Let me start by stating that I have no love of the ratings agencies. People respond to incentives, and the ratings gang was incentivized during the last decade to stamp AAA on securities backed by crap and take their big fees. They were not doing the job they were set up to do, and they are scumbags!!!
But, S&P was right to downgrade US debt. In fact, just like the did with CDO's, they probably have given us a AAA rating for too long. Let's look at the facts: We now have a national debt of around 100% of GDP, like Italy and a lot of other countries who debtors are worried about. On top of that, we have a completely disfunctional federal government, particularly a Congress that is being held hostage by the Tea Party, a bunch of morons who get up in the morning in their house whose mortgage was affordable because of government-insured loans, drives to work on government-provided roads, then get on the government-created internet and use their government-taught ability to read and write to complain about how government can't do anything right.
The likelihood of our current group of politicians coming up with a solution to our debt problems that is sensible, and will allow us to continue to invest in the education and infrastructure that is necessary to be a successful wealthy country, is close to nil. The Tea Party doesn't understand the importance of government investment in human capital. And they now appear to be driving the bus. Which means we are completely fucked. S&P should have downgraded US debt after a bunch of these whackjobs got elected. If they were really doing their jobs, they would have downgraded us when Bush got re-elected, the most obvious sign that a large portion of this country is too stupid to make sound decisions.
So, get used to the downgrades. I find it hard to see much positive about the future of a country who would elect the group of self-serving, power hungry scum (and I am not just talking about the Teabaggers now!) we have in DC, and all other governments around the country.
We are at a point where we don't have any obviously good decisions to make. Cutting government spending will send us back into recession, and continue to run deficits as we do now threatens our future financial help. We have old people who depend on the government to stay alive, and we are getting older. We have tough decisions to make that require thought and cooperation.
Good luck with that!
1 comment:
Oh another year,
First I'd like to say you make A good point for S&P downgrading our credit rating. I agree that we had it coming however, not particularly for all the reasons you specify. You list three primary reasons we were downgraded:
-National Debt around 100% of GDP
-Countries who worry about us paying the bills
-Shitty Government
(I’ll leave your Tea Party arguments out of my rebuttal)
Lets first look at our national debt; I’d like to bring up an example of Singapore. Singapore has a national debt OVER 100% of their GDP and remains a AAA rating by S&P. While they have an extremely high amount of debt they continue to remain one of the world’s most financially stable countries. They do this by having an economy based on technology and investments which sounds a lot like the U.S. While it is scary to think about how much debt we have, I don’t see it as a reason to downgrade our ability to pay.
Which leads me to the second point, countries who worry about us paying the bills. I believe the numbers speak quite clearly. The government currently pays approximately 400 billion dollars a year in interest to our debt holders, which equates to approximately 33.5 billion dollars a month. The government currently collets approximately 2 trillion dollars a year in revenue, which equates to approximately 167 billion dollars a month. I’m not sure which country are worried about us paying our bills but if I owed my bank 20% of my income I’m sure they wouldn’t be too worried.
Where I do agree with you on is the shitty government. We all know the political system is broken in the United States. Unfortunately working in the government I’ve been exposed to the careless waste and lack of accountability that exists in the governments’ financial systems. Everybody realizes we need dramatic changes to the government and that is the sole reason (that I believe) we were downgraded. Not fundamental reasons but the intangible reasons that could result in fundamental disaster down the road. Now I’m no economic expert (or even amateur) and if I’m straight up wrong I welcome the corrections. That’s my two cents though.
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