S&P Sends D.C. a Wake-Up Call
From S&P’s statement today:
Standard & Poor’s Ratings Services said today that it affirmed its ‘AAA’ long-term and ‘A-1+’ short-term sovereign credit ratings on the U.S. Standard & Poor’s also said that it revised its outlook on the long-term rating of the U.S. sovereign to negative from stable.
Our ratings on the U.S. rest on its high-income, highly diversified, and flexible economy. It is backed by a strong track record of prudent and credible monetary policy, evidenced to us by its ability to support growth while containing inflationary pressures. The ratings also reflect our view of the unique advantages stemming from the dollar’s preeminent place among world currencies.
“Although we believe these strengths currently outweigh what we consider to be the U.S.’s meaningful economic and fiscal risks and large external debtor position, we now believe that they might not fully offset the credit risks over the next two years at the ‘AAA’ level,” said Standard & Poor’s credit analyst Nikola G. Swann.
“More than two years after the beginning of the recent crisis, U.S. policymakers have still not agreed on how to reverse recent fiscal deterioration or address longer-term fiscal pressures,” Mr. Swann added.
In 2003-2008, the U.S.’s general (total) government deficit fluctuated between 2% and 5% of GDP. Already noticeably larger than that of most ‘AAA’ rated sovereigns, it ballooned to more than 11% in 2009 and has yet to recover.
Meanwhile, the Wall Street Journal reaffirms what we have been saying here for days: we can’t tax our way out of this financial crisis:
Consider the Internal Revenue Service’s income tax statistics for 2008, the latest year for which data are available. The top 1% of taxpayers—those with salaries, dividends and capital gains roughly above about $380,000—paid 38% of taxes. But assume that tax policy confiscated all the taxable income of all the “millionaires and billionaires” Mr. Obama singled out. That yields merely about $938 billion, which is sand on the beach amid the $4 trillion White House budget, a $1.65 trillion deficit, and spending at 25% as a share of the economy, a post-World War II record.
Get it? You could take 100% of what millionaires make and it still wouldn’t come close to solving the problem.
Does Obama get it? Here he is yesterday:
Now, if you look at the House Republican budget that they’ve proposed, you would have to cut education by 25 percent; you’d have to cut transportation spending by 30 percent. It does make Medicare into a voucher program. That fundamentally changes our society. It’s not compelled by the numbers; it’s compelled by their insistence that people like myself, millionaires and billionaires across the country, shouldn’t pay anything more in taxes, shouldn’t go back to the rates that existed back in the 1990s, when wealthy people were doing well — and, in fact, they want to give more tax breaks to those folks.
If we go back to the rates in the 1990s, you hack, it won’t pay for a fraction of what you want to continue to do.
Funny to say that on the day before he releases his tax forms, and he paid the current rates and took his deductions. He obviously doesn’t want to pay anything more in taxes, either.
MayBee (081489) — 4/18/2011 @ 7:30 pm“…you would have to cut education by 25 percent…”
I’m thinking 100%. Not the federal government’s job.
“…That fundamentally changes our society.”
That’s the general idea, all right.
Dave Surls (70604d) — 4/18/2011 @ 7:34 pmThe University of Texas took in a billion dollars in gold. That’s a prudent investment, given the potential for inflation.
There are a million ways to say that our economy has been destabilized by Obama’s leadership.
Pretty depressing to see Obama defend huge spending on the idea of taxing us enough to pay for it. He clearly has no intention of raising taxes enough to fund his priorities. It’s like a game where we pass the credit card from person to person, and we know the bill will have to be paid later, not by the next 2-3 people who hold it. They could do the right thing and be restrained, or they could be like Obama and just max that sucker out. People like Tricia Willoughby will get the bill, and frankly, why shouldn’t they default on it? Perhaps they won’t even have a choice… our entitlements are that bad.
Obama isn’t just talking about screwing the rich (in fact, I don’t think he wants to do that at all). The real suckers of his policies are the people who are dependent on government spending. Obama just hopes to be on the lecture circuit, blaming the GOP, when it’s time to pay for all his programs.
Lastly: “It does make Medicare into a voucher program. That fundamentally changes our society. ” Why does Obama think our society’s fundamentals depend on a government entitlement? How many morons out there are not saving for their future because they have been conned into dependency?
Dustin (c16eca) — 4/18/2011 @ 7:37 pm“…That fundamentally changes our society.”
I thought hopeychangey was a good thing.
JD (318f81) — 4/18/2011 @ 7:41 pmDoes anybody have any idea where he is getting those 25% and 30% figures?
I doubt he’s just talking about going back to 2008 budget levels. My guess is he’s talking about comparing Ryan’s budget with his 2012 budget at the end of 10 years or some other BS gimmick.
daleyrocks (bf33e9) — 4/18/2011 @ 7:45 pmThere’s always some fancy gimmick. These people cannot look America in the eye and be straight. The contempt they have for their own supporters must be amazing.
Anyhow, no, I have no idea where many of his figures come from, and that’s because Obama keeps a lot of this stuff hidden. once we have the details, we’ll be talking about a completely new, vague claim.
Obama would have fewer problem if he would drop the politics for a little while and just give America a straight explanation. He wants to jack up taxes a lot. He wants to leave us with a lot of debt. He wants huge spending and entitlements. If he doesn’t think he can sell us his plan the way Ryan sells his, pretty directly, then he should change his plan.
I had a naive hope that Obama would be the guy who showed a little common sense. Why, if he had shrank the deficit and lowered taxes like he promised, it would have fundamentally changed the political landscape forever. The democrat party would be an unstoppable force, and their entitlements probably could have been made far more stable and lasting.
Alas, I still voted for Mccain because Obama seemed two faced and dishonest.
Dustin (c16eca) — 4/18/2011 @ 7:57 pmIf we go back to the rates in the 1990s, you hack, it won’t pay for a fraction of what you want to continue to do.
I believe it’s Ace who came up with the instant reply to the argument Obama made, which is to ask whether Obama (or anyone making the ’90s argument) wants to go back to the 1990s level of spending.
Karl (385513) — 4/18/2011 @ 8:18 pmHas there been a fact check of that AP interview? That would be awesome!
daleyrocks (bf33e9) — 4/18/2011 @ 8:30 pmI said that first, Karl 😉
JD (318f81) — 4/18/2011 @ 8:33 pmhttp://directorblue.blogspot.com/2011/04/paul-krugman-how-dare-those-idiots-at-s.html
narciso (8a8b93) — 4/18/2011 @ 8:42 pmBill Gross at PIMCO has been walking away from U.S. debt for about 60-days now.
AD-RtR/OS! (47c5c8) — 4/18/2011 @ 8:49 pmI guess S&P finally got the message…
how long until DC wakes up?
Dustin, got a reference on UT?
Should we be buying gold first thing in the AM, or silver?
MD in Philly (3d3f72) — 4/18/2011 @ 9:05 pmUT bought a lot of gold.
By the way, they took physical delivery of it. I find it amazing, and quite a statement on the Dollar.
I don’t think today is the day to buy gold. I think yesterday was!
Dustin (c16eca) — 4/18/2011 @ 9:11 pmBill Gross at PIMCO has been walking away from U.S. debt for about 60-days now.
Longer than that, since PIMCO’s position was multiple billions in UST’s. Takes weeks, maybe months, to unwind that. They announced they were at zero at the end of Feb (could have been March, I forget). Regardless, the unwind had to begin Nov-Dec at the latest.
…you’d have to cut transportation spending by 30 percent.
And the bullet train to bankruptcy is how we’re gonna win the future. So we can’t cut that.
Chris (eafa5f) — 4/18/2011 @ 9:13 pmBTW, I’m sure this was a bad move, politically. UT is lobbying hard not to face too much budget cutting, and now the taxpayers are wondering why.
Why raid the rainy day fund to pay our state deficit? Why not take half of UT’s $20 billion?
Dustin (c16eca) — 4/18/2011 @ 9:14 pmWhy not just take half of everyone’s money, Chris?
JD (318f81) — 4/18/2011 @ 9:14 pmI meant Dustin, not Chris. Why in the world could they just take half their gold?
JD (318f81) — 4/18/2011 @ 9:16 pmWell, the question is we say “yesterday was the day to buy” two days from know.
All I can say is:
– a billion in gold bullion in Texas
– Mexican drug cartels invading the US
Walker and co. better be ready.
For those of us who can’t buy a billion worth, the pile of silver we can afford will be more impressive.
MD in Philly (3d3f72) — 4/18/2011 @ 9:17 pmJD,
Chris (eafa5f) — 4/18/2011 @ 9:17 pmI thought we already were. But I live in California. YMMV.
Uranium is a good bargain right now.
JD (318f81) — 4/18/2011 @ 9:22 pmThis is not about yearly income. It is about going after wealth and holdings.
Ed from SFV (4a7c52) — 4/18/2011 @ 9:22 pmif we go back to the 90s Kurt Cobain will still be alive!!
hallelujer praise jesus!
happyfeet (760ba3) — 4/18/2011 @ 9:23 pmWell, I guess the truth is I’m a little fuzzy about whether or not UT belongs to the state of Texas. I do think there’s very little reason for a university to have that much money. I love that we have great schools like that, but I think facilities and teachers and standards don’t need to cost that much.
I wonder why these public schools amass such massive amounts of money.
I think any state entity that has billions in the bank should be targeted for cuts in public support. not because of an emergency of funding, but as a matter of being a good steward. The money we save should simply be rolled into Texas’s rainy day fund, and over time, become a tax cut (I do want all states to have some money stashed away, just for the purposes of stability).
HOWEVER, let me just admit that I also think if Texas has a huge deficit, it needs to pay that off the backs of Texans today. As a principle, I prefer high taxes to high deficits. I prefer low spending to either of those, but I am so tired of seeing high spending paid for by future generations. So sure, why not just tax everyone? That’s a pretty legitimate solution to a budget shortfall. If they can’t explain why the hell they couldn’t cut spending first, let the voters have their say about that.
Dustin (c16eca) — 4/18/2011 @ 9:25 pm“This is not about yearly income. It is about going after wealth and holdings.
Comment by Ed from SFV ”
Sadly, that’s how Texas taxes us. I’d rather see a high sales tax than a property tax.
Dustin (c16eca) — 4/18/2011 @ 9:27 pmI guess my point was that there aree a lot of options available to the Stqte, but simply taking half their gold does not appear to be one of them, at least not legally. They could get it by legislation, I suppose, or by cutting future funds under the concept of fungibility.
JD (318f81) — 4/18/2011 @ 9:29 pmI’m sure this is true. BTW, they only have 1 billion in gold out of 20 billion stashed in some form or another.
And I was actually leaning towards this latter option of yours, of slashing funding because they have enough money to sustain operations, probably on endowment interest. I thought I made this clear in my comment, but then I went off on a tangent as usual. UT is lobbying for funds from the taxpayers, and this is a pretty showy way of illustrating how little they need that funding.
However, as best as I can tell (grain of salt), UT belongs to the taxpayers of Texas. So why shouldn’t the state have access to their funds? I suppose one great argument is that their endowment came from donations specifically meant to go towards the university, so it would be pretty dishonorable to raid those savings.
So I guess this idea just won’t work at all.
Dustin (c16eca) — 4/18/2011 @ 9:38 pmU.S. policymakers have still not agreed on how to reverse recent fiscal deterioration or address longer-term fiscal pressures…
Take your time – hurry up – choice is yours – don’t be late I think.
happyfeet (760ba3) — 4/18/2011 @ 9:49 pmSince they are clamoring for it let’s give people like Obama, rich and do not create and write payroll for one single job, a tax increase.
We increase taxes on the rich to 3 times what they are now. And then give them a credit for creating jobs. If they are responsible for creating more payroll than their take home pay they pay taxes at the level we see now. People like Hollywood Celebrities, sports stars, and other wealth sinks would not qualify. (Written carefully it might also disallow people like Michael Moore from the exemption.) Call the increased tax a “wealth sink” tax. Wealth goes in and comes out only in conspicuous consumption. Of course, at say $100 million a year raise the marginal tax rate to 75% with a deduction for being directly responsible for payrolls of 10,000 people or more. Cut it to 40% in that case.
The idea needs serious tuning. But I do like increased taxes on the rich who do not act like entrepreneurs and capitalists reinvesting in their business.
Ah, charge partnerships 40% and corporations 80% maybe? It seems when banks, stock firms, and lawyer’s offices were partnerships they acted just a whole lot more responsibly.
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JD (bcdcf2) — 4/19/2011 @ 3:06 amJD
The idea that the rich create wealth without creating jobs is the problem.
The part I am not understanding in your scenario is that there is somekind of assumption that the rich have jobless wealth?
What am I misunderstanding?
Same for partnerships and corporations and the acting responsibly thing I’m also not understanding
EricPWJohnson (da56e2) — 4/19/2011 @ 3:11 amBtw, Trump proffered a ‘onetime’ 14.25 million’s tax, to close the deficit, back when he was running
narciso (79ddc3) — 4/19/2011 @ 4:54 amfor the Reform Party, that along with single player
“13 Bankers” is a great book to get out from under all this incessant babbling in the media. It is recommended by Kansas City Fed President Tom Hoenig. He’s the last good guy at the Fed, and he’s leaving.
Wesson (b57910) — 4/19/2011 @ 7:15 amGo back to 90s tax rates? Fine. Let’s go back to 90s level budget levels and spending rates, you lying scumbag.
GS Patton (b5857e) — 4/19/2011 @ 8:38 am