USA credit rating drops

Post Reply New Topic

Obama spent most of the time when his party controlled both House and Congress talking with the Republicans.



Economics has been hijacked by politics ever since Keynes. You'll note, for example, that while many politicians quote Keynes when increasing spending in recessions, nobody ever takes the other side of the coin: cutting spending during booms. Politicians like Keynes in bad times and Friedman in good times, especially in the US. That's just plain nonsense.

There's already talk of the S&P lowering the credit rating again.

He talked with them to try to get them to come around to his point of view. He ignored anything they had to say in return. I don't think that's what Inuyasha has in mind.

To be fair, Clinton did that for his first two years, too. It was only when he was forced to compromise with a Republican controlled congress that he started working with them. Since the Republicans regained control of the house, Obama has also been forced to compromise - first with the extension of the Bush tax rates, and now with inclusion of budget cuts with the debt limit increase - albeit more reluctantly than Clinton did.


S&P has been quite clear: if the government doesn't stay within the spending limits in the debt ceiling agreement, there will be another cut. I think the Tea Party will keep the government within those limits for the next year or two, but after the next election things may change. And of course S&P may not have the same opinion of the Tea Party's clout over the 2012 budget as I have.

Yes, because the Bush economic policy is exactly the kind of policy that the US should pursue. Cut revenues and increase spending by starting wars!

S&P has been quite clear. They also want revenue increases. From their recent statement:

Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act. Key macroeconomic assumptions in the base case scenario include trend real GDP growth of 3% and consumer price inflation near 2% annually over the decade.

Our revised upside scenario-which, other things being equal, we view as consistent with the outlook on the 'AA+' long-term rating being revised to stable-retains these same macroeconomic assumptions. In addition, it incorporates $950 billion of new revenues on the assumption that the 2001 and 2003 tax cuts for high earners lapse from 2013 onwards, as the Administration is advocating. In this scenario, we project that the net general government debt would rise from an estimated 74% of GDP by the end of 2011 to 77% in 2015 and to 78% by 2021.

Note their clear objection to Republican (Tea Party) resistance. The objection is over their current clout. Their upside scenario includes revenues.

*Edited to note that I don't exactly consider S&P to be a trustworthy entity, given their failure to downgrade the CDO's during the subprime mess while knowing full well that those CDO's were junk. I'm just pointing out S&P's own reason's for the downgrade which specifically cite Republican stubbornness as problematic.

Last edited by number5 on 10 Aug 2011, 9:35 am, edited 1 time in total.

S & P expects the U.S. government to be a profit making firm.

Fat chance.

ruveyn

The whole CRA industry is fairly defunct, but I actually think the S&P is right on this one.