America Gets Downgraded
A spend and tax policy mix always leads to economic decline.
Friday's downgrade by Standard & Poor's of U.S. long-term debt to AA+ from AAA will be the first of many such humiliations if Washington doesn't change its economic and fiscal policies.Unfortunately Washington doesn't get this. All weekend long democrats have been blaming the Tea Party for the downgrade. Ha! What a hoot! a real ROTFLMAO! Unfortunately there are people who believe this partisan propaganda. In our new upside down world reality the Obama administration can put this talking point out there despite logic and facts, and people will still prefer to believe the lie.
So let's think about the Tea Party's guilt in this national embarrassment. For over a decade Democrats and Republicans have been spending like drunken sailors. Then a third party almost arises, but then loosely aligns themselves with old school spendaholic Republicans so that they might have more than a snowballs chance in hell to win some seats in the House and the Senate. Their stated mission is to reduce Government spending and save the country from the fate we are witnessing in Greece. Ergo, the downgrade is the fault of the Tea Party. Yep! Just like the villian in Saturday morning Scooby-doo cartons used to say "Those meddling kids! I would have gotten away with it if it weren't for them".Yep. Nobody would have figured out that massive runaway deficit spending would eventually collapse like a Bernie Madoff ponzi scheme.
Yet is there anything that S&P said on Friday that everyone else doesn't already know? S&P essentially declared that on present trend the U.S. debt burden is unsustainable, and that the American political system seems unable to reverse that trend.The very idea that if the Government had just quietly raised the debt ceiling with no debate, then everything would be just fine is laughable! Think about these numbers.
This is not news.
The Bush Presidency and previous GOP Congresses contributed to the current problem by not insisting on domestic cuts to finance the cost of war, and by adding the prescription drug benefit without reforming Medicare. But as recently as 2008 spending was still only 20.7%, and debt held by the public was only 40.3%, of GDP.Pretty bad huh? I remember the Hate Bush Party (sort of the opposite of the Tea Party) freaking out over this. My own mother lamented with crocodile tears about the horrible debt her grandchildren were going to inherit.
In the name of saving the economy from panic, the White House and the Pelosi Congress then blew out the American government balance sheet. They compounded the problem of excessive private debt by adding unsustainable public debt.From 40% to 72% in three short years. If pre 2008 spending drove you to the Hate Bush Party, then why isn't your head exploding today! Where is the seething hate? Even my mother no longer seems to be overly concerned about the debt her grandchildren will inherit despite these eye popping numbers.
They boosted federal spending to 25% of GDP in 2009, 23.8% in 2010 (as TARP repayments provided a temporary reduction in overall spending), and back nearly to 25% this fiscal year. Meanwhile, debt to GDP climbed to 53.5% in 2009, 62.2% in 2010, and is estimated to hit 72% this year—and to keep rising. These are all figures from Mr. Obama's own budget office.
But what is even more astonishing is the notion that if it were not for the darn Tea Party, everything would be fine. Standard & Poors would have never taken notice.
Think of it in real world terms. If you get a credit card and you pay your bills your credit score goes up. But, If you keep adding more credit cards and piling up more debt, at some point your score will go down, even if you are paying your bills. Your income to debt ratio makes you suspect in your ability to catch up on your bills. That's what happened to America on Friday. And it's not the Tea Party's fault, it's the fault of all those who would not listen to them. I hate to be the one to say it but "They tried to tell you so".
And as for yesterday's collapse in the stock market, it is my opinion that the correction is due more to the recent announcement that first half GDP number that was less than 2% growth. How could the market claim it is more valuable (11000 in January to 12750 in July) if the GDP is not growing at a similar rate? Hmmmmm... My stocks must be over priced. I'm outa here!
Obama was right about one thing yesterday "It's not rocket science".