Downgraded!

United States of America Long-Term Rating Lowered To 'AA+' Due To Political Risks, Rising Debt Burden; Outlook Negative

Excerpt:

The outlook on the long-term rating is negative. We could lower the long-term rating to 'AA' within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.

Comment: Further on the Washington Post

Standard & Poor’s announced Friday night that it has downgraded the sterling U.S. credit rating for the first time.

The move came even though the Treasury Department said that it had found a math error in the firm’s calculations of deficit projections, according to a person familiar with the matter.

S&P decided to lower the AAA rating, held by the United States for 70 years, to AA+ after a bipartisan debt deal signed into law this week failed to assuage concerns about the nation’s growing spending.

Analysts have said a downgrade could increase the cost of borrowing for the U.S. government and lead to tens of billions of dollars in more interest costs per year. That could translate into higher borrowing for consumers and businesses, too.

A downgrade would also have a cascading series of effects on states and localities that rely on federal funding, including in the Washington metro area, potentially raising the cost of borrowing for schools and parks.

Comment: AAA for 70 years ... downgraded ... thank you President Obama!

Obama's curious exercise of presidential "leadership"

Boehner Repeals Murphy's Law

Excerpt:

... by rejecting everyone else's plan while offering no plan of his own, the president effectively took himself out of the game. This curious exercise of presidential "leadership" transformed Mr. Obama into the Newt Gingrich of this debate, while Mr. Boehner looked serious and reasonable.

That seems to be the liberal reading as well. The New York Times appears to be reeling. Maureen Dowd quotes a Democrat as saying we're watching President Obama "turn into Jimmy Carter right before our eyes."

Comment: He seems content to enjoy the trappings of the presidency: the world tours, the entourage, the fawning, et cetera. First lady Michelle the same.

Deciding not to buy a Lamborghini

When a cut is not a cut

Excerpt:

No plan under serious consideration cuts spending in the way you and I think about it. Instead, the "cuts" being discussed are illusory, and are not cuts from current amounts being spent, but cuts in projected spending increases. This is akin to a family "saving" $100,000 in expenses by deciding not to buy a Lamborghini, and instead getting a fully loaded Mercedes, when really their budget dictates that they need to stick with their perfectly serviceable Honda. But this is the type of math Washington uses to mask the incriminating truth about their unrepentant plundering of the American people.

Comment: Ron Paul

Debt deal: Big issues kicked

Leaders Agree on Debt Deal - Plan to Cut $2.4 Trillion in Spending, Avoid Default Fails to Resolve Fraught Issues

Excerpt:

For all the down-to-the wire drama, the deal leaves the hardest questions unanswered and sets in motion years of fiscal pain. It imposes spending caps for the next 10 years, but leaves the details of what programs would be cut to congressional committees.

And it launches a ferocious, months-long argument over how to rewrite the tax code and what changes to make in popular programs like Social Security and Medicare—issues that were ultimately shelved in this debate.

So while one uncertainty would be lifted from the economy with the increase in the debt ceiling, others would be prolonged.

Comment: Findings of the Bowles-Simpson commission should be considered

How bad is it?

Focus Turns to Weekend Negotiations

Comment: Graphic from above WSJ article.

Running out of Cash: The world's largest tech company has more cash than the world's largest sovereign government.

Apple Now Has More Cash Than The U.S. Government

Daily statement from the U.S. Treasury

Comment: Cash Bundle Image Source

Screen grab from Estimates of When the U.S. Will Run Out of Money

Some Facts About the Debt Limit

Some Facts About the Debt Limit

Excerpt:

The Democrats like to point out that the ceiling was raised 18 times during the Reagan administration. That’s right, an average of about once every six months. In other words, those increases were small and highly temporary, as you can see from the chart. It is also noteworthy that the total increase in the debt ceiling during the Reagan years was almost exactly equal to the increase in the debt ceiling during the Clinton administration. Neither, however, is in the same universe with the spiraling debt the Democrats have racked up since they took control of Congress in 2007.

Comment: Unsustainable

Obama's debt limit hypocrisy

Senator Barack Obama Explaining his 2006 Vote Against Raising the Debt Limit

Excerpt:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

Comment: Who's not leading now!

Bernanke: Debt ceiling breach 'calamitous'

Debt ceiling delay: Gun shot to the economy

Excerpt:

No one knows what will happen to the economy if lawmakers fail to reach a debt ceiling deal by Aug. 2.

Except this: It won't be good.

For starters, interest rates could shoot up and stock prices could plummet -- leaving Americans less well off and less willing to spend, to say nothing of having less economic confidence going forward. The same goes for business owners and investors.

On top of that, the federal government won't be able to pay 44% of its bills worth an estimated $134 billion, according to a Bipartisan Policy Center analysis.

On an annualized basis, that's like cutting spending by $1.6 trillion -- which is nearly all of discretionary spending, including defense. Looked at another way, it's like slashing $33.5 billion a week.

Technically, it wouldn't be a "cut" in spending so much as a postponement. That's because the bills the Treasury Department puts off will have to be paid once the debt ceiling is raised. It is, after all, money owed for goods and services already provided, government benefits already earned or agency funding already appropriated.

Comment: My own view ... not sure of the effect but I doubt it would be good

Debt Ceiling votes: What goes around comes around

March 16, 2006 (Bush was President)

Obama a Johnny-come-lately phony deficit hawk

Call Obama’s bluff

Excerpt:

President Obama is demanding a big long-term budget deal. He won’t sign anything less, he warns, asking, “If not now, when?”

How about last December, when he ignored his own debt commission’s recommendations? How about February, when he presented a budget that increases debt by $10 trillion over the next decade? How about April, when he sought a debt-ceiling increase with zero debt reduction attached?

All of a sudden he’s a born-again budget balancer prepared to bravely take on his own party by making deep cuts in entitlements. Really? Name one. He’s been saying forever that he’s prepared to discuss, engage, converse about entitlement cuts. But never once has he publicly proposed a single structural change to any entitlement.

Hasn’t the White House leaked that he’s prepared to raise the Medicare age or change the cost-of-living calculation?

Anonymous talk is cheap. Leaks are designed to manipulate. Offers are floated and disappear.

Comment: Where's the beef, Mr President?

"they are the system. If it's broken, they're broken, and if they're broken, who needs them? "

This Is No Time for Games - Ronald Reagan wouldn't be playing 'Targeted Catastrophe.'

Excerpt:

Looked at one way, it shouldn't be hard. Both parties in Washington have every reason to want to prove they possess the baseline political competence to meet the government's central and pending crisis, which is the spending crisis. Both parties should be eager to reach a debt ceiling agreement, if only to prove the system isn't broken. Because really, they are the system. If it's broken, they're broken, and if they're broken, who needs them?

So you'd think the hangman's noose would have concentrated their minds. Instead, of course, it's a battle. As this is written, the president seems to have the edge. But if he wins—whatever winning looks like—he'll likely pay a price for his political victory. He usually does. He won on health care, which ruined his first two years in office and sharply accelerated the decline in his popularity.

Comment: Image Shadow of hangman's noose displaying against brick exterior of Konigstor Tower.

Budget Blamefest and Presidental Snow Jobs

Budget Shell Games Are Contrary to Law

Excerpt:

By April 1, according to the Budget Act, the House and the Senate must either adopt the president's budget or put forward an alternative. They cannot just hide in the weeds. The House and Senate reports must detail any differences from the president's budget and explain the "economic assumptions" underlying them. By April 15, Congress must adopt a concurrent resolution embodying a congressional budget. Appropriations bills must stay within this budget or be subject to a point of order.

The House of Representatives complied with the law, passing a budget that would reduce spending by an estimated $5.8 trillion over 10 years (according to the CBO). The Senate has not passed a budget. In fact, the Senate has not passed a budget since 2009.

This defiance of the Budget Act is responsible for the current blamefest in Washington. The law was intended to bring transparency and timeliness to debates over taxing and spending. All proposals are public, and all are scored by the CBO according to the same metric. This makes it difficult for politicians to shift blame. This year, without a genuine presidential budget, or any Senate budget, the negotiations are shrouded in fog. The president may tell press conferences that he proposed $3 trillion in spending reductions, but there is no way to know what that means without a budget.

Comment: Another good read: Welcome to Jimmy Carter’s 2nd term

Excerpt:

It has taken three decades, but Americans are finally living through Jimmy Carter’s second term.

Now we’ve got Jimmy Jr. barking at us from the White House about eating our peas and ripping off our Band-Aid. He might not even let us have our Social Security checks.

These are just the latest in a long line of nagging lectures. Already, we have been taught how we should sneeze into the crook of our arm. We need to drive less. And we need to caulk up those drafty houses of ours.

What ever happened to the soaring rhetoric and big bold ideas President Obama promised us in that historic election of his?

Is this what he meant by a new kind of politics? If so, no thanks. Oh, and it is not new. Jimmy already dragged us through all this once and we just barely survived it.

One of the most unpleasant things about Mr. Carter was the condescending disdain he could barely disguise for struggling Americans and their irritating malaise.

Increasingly, Jimmy Jr. is having difficulty concealing that very same disdain for us as the political winds around him turn hostile and all of his bright ideas lie fallow as nothing more than socialist hocus-pocus.

But even Mr. Carter never laid bare so baldly and plainly as Mr. Obama did earlier this week his deep-seated contempt for this whole annoying process we call “democracy.”

The problem with reaching a deal to raise the debt ceiling, he explained in a long sermon, is that there is this huge wave of Republicans who won control of the House in the last election by promising not to raise any more taxes and to cut the absurd overspending that has driven this town for decades.

He bemoaned - in public - that these Republicans are more concerned about the “next election” rather than doing “what’s right for the country.” In other words, he is saying the honorable thing would be for these Republicans to ignore the expressed wishes of voters, break their campaign promises and raise taxes. Wow.

As if the whole problem of Washington spending us into oblivion is the fault of stingy taxpayers and stupid voters. And what we really need is Jimmy Jr., who knows what is best for us despite what we may think.