Patterico's Pontifications

8/5/2011

Breaking: We Have Been Downgraded (Update: Full Text)

Filed under: General — Aaron Worthing @ 5:42 pm

[Guest post by Aaron Worthing; if you have tips, please send them here.  Or by Twitter @AaronWorthing.]

Just read it via CNN’s breaking news.  Standard & Poor’s reduced us from AAA to AA+.

Organizations like this told us we needed to get a hold of our debt problem.  Instead the political leadership saw it as a call to raise the debt ceiling, which you know, is kind of the opposite of handing the problem.  Its like a parent telling a teenage girl she is maxing out her credit cards, so she gets a new one.

So, the stock market tanks and we lost our triple AAA credit rating.  This administration has officially diminished America as a nation.  Heckuvajob there, Barry.

2012 can’t come fast enough.

Update: Standard & Poor’s website, unsurprisingly, is very slow tonight.  The WSJ has a copy, but I expect them to get flooded, too, so I will cut and paste the analysis under the fold.

The gist is simply this.  They don’t care how we cut the debt, by taxes, by cutting spending, by whatever, but it is our inability to really, seriously, tackle this issue that led to this.

This is why the Tea Party exists and I am a proud, patriotic member.  I love this country too much to see them do this to us without speaking up.

(more…)

Sockpuppet Friday — The British Laffer Curve Edition

Filed under: General — Karl @ 8:48 am

[Posted by Karl]

As usual, you are positively encouraged to engage in sockpuppetry in this thread. The usual rules apply.

Please, be sure to switch back to your regular handle when commenting on other threads. I have made that mistake myself.

And remember: the worst sin you can commit on this thread is not being funny.

—–

And for this week’s Friday frivolity, we look across the pond to the United Kingdom:

David Cameron and George Osborne are plotting to slash the top rate of income tax to 45p in the pound as early as next March.

The Prime Minister and Chancellor want to make the change after seeing Treasury figures which show that the current 50p top rate will generate only marginal financial gains for the Government.

***

[A]llies of Mr Osborne believe a cut in the 50p rate is necessary to encourage wealth generators to stay in Britain and create new jobs to kick-start growth in the economy.

Treasury analysis shows that Labour’s decision to raise the top rate of tax from 40 per cent to 50 per cent on those earning £150,000 a year or more has generated up to £2.4billion a year.

But in an illustration of the way high tax rates encourage the better-off to dodge tax altogether, officials found that 70 per cent of that money, around £1.65billion, would be collected anyway if the top rate was 45p in the pound.

Some officials, including Robert Chote, head of the independent Office of Budget Responsibility, believe that the gains between 45p and 50p may be almost zero when the final tax take figures are in.

This is because when taxes are raised, Britain’s wealth creators use tax avoidance ploys to dodge income tax, putting money offshore or into pensions.

Something to keep in mind when Pres. Obama and other Democrats renew their call for a “balanced approach” to defusing the debt bomb.  I’m not suggesting the US is on the same spot on the Laffer Curve as the UK.  However, US history does show that the revenue/GDP ratio stays pretty stable (between 18-21%), regardless of the top marginal rate.  Progressives seem to think that allowing it to rise to 30% will solve the debt problem.  This seems… unlikely.

OK, let the sockpuppetry begin!

–Karl

Unemployment Unexpectedly Mediocre. Yay! (Update: Possible S&P Downgrade today)

Filed under: General — Karl @ 6:50 am

[Posted by Karl]

Unexpectedly, Reuters gets a not-terrible use of “unexpectedly” today:

U.S. payrolls increased 117,000, the Labor Department said on Friday, above market expectations for an 85,000 gain. The unemployment rate dipped to 9.1 percent from 9.2 percent in June, but this was mostly the result of people leaving the labor force.

Note the last part; according to Bloomberg, the share of the eligible population holding a job declined to 58.1 percent, the lowest since July 1983.  As NRO’s Jim Geraghty put it, “Since January 2009, Obama’s policies have successfully lowered unemployment by driving 3,566,000 Americans from the work force.”  In the household survey over the last three months alone, the labor force is down 500K, the number of employed is down 500K, and the number unemployed is unchanged.  If the active labor force was as big as it was when Pres. Obama took office, the unemployment rate would be 11.7 percent.  Also, average weekly hours worked for all employees were flat at 34.3 hours, essentially the same as year ago.  Plus, temporary help, usually a precursor of future hiring, added 0 jobs in July. 

Today’s report may help avert a meltdown in the markets, which is something.   However, by every standard Obama listed in his megalomaniacal speech about slowing the rise of the oceans, the United States is either stagnant or worse off than in 2008.  Indeed, according to White House press flack Jay Carney: “The White House doesn’t create jobs.”

Update: Markets are headed down again today.  There’s a rumor going around trading desks that I won’t recirculate. It concerns the possibility of bad news after the close of trading. We”ll see.

Update 2: Markets are back up marginally at midday. I hope that means the rumor has been discarded.

Update 3: Markets closed pretty flat… but the rumor has made it into the media: CNBC is reporting that the government is preparing for a possible downgrade from S&P.  There are reasons to be skeptical.

Update 4: “A government official tells ABC News that the federal government is expecting and preparing for bond rating agency Standard & Poor’s to downgrade the rating of US debt from its current AAA value…”  And according to the source (caution there), the S&P will blame the GOP position on tax increases, as opposed to Democratic intransigence on entitlements. Of course.

Update 5: The effect of a downgrade — if it occurs — may be minor at this point.

Update 6: Jake Tapper’s story now adds: “Another government official confirms the Obama administration is preparing for the downgrade but is not 100% positive it’s going to happen, and if it does happen officials are not sure when it will happen…”

–Karl


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