[russ_watters]

Result of extreme partisan Tea Terrorists implementing a dysfunctional democracy?

No, given that they also said:

The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.

Considering that until last year's election brought in the Tea Party and a Republican majority, Obama's plan was to drive up the debt even faster than it is being driven up now, I 'd say the S&P would see them pushing the economy back in the right direction, away from the truly massive debt the Obama admin is driving us toward. Sounds to me like they think it is the democrats that are being irresponsible.

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. But regardless of which is the chicken and which is the egg, a policy that massively drives up debt has shown to not meet Obama's predictions of economic recovery while driving up debt in a way that will be difficult to recover from even if it had worked as advertised.

 

[edward]

A senate investigation of the credit ratings agencies really raked them over the coals a few years back.

http://hsgac.senate.gov/public/inde...aring_id=5f127126-608a-4802-ba77-d1bdffdfbe9b

Click on: view archive webcast. The first five or ten minutes of Senator Levin's opening comments demonstrates what the credit agencies were accused of.

Basically they gave triple A ratings to packaged sub prime loans.

It looks like it is pay back time.

 

[AwwYeaa44]

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. But regardless of which is the chicken and which is the egg, a policy that massively drives up debt has shown to not meet Obama's predictions of economic recovery while driving up debt in a way that will be difficult to recover from even if it had worked as advertised.

I don't know what to think about this because, wouldn't prices adjust if that were the case, and then everything else would adjust around the lower price levels?

And so the hoarding wouldn't have any effect in the long-term?

 

[russ_watters]

Threats not to raise the debt ceiling had little impact on this credit rating drop.

From other threads, the perception from liberals in here is 'he who smelt it, dealt it'. That republicans made the debt an issue by making it an issue. That logic doesn't work past 7th grade. The debt issue is real, even if the democrats successfully ignored it for 2 years. One way or another, someone would have to make it an issue and it sure as heck wasn't going to be the party that was driving the debt up so fast! The Republicans should be commended for at least trying to do something about it before we got downgraded, rather than rubber-stamping another increase as the democrats wanted them to.

 

[russ_watters]

I don't know what to think about this because, wouldn't prices adjust if that were the case, and then everything else would adjust around the lower price levels?

And so the hoarding wouldn't have any effect in the long-term?

Prices of what?

Hoarding cash means that businesses are taking their profits (and profits over the past year have been pretty good) and sticking them in the bank rather than re-investing them in their business.

I work in construction on the industrial level and there is both a cyclical component and a fixed component to the market. The cyclical is driven by demand for products, so it isn't surprising that that is down, but the fixed component is driven by the fact that buildings deteriorate over time and a certain amount of annual maintenance is required to just to keep them running at a certain level. My company's clients cut both components for the past two years and are damaging their ability to function by doing so.

 

[AwwYeaa44]

From other threads, the perception from liberals in here is 'he who smelt it, dealt it'. That republicans made the debt an issue by making it an issue. That logic doesn't work past 7th grade. The debt issue is real, even if the democrats successfully ignored it for 2 years. One way or another, someone would have to make it an issue and it sure as heck wasn't going to be the party that was driving the debt up so fast! The Republicans should be commended for at least trying to do something about it before we got downgraded, rather than rubber-stamping another increase as the democrats wanted them to.

I'll keep that in mind next time I look at Reagan and Bush-era spending.

If the republicans had power right now, they'd be raising spending just like they did a few years ago. This is not a party-issue.

No matter what party you elect, you're going get warfare, welfare, and debt.

The tea party was supposed to offer an alternative to this.

 

[russ_watters]

A senate investigation of the credit ratings agencies really raked them over the coals a few years back.

Basically they gave triple A ratings to packaged sub prime loans.

It looks like it is pay back time.

You're saying you think the S&P did this out of revenge for a senate investigation a few years ago? Really? You don't think the S&P believes it sees an actual problem?

Was the top Chinese credit agency, which also downgraded us - before the S&P did - also a part of that scandal? http://www.cnn.com/2011/BUSINESS/08/02/china.us.rating/index.html?hpt=hp_p1&iref=NS1

 

[AwwYeaa44]

Prices of what?

Hoarding cash means that businesses are taking their profits (and profits over the past year have been pretty good) and sticking them in the bank rather than re-investing them in their business.

I work in construction on the industrial level and there is both a cyclical component and a fixed component to the market. The cyclical is driven by demand for products, so it isn't surprising that that is down, but the fixed component is driven by the fact that buildings deteriorate over time and a certain amount of annual maintenance is required to just to keep them running at a certain level. My company's clients cut both components for the past two years and are damaging their ability to function by doing so.

You have $2 and 4 pieces of bread, $.5 each. You hoard $1 into the bank, and now prices adjust to $.25 each. My line of thought, I don't know too much. I'm sure it's a bit more complicated when you start including foreign competition, etc.

It's probably the case that the amount hoarded isn't enough to effect prices but is enough to stop a good bit of hiring. Or perhaps there's just less bread.

 

[Jimmy Snyder]

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

 

[AwwYeaa44]

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

And vise-versa. It's sad when people get stuck into such a tribal mentality.

8 years of bush = debt, corporatism, war. A few years of Obama = debt, corporatism, war.

The only thing that ever changes is the color of the rod ramming itself up your ***. And it seems that 90% of the population will accept a blue rod or a red rod, but not no rod.

 

[russ_watters]

I'll keep that in mind next time I look at Reagan and Bush-era spending.

By all means, compare the two spending rates! And be sure to include Obama's predictions for the next 10 years!

If the republicans had power right now, they'd be raising spending just like they did a few years ago.

Maybe they would, maybe they wouldn't. A few years ago, spending (discretionary spending, anywa) increased primarily because of wars, which are now ending (where's that savings?), and a new government agency created due to 9/11.

While it is true that sometimes the Republicans don't act like their mantra of lean government says they should, you're more likely to see Republicans get back to type than you are to see Democrats stray from type, particularly in hard economic times.

This is not a party-issue.

No matter what party you elect, you're going get warfare, welfare, and debt.

The tea party was supposed to offer an alternative to this.

As said, they tried and they did have at least a little success. They just didn't get as much as they wanted. The tea party is the very last group that should be getting blame here.

 

[russ_watters]

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

Is the debt not getting worse much faster than it was when the Republicans were in power?

And I'm not discounting that the debt was high 2 years ago - this issue today isn't primarily about how we got here, it is about where we are going and where we are going clearly has Democrats pushing to keep spending and raising the debt rapidly and Republicans trying to slow the increases in the debt.

Reread my post if you missread it the first time: I didn't make a claim about anything other than who was (is) pushing for massive spending increases over the past year. I'm talking about where we are now and where we are going. AwwYeah44 brought up history and you followed him there.

 

[russ_watters]

You have $2 and 4 pieces of bread, $.5 each. You hoard $1 into the bank, and now prices adjust to $.25 each. My line of thought, I don't know too much.

I'm not even following the line of thought, much less how it is relevant.

 

[AwwYeaa44]

By all means, compare the two spending rates! And be sure to include Obama's predictions for the next 10 years!

You're liking someone because they promise to kill you slower.

Both rates are way too high to claim to be fiscally responsible. Neither party has any fiscal credibility.

Republicans will claim to be fiscally responsible when they don't have the power to increase spending . Then, when they get the power, they'll just dangerously increase spending.

Maybe they would, maybe they wouldn't. A few years ago, spending (discretionary spending, anywa) increased primarily because of wars, which are now ending (where's that savings?), and a new government agency created due to 9/11.

How is this an excuse for the spending?Not to mention the bailouts, etc.

While it is true that sometimes the Republicans don't act like their mantra of lean government says they should,

Sometimes?? Republicans have raised government spending every time they've had power in the past 30 years!

It's like the democrats claiming to be anti-war and then... more war.

Both parties are lying to your face and giving you empty promises.. People need to stop buying them.

you're more likely to see Republicans get back to type than you are to see Democrats stray from type, particularly in hard economic times.

Since neither has ever done it in recent history, you can only say that they have equal odds of doing so... which are 0.

Clinton at least ran a very small deficit (not counting social security raids).. So, you could say that the democrats have more credibility.

 

[russ_watters]

You're liking someone because they promise to kill you slower.

These are the choices available to us. It sucks, but yeah, I'll pick the lesser of two evils.

How is this an excuse for the spending?

I didn't say it was an excuse, I just said it was ending. Or are you saying that you think Republicans will always find another war to fight?

Not to mention the bailouts, etc.

The irony of Bush's bailout (TARP) is it shows up as spending on his balance sheet and income on Obama's. It's a trillion dollar misleading swing in their balance sheets!

I didn't like it, but it was ultimately completely painless.

Sometimes?? Republicans have raised government spending every time they've had power in the past 30 years!

Yeah, I know - I've seen the misleadiing graphs that ignore the history of what actually happened. Again, I'm not interested in playing history games, I'm interested in where we are now and where we are going.

Since neither has ever done it in recent history, you can only say that they have equal odds of doing so... which are 0.

Does your recent history include the past year? Because during that history, Republicans reverted to type.

Clinton at least ran a very small deficit (not counting social security raids).. So, you could say that the democrats have more credibility.

Not really, no. To be sure, Clinton's no Obama, but Clinton also had a Republican Congress to keep him from spending as much as he wanted to.

 

[WhoWee]

Result of extreme partisan Tea Terrorists implementing a dysfunctional democracy?

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

They were swept into office last Fall to solve the problems in the US. They were elected because we are borrowing $.43 of every dollar spent - on trajectory to a $20+Trillion national debt - with additional unfunded liabilities projected anywhere from $60Trillion to $120Trillion over time.

Perhaps the Treasury Secretary and President Obama should have been paying closer attention? Geithner said this three (3) months ago:

http://video.foxbusiness.com/v/4651704/geithner-no-risk-us-will-lose-aaa-credit-rating




The Obama administration response - acting like children (IMO) - they blame S&P:

http://www.680news.com/news/world/article/261846--obama-administration-bashes-u-s-credit-downgrade

"The Obama administration is questioning the math that led to the decision to downgrade the U.S. credit rating by credit agency Standard & Poor's."



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?

 

[DevilsAvocado]

I hope you're not playing the devil's avocado here because I love guacamole.

lol no worries mate!

Threats not to raise the debt ceiling had little impact on this credit rating drop. We pull in more than 10 times enough revenue to cover interest on the debt and the president is legally obligated to pay debt interest before anything else. This is just like how corporations must pay bondholders first.

I think you’re wrong. If the greatest economy in the world, in possession of the global reserve currency, behaves like little kids in a sandpit – it will of course affect the confidence of investors.

When John Chambers (S&P) was asked if the latest mayhem in congress had a major impact on the decision to downgrade – he answered (@03:00):

Yes, I think that is what put things over the brink.​

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

So, there was never any danger of default. Anyone talking about it was just trying to scare people into supporting their plan or scare people into watching their TV show. It was another WMD-in-Iraq-OMG-INVADE-SCARE-TACTICS or omg-pass-10000-page-multitrillion $-legislation-without-reading-it-or-world-economy-will-end-4ever tactic.

The downgrade is mostly because of a failure to cut spending. The fear is that we'll inflate our way out of increasing government obligations - and S&P is probably right.

Mainstream republicans really didn't want to cut spending. Neither did democrats. At least, neither wanted to cut spending enough. The tea party was the only political faction that had a plan that would have avoided a downgrade.

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 ...

 

[RudedawgCDN]

I find it amusing when people try to defend the Republicans and spending.

The Republicans and Democrats are equally to blame and equally bad. Anyone who denies this has their head in the sand and is in complete denial.

What hurt the US under Bush:

Medicare Part D - unpaid for
2 very costly wars - 4 trillion dollars
Bush Tax cuts - 11.5 trillion dollars
TARP (Bush October 3, 2008)
600,000 Americans losing their job every month when Bush left office
1 in 8 homes going into foreclosure when Bush left office
The worst WORLD recession since the 1930's!

You Americans are so divided along party lines you fail to see that both parties and all congresses have been equal to blame for your current crisis.

The Republicans are reckless (willing to risk default) and your Democrats are inept (unable to implement spending cuts and revenue increases).

When I find truly amusing is how you can be so arrogant as to think you can wage 2 costly wars and cut taxes at the same time.

Bush was truly a moron, but why Obama is making the same mistake is perplexing.

As I said both parties seem equally set on financially ruining your once great nation.

 

[DevilsAvocado]

No, given that they also said:

See John Chambers in previous post.

Considering that until last year's election brought in the Tea Party and a Republican majority, Obama's plan was to drive up the debt even faster than it is being driven up now, I 'd say the S&P would see them pushing the economy back in the right direction, away from the truly massive debt the Obama admin is driving us toward. Sounds to me like they think it is the democrats that are being irresponsible.

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. But regardless of which is the chicken and which is the egg, a policy that massively drives up debt has shown to not meet Obama's predictions of economic recovery while driving up debt in a way that will be difficult to recover from even if it had worked as advertised.

It’s a tough problem. I’m no "financial expert" in any sense, but from what I’ve heard and what sounds logical – if you "hit the brakes" facing a possible recession, forget "possible"; recession will come faster to you than a real "eggy hen". They say that the trick to pass this kind of situation is to hit the gas & brake at the same time... don’t ask me how it works in practice...

Talking about chicken or egg problem, as I see it, one major problem is that some "Kentucky Fried Chickens" seems to have too much (oversimplified) sayings in the congress... and if one does not understand the meaning of the word "compromise"... well, it worries me... and when they guy thinks we should be happy there’s "no shooting" in the congress... I’m just stunned.


https://www.youtube.com/watch?v=Ukn7crpYG90

 

[DevilsAvocado]

... Basically they gave triple A ratings to packaged sub prime loans.

It looks like it is pay back time.

Maybe, it looks a little bit 'strange'... S&P 'missed' $2 trillion in http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DUS_Downgraded_AA%2B.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243942957443&blobheadervalue3=UTF-8" ... John Chambers (S&P) looked really 'lost'...

Anyhow, it takes all 3 rating agencies to downgrade, to make any real impact on the market. (I think... )


P.S. Who 'ranks' the ratings agencies??

 

[WhoWee]

I find it amusing when people try to defend the Republicans and spending.

The Republicans and Democrats are equally to blame and equally bad. Anyone who denies this has their head in the sand and is in complete denial.

What hurt the US under Bush:

Medicare Part D - unpaid for
2 very costly wars - 4 trillion dollars
Bush Tax cuts - 11.5 trillion dollars
TARP (Bush October 3, 2008)
600,000 Americans losing their job every month when Bush left office
1 in 8 homes going into foreclosure when Bush left office
The worst WORLD recession since the 1930's!

You Americans are so divided along party lines you fail to see that both parties and all congresses have been equal to blame for your current crisis.

The Republicans are reckless (willing to risk default) and your Democrats are inept (unable to implement spending cuts and revenue increases).

When I find truly amusing is how you can be so arrogant as to think you can wage 2 costly wars and cut taxes at the same time.

Bush was truly a moron, but why Obama is making the same mistake is perplexing.

As I said both parties seem equally set on financially ruining your once great nation.

I realize you are new to PF - but we have rules - please support your comments, label OPINION, or retract - (again) please.

 

[Ivan Seeking]

Result of extreme partisan Tea Terrorists implementing a dysfunctional democracy?

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.

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.

 

[DevilsAvocado]

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

Agree.

The fact is that Mitt Romney & John Boehner has already started "the blame game". Only a sick hen will buy it, and they are going to lose on this "tactic".EDIT: WhoWee, Ivan, et al, I’m short on time... get back to you later, promise.

 

[WhoWee]

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.

 

[edward]

You're saying you think the S&P did this out of revenge for a senate investigation a few years ago? Really? You don't think the S&P believes it sees an actual problem?

Was the top Chinese credit agency, which also downgraded us - before the S&P did - also a part of that scandal? http://www.cnn.com/2011/BUSINESS/08/02/china.us.rating/index.html?hpt=hp_p1&iref=NS1

And you are presuming that S&P would never have an ulterior motive for their actions?? You didn't watch the video did you?? I watched the entire proceeding on C span live at the time. The S&P executives were very obviously seething with anger because they could not defend giving AAA ratings to toxic paper.

The bit about the top Chinese agency is merely unproductive sarcasm. Are we going to allow China to control our future now. According to your statement it looks like it.

 

[WhoWee]

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.

Of course the problem is the debt. It's projected to exceed $20Trillion - $.43 of every dollar spent is borrowed, and the unfunded future liabilities might exceed $100Trillion.

As for collapse of the system - shall I post the Cloward-Piven stuff again?

 

[jreelawg]

The "Guy Behind S&P's Decision", gave these insights into why they downgraded us.

Our Debt to GDP ratio is bad, and they predict it is going to get worse and worse. And we are spending too much money. But he made it clear that the straw that broke the camels back, was the recent political fiasco over the debt ceiling. Particularly the fact the we waited until the last day to raise the debt limit and avoid default. He also emphasized that the political environment is such that there is a refusal to raise revenues.

The republicans may have achieved a victory by their definition, in terms of getting what they wanted. But, they also inflicted serious damage to the economy by playing chicken with our economy, and turning at the last minute. And now the world is saying that was close, they were less than 24 hours away from default. How could we not be downgraded?

That being said, S&P, basically just know that it looks like we won't be able to pay our bills. We won't earn enough. And that we already spent three weeks threatening to not pay them.

 

[rootX]

The bit about the top Chinese agency is merely unproductive sarcasm. Are we going to allow China to control our future now. According to your statement it looks like it.

China is the world's largest holder of US debt.