Is a Downgrade of US Credit Inevitable?

[Dale00]

Shrinking the .gov is a good idea, but it's just a drop in the bucket. The real drain is on socialized welfare. Not individual welfare mind you, but corporate welfare, nation welfare, industry welfare, community welfare, etc. If the .gov wasn't so busy giving away our tax dollars, they'd have enough left to run the .gov we have 10 times over.

I hear you. A small nearby town just got a grant (federal, I assume) for $50,000 to fix the roof, put in new carpet etc in their police department. According to the newspaper it is a great thing. To me it is bad policy. Towns should pay for their own maintenance.

But still the best way I know to bring about such a change is to cut the appropriate federal agency by 25% or more. They will be scrambling to save their positions and in the process the grant money will dry up.

If we don't prune back federal agencies, they will keep growing. The nation is way too top heavy.

 

[Glocktogo]

I'm afraid that if they don't stop spending like drunken sailors on shore leave then it will be the average guy like you and me facing the consequences.

It's always the average guy that pays. We're stuck between rocks and hard places.

 

[RickN]

To my mind, they should start with the waste and fraud in government and government run programs. Go through each agency with a fine tooth comb. Get rid of the duplicate agencies, weed out the farm grants to people that have never even seen a farm, healthcare providers that have never seen a patient but bill Medicare, etc, etc, etc. Then pass a law that says if your taxes are not paid in full you can not hold elected office or a government job. (that will raise billions)

Then start really trimming government.

 

[Dale00]

To my mind, they should start with the waste and fraud in government and government run programs. Go through each agency with a fine tooth comb. Get rid of the duplicate agencies, weed out the farm grants to people that have never even seen a farm, healthcare providers that have never seen a patient but bill Medicare, etc, etc, etc. Then pass a law that says if your taxes are not paid in full you can not hold elected office or a government job. (that will raise billions)

Who are "they"? ("They should start with the waste and fraud...")

As I think about the mess we are in, "they" cannot be trusted to do the job. The bureaucrats and politicians will only kick the can down the road. It is not in their selfish interest to make real cuts or eliminate fraud. Doing so loses power for the bureaucrat by shrinking the size of his kingdom and loses votes for the politician by taking away his power to buy votes and political contributions through "free" govt. programs and pork.

With a growing entitlement mentality spreading through our country, more and more mindless voters want bigger government. I believe that forty two percent of our earnings already goes to government taxes. We have conservative politicians who bemoan waste and point out specific wasteful grants and programs but it is just window dressing to impress their conservative base.

Abandon all hope that "they" will suddenly get their heads on straight and eliminate waste and fraud. It is time for emergency surgery in which "We the people" insist that specific government agencies be sharply cut or eliminated.

For starters:
Department of Energy - established to eliminate our dependence on foreign oil and has failed
Department of Education - give power back to local schools and teachers to set educational goals
Internal Revenue Service - eliminate it with the Fair Tax and provide a real stimulus to the economy
Environmental Protection Agency - working to reduce your carbon footprint etc. through forced regulation

 

[Vamoose]

In a year you'll never know all of this happened.

 

[DPI]

The US credit rating has been downgraded by Dagong Global. Dagong Global is a Chinese agency that was rejected in its bid to be an officially recognized bond rater in the U.S. Additionally, the US has been downgraded by Weiss Ratings and Egan-Jones Ratings Co.

Weiss Ratings. Among the smaller ratings agencies, Weiss Ratings has been the most critical of the lack of progress made so far on deficit reduction. In April, Weiss, which is based in Jupiter, Fla., released its first ever ratings of the sovereign debt of 47 countries, giving the U.S. debt a rating of C, or "fair." Last week, it issued a further downgrade to C-minus, or the S&P equivalent of one notch above "junk" status. In a press release, Weiss Ratings senior financial analyst Gavin Magor said: "Our downgrade today is not contingent on the outcome of the debt ceiling debate in Washington. It is driven exclusively by the numbers, which indicate that, in addition to a decline in the long-standing weaknesses we noted three months ago, the U.S. has already lost the golden halo that helped guarantee liquidity and acceptance of its government securities in global markets."

Egan-Jones Ratings Co. The only Nationally Recognized Statistical Rating Organization (NRSRO)-a distinction held by the big three agencies and given by the U.S. Securities and Exchange Commission-among the three ratings agencies listed here, Haverford, Pa.-based Egan-Jones also downgraded the U.S. last week. In March, Egan-Jones put the U.S. government on negative ratings watch-much like what some of the bigger ratings agencies have done recently. Then on July 16, it decided to lower their rating of U.S. debt from AAA to AA+. In a statement it said, "The major factor driving credit quality is the relatively high level of debt and the difficulty in significantly cutting spending. We are taking a negative action not based on the delay in raising the debt ceiling but rather our concern about the high level of debt to GDP in excess of 100 percent compared to Canada's 35 percent."

Dagong Global Credit Rating. Based in Beijing, Dagong is also a relative newcomer in the credit rating business, but its darkening opinion of U.S. debt highlights the global attention being paid to decisions in Washington. It published its first report on global sovereign debt ratings in July 2010 when it assigned the U.S. a rating of AA. In November 2010, after the Federal Reserve launched its highly controversial second round of quantitative easing-dubbed "QE2"-in which it bought $600 billion worth of treasury securities to try to kickstart the economy, Dagong further downgraded the U.S. credit rating to A+. It said the Fed program would further erode the value of the dollar. Pending progress on Capitol Hill, Dagong has also said it's willing to further downgrade U.S. debt if nothing is done.

Link

 

[Dale00]

In a year you'll never know all of this happened.

You are probably correct about the short term. However, we are in a long term decline and the "powers that be" are determined to keep it gradual so as not to create panic. I'm arguing that we take the pain now to avoid much worse pain later.

 

[Vamoose]

You are probably correct about the short term. However, we are in a long term decline and the "powers that be are determined to keep it gradual so as not to create panic. I'm arguing that we take the pain now to avoid much worse pain later.

I agree completely with you. I just think that the gutless wonders we have in DC will do whatever they need to survive and nothing else.

 

[Glocktogo]

I think it will take an outright tax revolt to curb .gov spending. When there's no money in the coffers, they'll have nothing to spend. Sure, they'll have the Fed print some worthless money for a while, but when it's value drops below the peso, they'll be forced to drop the charade.

 

[HMFIC]

Reading all of the comments, you guys sure don't like drunken sailors. It's kind of an insult to compare them to the likes of lowly politicians.

What's not to like really... I mean they end up paying for most of our bar tab when we'd hit port. They can't really hurt anyone. And after they've thrown up on themselves, theres less competition for the females (not that a Marine has any competition anyway).

Just make sure they're sober again before they starting trying to drive our big gray taxi around. It's hard to sleep when they're rocking it around.