Skip to main content

How Much is Too Much Debt?

By

Standard and Poor's recent decision to downgrade the US credit rating is a historic one.  The US had enjoyed a AAA rating since 1917, which not only spans the Great Depression, but the Big Recession of the 70s as well, not to mention the collapse of the S&L's in the 80s and the banking meltdown of 2008.  So why now?

S&P would like the public to believe it is non-partisan, but it seems it was first challenging the White House back in April, according to this article from Business Insider, which very clearly shows which side of the political divide S&P sits on,

The S&P was much less optimistic when they reported that  "we believe the Democratic Party, which controls the Senate, remains committed to its spending priorities and is unlikely to agree to further tax cuts, particularly for the highest-income earners, meaning Democrats are unlikely to accept the Ryan proposal without substantial modification."

Seems the $4 trillion deficit reduction plan Obama had on the table in June, which only included 17% in revenue increases, wasn't enough in their mind.  But, like the Ryan plan, S&Ps numbers just don't add up, as Tim Geithner pointed out.

Moody's thinks there should be more budget cuts as well, but it chose to retain the US's AAA rating.  Interesting that neither of these credit rating agencies feel that revenue increases are in order?
Labels:

Comments

  1. James FergusonAugust 8, 2011 at 6:00 PM

    I see stocks predictably took a nosedive on the S&P report, despite the report being largely discredited in the press. Seems traders will use any excuse to sell. Sometimes you wonder how much of this is orchestrated.

    ReplyDelete
  2. Rick DiguetteAugust 9, 2011 at 1:51 AM

    As Paul Krugman points out in Today's New York Times, "America’s large budget deficit is, after all, primarily the result of the economic slump that followed the 2008 financial crisis. And S. & P., along with its sister rating agencies, played a major role in causing that crisis, by giving AAA ratings to mortgage-backed assets that have since turned into toxic waste." I guess the S. & P. might argue that it has learned its lesson, but I'm a little skeptical.

    ReplyDelete
  3. James FergusonAugust 9, 2011 at 8:16 AM

    No, this rating "downgrade" strikes me as purely political.

    ReplyDelete

Post a Comment

Popular posts from this blog

Dylan in America

By
Whoever it was in 1969 who named the very first Bob Dylan bootleg album “Great White Wonder” may have had a mischievous streak. There are any number of ways you can interpret the title — most boringly, the cover was blank, like the Beatles’ “White Album” — but I like to see a sly allusion to “Moby-Dick.” In the seven years since the release of his first commercial record, Dylan had become the white whale of 20th-century popular song, a wild, unconquerable and often baffling force of musical nature who drove fans and critics Ahab-mad in their efforts to spear him, lash him to the hull and render him merely comprehensible. --- Bruce Handy, NYTimes ____________________________________________ I figured we can start fresh with Bob Dylan.  Couldn't resist this photo of him striking a Woody Guthrie pose.  Looks like only yesterday.  Here is a link to the comments building up to this reading group.
182 comments
Read more

The Triangle Shirtwaist Factory Fire

By
  Welcome to this month's reading group selection.  David Von Drehle mentions The Melting Pot , a play by Israel Zangwill, that premiered on Broadway in 1908.  At that time theater was accessible to a broad section of the public, not the exclusive domain it has become over the decades.  Zangwill carried a hopeful message that America was a place where old hatreds and prejudices were pointless, and that in this new country immigrants would find a more open society.  I suppose the reference was more an ironic one for Von Drehle, as he notes the racial and ethnic hatreds were on display everywhere, and at best Zangwill's play helped persons forget for a moment how deep these divides ran.  Nevertheless, "the melting pot" made its way into the American lexicon, even if New York could best be describing as a boiling cauldron in the early twentieth century. Triangle: The Fire That Changed America takes a broad view of events that led up the notorious fire, noting the gro
228 comments
Read more

Team of Rivals Reading Group

By
''Team of Rivals" is also an America ''coming-of-age" saga. Lincoln, Seward, Chase et al. are sketched as being part of a ''restless generation," born when Founding Fathers occupied the White House and the Louisiana Purchase netted nearly 530 million new acres to be explored. The Western Expansion motto of this burgeoning generation, in fact, was cleverly captured in two lines of Stephen Vincent Benet's verse: ''The stream uncrossed, the promise still untried / The metal sleeping in the mountainside." None of the protagonists in ''Team of Rivals" hailed from the Deep South or Great Plains. _______________________________ From a review by Douglas Brinkley, 2005
293 comments
Read more