The Political Blame Game And The S&P’s Downgrade Of U.S. Credit Rating
Posted: Monday, August 08, 2011
by Joel Hendon
http://hebronics.org/index.html
As might be expected, since the loud cursing and berating of one party at the other and the S & P downgrading of our credit rating from AAA to AA, everyone is to blame…in the other’s eyes. But let us look at the real facts behind this mess and the sorry condition it has us in.
If one had a thousand fingers, he would be hard put, to point them to all who hold partial blame for our predicament. It began in the 1940’s you know. President Roosevelt began borrowing money to pay for World War 2. But you cannot blame him too harshly. He did not get us into that war and it was such that we had no choice, but to throw our full weight into it, however we had to finance it. And if one remembers, it was the last successful war we ever fought. If we had lost that one, you would probably be eating sukiyaki for dinner tonight.
The creation of Fannie Mae and later Freddie Mac was a terrible mistake and their continuance was much worse. Especially when congress appointed Chris Dodd and blubber lips Barney Frank as the watchdogs over them. Their efforts are probably the most responsible of anything else for our current crisis. We would still have a large indebtedness but the economic collapse is far less apt to have occurred.
The praise given to President Clinton for having balanced the budget, is misplaced. It would never have happened had the American people not rebelled at Hillary’s attempt to create the forerunner of Obama Health Care. In fact, our crisis and unbalanced budget would have arrived much sooner. The credit for his balanced budget belongs to Newt Gingrich and the conservative congress elected because of the bank-breaking healthcare plan proposed by Hillary and condoned by the president.
And what happened when we showed a few million surplus? Congress spent weeks playing in the new sandbox trying to decide what to buy with the new windfall. If I had owned a bullhorn with enough volume to reach Washington, I would have yelled, “Pay down on the debt, you (censored cuss-word)!
But then, the past has passed. So, let’s see why our current crisis blew in so suddenly (?) after only 66 years in the making.
(1) We entered into two justifiable wars, but not to win again. We had the force…even if it took limited use of nuclear tactical weapons. But no, we now must fight wars, only by slapping back when they slap you. There must not be any innocents hurt or killed, even if they have a terrorist behind them. They have dragged on now for a decade. Few people realize that huge casualties quickly, if it will stop the war, is preferable to spreading more losses over a long period. People ridiculed President Truman and the U.S. in general for the two atomic bombs used on Japan’s large cities, but two did the trick, it stopped the most brutal war in our history. Many civilians were killed but they had been being slaughtered for the full five plus years, even before we entered the war.
The continuing wars in Iraq and Afghanistan were largely responsible for the won election by our present administration, with promises of “change” and ending the wars. Neither has ended yet and another has been added, another no-win war that was none of our business to begin with. Plus the down ward spiral of the economy which started in the last two years of the Bush administration, the period controlled by a liberal congress. The present administration continues to say they inherited the problem from the Bush administration. Although Bush was too liberal himself, they primarily inherited the problem from their previous liberal congress and then sent it into the abyss by wild, unfettered spending which did no good.
Now that we’ve come to the who’s to blame for the crisis and the lowered credit rating by Standard & Poors (only), to AA status, we have finger pointing from ever angle. But the rhetoric hasn’t just started, it was rampant during the extended debate. The White House and the liberal say that the lower rating was caused by the extended argument and refusal of the conservative house to make any concessions. Whoa! Where were the liberals during the arguing and debating? They were right in the middle and refusing to make any concessions!
Paul Ryan (a Republican in the House of Representatives) proposed a budget bill early on that would have resulted in lowering the deficit spending, made workable plans to permanently deal with the “entitlements” that would have hurt no one (including myself who is one who depends upon those “entitlements” which I worked a paid for over a period of 47 years), and was otherwise workable. The Liberals would not consider it but tabled it without debate.
The House of Representatives then drew up a bill named the “Cut, Cap and Balance act”. The liberal senate refused to consider it and tabled it without discussion. The president had already said he would veto it if it reached his desk, without considering it’s merits. Then after another bill was proffered, the wrangling and name calling went on for weeks. Finally in the last minutes, each side accepted a bill neither liked, to avoid a government shut down. Now, neither side can blame the other on this bill. Both wanted their way and both gave a little, resulting in a no good bill which will not help the deficit.
Now, let us try and resolve the present accusations being blasted from the liberals, that the extended arguing and virtual gridlock caused the downgrade in our credit rating and was the conservatives fault. First, the conservatives offered two bills which would have averted the downgrade (and we’ll show proof of that). But due to the arrogance and hatred of one party towards the other, the liberals ignored both of those bills simply because they were offered by their arch enemies.
How do we know this is what caused the down grade? Keep in mind that the current bill which passed, only asks for two trillion reduction in spending over 10 years.
John Chambers, sovereign rating chief, for Standard and Poors was engaged in a conference call which was held for investors on state and local governments and pension issues with a number of news reporters and answered the following questions:
Q: “There's been a figure of $4 trillion dollars circulating as an example of the scope of fiscal consolidation measures that could work to stabilize the U.S. debt-gdp ratios. Could you explain how that figure was arrived at since it was mentioned in S&P's reports and where it figures in S&P analysis?"
A: “First of all, that figure comes initially from the Bowles-Simpson fiscal commission, and it was embraced by President Obama in his April 13 speech and Paul Ryan in his counter-budget proposal. And so you had policy makers converging around the amount. Now actually the $4 trillion, depending on whether it is front-loaded or back-loaded, is not going to do the trick in terms of stabilizing U.S. government debt-to GDP ratios. But it takes you pretty far along. And I think a grand bargain of that nature would signal, you know, the seriousness of policy makers to address the fiscal issues of the United States, to actually stabilize the debt-to-GDP. The IMF says it takes 7.5% of GDP consolidation. I think we have more than that." (The present budget deficit is 9% JHH)
Chambers adds: “But $4 trillion would be a good down payment. We thought that..if policy makers could deliver the goods on that, then that would be a strong sign on our political scores and eventually on our projections on the fiscal side.”
S&P has already said it may slash the Triple-A rating if a debt ceiling deal is not accompanied by what it deems is a credible plan to cut the $14.3 trillion federal deficit by $4 trillion. The plan has "to have bipartisan support," Chambers said. "If you have a plan that is only backed by one side or the other, even if you got it through, you would be faced with the prospect of it being unwound." (These quotations taken from Red State-“Only The Tea Party Had A $4 Trillion Plan“: August 5, 2011) (The conference call was made in late July, before the bill was passed)
So the solution to our woes is chopping spending to the bone! There will be weeping and gnashing of teeth. (Matthew 8:12 KJV)
This Article has been viewed 238 times. (Not updated in real-time.)
Top-level comments on this article: (0 total)No comments yet.
We want your comments! If you can read this, you don't have javascript enabled, so you can't use this comment system. Please enable javascript.