Posts Tagged ‘national debt’

Attacking the Messenger

August 8, 2011

If you were expecting the Obama administration to take at least some of the blame for S&P’s downgrade of the federal government’s credit, you have a long wait. Instead they have decided to attack the messenger.

Treasury Secretary Timothy Geithner slammed Standard & Poor’s on Sunday as showing “terrible judgement” in downgrading the US credit rating for the first time ever.

“I think S&P has shown really terrible judgement and they’ve handled themselves poorly, and they have shown a stunning lack of knowledge about basic US fiscal budget math, and I think they came to exactly the wrong conclusion,” Geithner said in an interview with NBC News.

He has a point. They did show poor judgement in only lowering the rating by one notch.

If attacking Standard & Poors for being honest doesn’t work, they could try blaming the people who have been warning them and demanding fiscal sanity, the Tea Partiers.

While continuing to cast doubt on the credibility of Standard & Poor’s, several Democrats on Sunday said there is an even greater culprit in the downgrade of the nation’s credit rating: the tea party.

“I believe this is, without question, the tea party downgrade,” Sen. John F. Kerry, Massachusetts Democrat, said on NBC’s “Meet the Press” on Sunday, a day that also saw mounting anxieties in world markets over the downgrade among myriad other economic woes worldwide. Some of the world’s top financial ministers issued a joint statement Sunday night committing themselves to preserve the stability of financial markets and their economies.

David Axelrod, a former senior adviser to President Obama, used the exact same phrase in dubbing the credit rating drop the “tea party downgrade,” as Democrats tried to position themselves as reasonable, pragmatic leaders and conservative Republicans as irresponsible ideologues who caused the downgrade by refusing to accept any new taxes.

I wonder of the Journo-List has been resurrected to give the Democrats and the Media their talking points. Senator Lindsey Graham defended the Tea Party.

Sen. Lindsey Graham, South Carolina Republican, defended the tea party and said that without the movement, trillions of dollars in spending cuts wouldn’t be possible.

“Thank God they’re here,” he said on CBS’ “Face the Nation.”

“This is the first time we’ve ever raised the debt ceiling where we tried to actually reduce spending. That’s a good thing, but we’re woefully short,” he said. “The tea party hasn’t destroyed Washington. Washington was destroyed before the tea party got here. The hope is that the tea party and middle-of-the-road people can find common ground to turn this country around before we become Greece.”

He’s absolutely right. The Tea Party is not to blame for the mess we are in. The Tea Party formed because enough people around the country realized that things could not continue to go on as they have been in Washington.

Meanwhile, Micheal Moore has some advice for Obama.

Liberal firebrand Michael Moore called on President Obama to respond to the U.S. credit downgrade by arresting the leaders of the credit-ratings agencies.

On his Twitter feed Monday, the Oscar-winning film director also blamed the 2008 economic collapse on Standard & Poor’s — apparently because it and other credit-ratings agencies did not downgrade mortgage-based bonds, which encouraged the housing bubble and let it spread throughout the economy.

“Pres Obama, show some guts & arrest the CEO of Standard & Poors. These criminals brought down the economy in 2008& now they will do it again,” Mr. Moore wrote.

I am sure that will work.

Also, the stock market fell 634 points. I guess we should be getting ready for the second Great Depression.

 

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U.S. Credit Downgraded

August 6, 2011

For the first time in American history, the federal government’s credit rating has been downgraded from AAA to AA+ by Standard & Poors.

Standard & Poor’s announced Friday night that it has downgraded the U.S. credit rating for the first time, dealing a symbolic blow to the world’s economic superpower in what was a sharply worded critique of the American political system.

Lowering the nation’s rating to one notch below AAA, the credit rating company said “political brinkmanship” in the debate over the debt had made the U.S. government’s ability to manage its finances “less stable, less effective and less predictable.” It said the bipartisan agreement reached this week to find at least $2.1 trillion in budget savings “fell short” of what was necessary to tame the nation’s debt over time and predicted that leaders would not be likely to achieve more savings in the future.

“It’s always possible the rating will come back, but we don’t think it’s coming back anytime soon,” said David Beers, head of S&P’s government debt rating unit.

The decision came after a day of furious back-and-forth debate between the Obama administration and S&P. Treasury Department officials fought back hard, arguing that the firm’s political analysis was flawed and that it had made a numerical error in a draft of its downgrade report that overstated the deficit over 10 years by $2 trillion. Officials had reviewed the draft earlier in the day.

“A judgment flawed by a $2 trillion error speaks for itself,” a Treasury spokesman said Friday night.

The downgrade to AA+ will push the global financial markets into uncharted territory after a volatile week fueled by concerns over a worsening debt crisis in Europe and a faltering economy in the United States.

The AAA rating has made the U.S. Treasury bond one of the world’s safest investments — and has helped the nation borrow at extraordinarily cheap rates to finance its government operations, including two wars and an expensive social safety net for retirees.

Treasury bonds have also been a stalwart of stability amid the economic upheaval of the past few years. The nation has had a AAA rating for 70 years.

Analysts say that, over time, the downgrade could push up borrowing costs for the U.S. government, costing taxpayers tens of billions of dollars a year. It could also drive up interest rates for consumers and companies seeking mortgages, credit cards and business loans.

A downgrade could also have a cascading series of effects on states and localities, including nearly all of those in the Washington metro area. These governments could lose their AAA credit ratings as well, potentially raising the cost of borrowing for schools, roads and parks.

They don’t believe that we will get our finances under control and I don’t blame them. I suspect that they were either being nice or were subject to political lobbying or they would have downgraded us all the way down to junk bond status.

I think it’s official now. Obama is a worse president than Jimmy Carter. If he keeps going he’ll pass James Buchanan as the worst president in history.

In case there’s any question about whose fault this mess is, look at this graph.

Bush’s spending was bad enough but Obama’s is an order of magnitude worse.

Hope and change!!

 

Debt Deal Winners

August 3, 2011

I am still not certain who has come out ahead in the debt ceiling deal. Michael Barone seems to think that the Republicans go the better of the deal. In his latest column, courtesy of Human Events, he explains that the Republicans win when the debate is over spending cuts.

First of all, the liberals seem to be a whole lot angrier over the deal.

Democrats seem especially unhappy. They could have avoided the fight in the first place by raising the debt ceiling in the lame duck session in December, when they had large majorities in both houses of Congress.

But they decided not to. Reid’s comments then suggested that he expected the issue to split the House Republicans, pitting the leadership against the 87 Tea Party-sympathizing freshmen. The leaders would have to agree to a tax increase in order to get a deal, with a party schism like the one that followed George H.W. Bush’s agreement to a tax increase in 1990.

That didn’t happen. Instead Reid abandoned his demand for a tax increase. The reason, I think, is that he hasn’t had a 50-vote majority for a tax increase in the Senate, just as Senate Democrats haven’t been able to pass a budget.

All of which left Barack Obama looking somewhat ridiculous when he called for more taxes in his televised speech Monday night. When you’re trying to show you’re leading and your followers have already gone off in another direction, you tend to look like something other than a leader.

Some Democrats, in frustration, have said House Republicans are acting “almost like a dictatorship” or are using “terrorist tactics.” But in opposing tax increases, House Republicans are just being true to the voters who gave them in November 2010 a larger majority than they have won since 1946.

Other Democrats have taken to blaming Obama. Robert Reich, labor secretary in the Clinton administration, decries an empty bully pulpit. Paul Krugman​, the trade economist who writes partisan vitriol for The New York Times, talks about a centrist copout.

That’s what they get for being too clever. Here is the point of the column.

All of which weakens Boehner’s bargaining position and may mean a final bill less tilted to Republican demands. But, as many Democrats note, the battle is being fought over how much spending to cut, which means that Republicans are winning. The question is just how much.

Democrats went into this fight with a precedent in mind, the budget fight between President Clinton​ and Speaker Newt Gingrich in 1995-96. The conventional wisdom is that Clinton won that fight and Republicans lost.

That’s not quite right: After shifting to noticeably more moderate policies, Clinton was re-elected in 1996, but Republicans lost few House seats and held onto their congressional majorities at the same time.

The difference this time is that Obama has not shifted policies noticeably, but instead has seemed to position himself as a complainer on the sidelines, asking voters to call their congressman. He has presented no specific plan of his own. His chief of staff reports that he hasn’t spoken at all to Boehner lately.

One major difference which Barone neglects to mention is the simply fact that with the loss of their monopoly over the news media, the Liberals are no longer able to completely control the narrative. Back in Clinton’s day, before Fox, the Internet, and when Conservative talk radio was just beginning to get big, Clinton enjoyed the advantage of being able to fight almost entirely on his own terms. If the media slammed the Republicans for being extreme and stubborn, there was really only Rush Limbaugh to tell the other side. Now, of course, Obama does not have that advantage and the fight is more equal.

I think that on the whole the republicans did get the better of the deal. It’s no where near enough to avert eventual catastrophe but at least it’s a step in the right direction.

The Debt Ceiling

July 31, 2011

I haven’t been following the debate very closely, just on and off. Right now I am not sure what is happening. I see a report through Drudge that they are very close to a deal. But, as I read through the story, I don’t see any details. Evidently there will be no new taxes but I don’t see what they might cut.

WASHINGTON (AP) — The top Republican in the Senate said Congress and the White House were very close to a deal on raising the limit on U.S. borrowing that would avert an unprecedented default on America’s debt, ending one of the nastiest partisan fights in recent memory.

Senate Majority Leader Mitchell McConnell said he was nearing a recommendation of the tentative agreement to Republicans in the upper chamber. It would, he said, likely extend U.S. borrowing authority, which expires on Tuesday, beyond the 2012 presidential and congressional elections, a fundamental demand of President Barack Obama.

At the same time, the agreement would include none of the tax increases Obama has sought and Republicans had steadfastly rejected. It also includes, he said, the requirement that both houses of Congress vote on a constitutional amendment to balance the budget. That outcome of that vote, however, would have no effect on raising the debt limit.

Senior White House adviser David Plouffe said that both sides are generally in agreement on an emerging package that would cut the deficit in two stages, with key details still being worked out.

Democratic Sen. Chuck Schumer said there still was no deal and talks on many issues still needed to be settled. Although he said there was “relief” in Congress and the White House because serious negotiations were now making headway.

The deal, negotiated late Saturday night, would raise the nation’s debt limit would rise in two steps by about $2.4 trillion and spending would be cut by a slightly larger amount, according to officials close to the talks. The first stage — about $1 trillion — would take place immediately and the second later in the year.

The officials who described the talks did so on condition of anonymity, citing their sensitive nature.

Obama is seeking legislation to raise the government’s $14.3 trillion debt limit by enough to tide the Treasury over until after the 2012 elections. He has threatened to veto any legislation that would allow a recurrence of the current crisis next year but has agreed to Republican demands that deficits be cut — without tax increases — in exchange for additional U.S. borrowing authority.

The alarming thing is that this isn’t the real crisis. The real crisis is that we are 14.3 trillion dollars in debt and as far as I can tell this deal only gets us further in the hole. We have got to start balancing our budget right now. We have got to come up with a credible plan to begin to pay down that literally astronomical debt. Frankly I think it might have been better to not raise the debt ceiling and deal with a default right now. If things go on as they have been, we will have a default in our lifetime, probably sooner rather than later.

This Sums it All Up

July 28, 2011

I think this cartoon sums up the debt situation so far.

Thanks to Conservative Byte for showing it.

Our Leader Speaks

July 22, 2011

USA Today ran a piece by President Obama today titled “Go ‘big’ on debt deal”, in which he discusses our fiscal situation. I just want to say that I am beginning to fear for his mental health. I honestly think he has lost touch with reality.

He begins well enough,

For years now, America has been spending more money than we take in. The result is that we have too much debt on our nation’s credit card — debt that will ultimately weaken our economy, lead to higher interest rates for all Americans, and leave us unable to invest in things like education, or protect vital programs like Medicare.

Neither party is blameless for the decisions that led to this debt, but both parties have a responsibility to come together and solve the problem. That’s what the American people expect of us. Every day, families are figuring out how to stretch their paychecks a little further, sacrifice what they can’t afford, and budget only for what’s truly important. It’s time for Washington to do the same.

Both parties are, of course, to blame. Both Democrats and Republicans have been spending our money like so many drunken sailors. But I really wish that Mr. Obama would take the blame for the unprecedented amount of “stimulus spending” that his administration has been responsible for these last two years

But over the last few months, I’ve also said that I’m willing to cut historic amounts of spending in order to reduce our long-term deficits. I’m willing to cut spending on domestic programs to the lowest level in half a century. I’m willing to cut defense spending by hundreds of billions of dollars. I’m willing to take on the rising costs of health care programs like Medicare and Medicaid, so we can meet our obligations to an aging population.

Some of these cuts would eliminate wasteful spending, weapons we don’t need, or fraud and abuse in our health care system. Still, some of the cuts would target worthwhile programs that do a lot of good for our country. They’re cuts that some people in my own party aren’t too happy about, and frankly, I wouldn’t make them if we didn’t have so much debt.

But the American people deserve the truth from their leaders. And the truth is, you can’t get rid of the deficit by simply eliminating waste and fraud, or getting rid of pet projects and foreign aid, like some have suggested. Those things represent only a tiny fraction of what we spend our money on.

But he doesn’t give any specifics on what he thinks we should cut. So far, I have not heard him even consider cutting spending on any of his pet projects like Obamacare, or all of that stimulus. But next he get what he’s really after.

At the same time, it’s also true that if we tackle our deficit with spending cuts alone, it will likely end up costing seniors and middle-class families a great deal. Retired Americans will have to pay a lot more for their health care. Students will have to pay a lot more for college. A worker who gets laid off might not have any temporary help or job training to fall back on. At a time of high gas prices, we’ll have to stop much of the clean energy research that will help free us from our dependence on oil.

That’s why people in both parties have suggested that the best way to take on our deficit is with a more balanced approach. Yes, we should make serious spending cuts. But we should also ask the wealthiest individuals and biggest corporations to pay their fair share through fundamental tax reform. Before we stop funding clean energy research, we should ask oil companies and corporate jet owners to give up the tax breaks that other companies don’t get. Before we ask college students to pay more, we should ask hedge fund managers to stop paying taxes at a lower rate than their secretaries. Before we ask seniors to pay more for Medicare, we should ask people like me to give up tax breaks they don’t need and never asked for.

The middle class hasn’t just borne the brunt of this recession; they’ve been dealing with higher costs and stagnant wages for more than a decade now. It’s just not right to ask them to pay the whole tab — especially when they’re not the ones who caused this mess in the first place.

That’s right. Raise the taxes on those evil rich who caused the mess we are in. He doesn’t want to cut any of his projects like “clean energy research” that is going nowhere. Of course he has to throw that bit in about corporate jets. That facts of the matter are that eliminating tax breaks for oil companies and corporate jets wouldn’t even begin to pay for the increased spending that has occurred on his watch. Confiscating the wealth of every millionaire wouldn’t make a dent on our national debt. Our problems come not because the government is not getting enough revenue but because our leaders can’t stop spending, even if their lives depended on it. Either Obama knows this and is the biggest liar we have ever had in the White House, or he believes what he is saying and has lost it.

Trillions and Trillions

July 21, 2011

The United States Federal Government is more than $14 trillion in debt. I think that one of the problems in our political discussions over the debt is that the human mind is simply not designed to comprehend such large numbers. We may understand them on an intellectual level but not on an emotional or “gut” level. I am not sure what the largest number we can really understand intuitively, maybe 20 or 100. Anyone can instantly tell the difference between 10 and 20 or 50 and 100, but when it comes to millions or billions, it’s harder to compare.

The largest number the ancient Greeks and Romans used was the “myriad” which was 10,000. So 50,000 was 50 myriad, 1,000,000 was 100 myriad, and so on. This went up all the way to a myriad myriad which means 100,000,000. They didn’t really need any numbers larger than that.

By the time of the Renaissance, mathematicians and bankers needed larger numbers. The precise meaning of large number names varies from country to country. I will be using American usage.  A million is a thousand thousand. The word million was coined sometime in the 14th century from French and Italian. A billion is a thousand million. The word was coined around 1680 and means simply two + million. A trillion is a thousand billion. The word was also coined around 1680 and means three + million. I could go on with quadrillion, quintillion, and so on but I think you get the point. Anyway mathematicians and scientists who use really large number use scientific notation, which is beyond the scope of this post.

All right now, let’s see if we can understand 14 trillion. Fourteen doesn’t seem to be a large number, does it? Well, let’s convert the trillions to billions giving us  14 thousand billion. That seems a bit larger. Now let’s go further down to millions. Now we have 14 thousand thousand million. One more step. Try thinking about 14 thousand thousand thousand. That sounds like a whole lot more than just 14 trillion.

Whichever way you put it, that is a truly astronomical number. It is more than the number of stars in our galaxy. It is more than the number of galaxies in the observable universe. It’s a little more than half the distance to Alpha Centauri, the nearest star, in miles, but give Obama a second term and I’m sure we’ll get there.

If any of this doesn’t help, here is a visual aid I got from life’s little mysteries.

What the 14 Trillion National Debt Looks Like
Infographic Source:

 

With all that in mind, the current controversy concerning the debt limit seems to me to be rearranging the deck chairs on the Titanic. The iceberg has hit us and we had better start plugging the hole.


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