S&P Downgrade based on Political Dysfunction

Here's S&P's rationale for the downgrade:

"We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade."

Isn't a healthy democratic system of government suppose to be ripe with debate and slow to take large actions? There are multiple parties, multiple districts, and two distinct chambers of Congress that help ensure that large decisions like this are not made with haste, and that everyone has a say. A democracy can not be run like a nimble private corporation

The fact that Congress has made a step towards cutting the deficit is significant and unusual. To downgrade us at this time seems premature. It may lead to more lost jobs and wealth degradation. But then again, they're just doing their job, right?

 
Bankn:
I wonder if it might be hard for S&P employees to walk down the streets of New York tomorrow, knowing that they may very well cause thousands of jobs to be lost and wealth to be diminished. But then again, they're just doing their job, right?

That said in a banking forum..?!

 
Bankn:
Here's S&P's rationale for the downgrade:

"We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade."

Isn't a healthy democratic system of government suppose to be ripe with debate and slow to take large actions? There are multiple parties, multiple districts, and two distinct chambers of Congress that help ensure that large decisions like this are not made with haste, and that everyone has a say. A democracy can not be run like a nimble private corporation

The fact that Congress has made a step towards cutting the deficit is significant and unusual. To downgrade us at this time, with such little notice, seems premature. It may lead to more lost jobs and wealth degradation. But then again, they're just doing their job, right?

I think it's pointing out the long period of arguing for relative inaction does not bode well for further deficit reduction without a catalyst such as a downgrade.

Reality hits you hard, bro...
 
MMBinNC:

I think it's pointing out the long period of arguing for relative inaction does not bode well for further deficit reduction without a catalyst such as a downgrade.

It is to some extent, but we did get our printing presses running before certain default. It is more pointing out that Congress can't agree. Considering that Congress has been seriously thinking about cutting deficit for less than 3 months now, I don't see why they should be agreeing! These are major issues here, like cutting a paycheck to the poor or to the elderly. Or raising taxes on a middle income already feeling the pain of stagnant wages and rising inflation. These are not easy things to agree on, nor should they be.

Global investors will continue to buy into the U.S. dollar and treasuries. And the U.S. will continue to pay their bills. What S&P is doing here is saying, "We don't believe in the long-term future of the United States, please look for another reserve currency." And I'm not saying that any private company would not be downgraded for being too far leveraged, but this is the sort of situation where CEO and BOD of S&P can reasonable put their country first and prevent such a downgrade (even if the numbers say otherwise).

That probably sounds extreme to some people, and it probably makes complete sense to others.

 
Bankn:
Here's S&P's rationale for the downgrade:

"We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade."

Isn't a healthy democratic system of government suppose to be ripe with debate and slow to take large actions? There are multiple parties, multiple districts, and two distinct chambers of Congress that help ensure that large decisions like this are not made with haste, and that everyone has a say. A democracy can not be run like a nimble private corporation

The fact that Congress has made a step towards cutting the deficit is significant and unusual. To downgrade us at this time, with such little notice, seems premature. It may lead to more lost jobs and wealth degradation. But then again, they're just doing their job, right?

Euro crisis isnt that great like the dollar crisis. I fear next week, maybe China and some SWFs from gulf region decide to shift their assets largely in EUR, CHF, GBP.

This is no debt crisis, its a starting currency war

Who will be the successor of the dollar, thats the question fueling FX markets

 
Best Response
Bankn:
Here's S&P's rationale for the downgrade:

"We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade."

Isn't a healthy democratic system of government suppose to be ripe with debate and slow to take large actions? There are multiple parties, multiple districts, and two distinct chambers of Congress that help ensure that large decisions like this are not made with haste, and that everyone has a say. A democracy can not be run like a nimble private corporation

The fact that Congress has made a step towards cutting the deficit is significant and unusual. To downgrade us at this time, with such little notice, seems premature. It may lead to more lost jobs and wealth degradation. But then again, they're just doing their job, right?

with little notice? Rating has been on review for some time now, congress decided to fuck everyone over by not cutting welfare programmes and not raising taxes, both done for political reasons. US currently seems to have no plan for growth and a bad one for cutting the deficit

 

S&P is run by a bunch of GOP stalwarts that think they're "sticking it" to Obama. The reality is that they're just making things worse. Personally, I haven't paid attention to them since I found out they never really did what it was they were supposed to do for the last decade or so: why the hell would I give a fuck what they think now?

Get busy living
 
leveredarb:
What amazes me is how everyone is blaming Obama when bush tax cuts created the massive deficit to begin with and then some red-neck tea party republicans who would be in mental institutions everywhere else but in the US almost cause Armageddon.

There will come a time when you libs can't blame Bush...eh, nevermind, probably not. I seem to remember those same red neck tea partiers were the ones who passed a bill containing $4T in debt reduction. The same amount that the S&P called for. What did the dems pass? I forget...

 

You're right, a deficit is created because not enough money comes in. Or maybe you run up a deficit because you spend beyond your means. Since when has letting people keep the money they earn a bad thing.

You are just someone who thinks taking from those who work is cool because the government knows better. I also love the derogatory tea party comments. Sorry that a small government, less taxation group scares you. Not like tax and spend liberals are any better.

 
ANT:
You're right, a deficit is created because not enough money comes in. Or maybe you run up a deficit because you spend beyond your means. Since when has letting people keep the money they earn a bad thing.

You are just someone who thinks taking from those who work is cool because the government knows better. I also love the derogatory tea party comments. Sorry that a small government, less taxation group scares you. Not like tax and spend liberals are any better.

Agree. I think.

The bottom line is that the debt has been climbing for decades and hitting the panic button is really just a god awful way to do things.

Get busy living
 

Debt has been climbing for a long time and Bush didn't help things. Obama had a great opportunity to really shit all over Bush and instead he has become Bush with a tan.

We are in 3 wars now.

More government spending and growth.

Gitmo is still open for business.

Please tell me what has changed? If anything, the Republicans (thanks to the Tea Party) has pulled their head out of their ass and become fiscally conservative once again.

Listen, It sucked for Obama. You get elected with all these ideas and instead get fucked by past presidents. I feel you bro. Blows. But time to pull your big boy pants on and fix things. You cant just plow ahead and pretend like it isn't your problem.

Also, Obama cannot just blame the Republicans. You have to take some blame on yourself. Bush has been a non stop whipping boy for the Dems and Obama. Now it is just the Republicans. Time to man up and take control of shit.

 

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