SF: “If the reason for the downgrade in 2011 was solely because of the underlying debt dynamics, and had nothing to do with political wrangling, then why did it happen just at the time of the debt ceiling fight?? Was that a big coincidence?

Comment by daleyrocks (bf33e9) — 1/4/2013 @ 1:32 pm

Sammy – I don’t think it was any coincidence, why would you?

I don’t – but not being a coincidence means it had to be about the political dysfunction, not the debt – actually a closer reading shows it is a little bit more complicated.

“That sounds strange. Were they really expecting something to happen because of the debt ceiling?”

Why wouldn’t they expect something to happen?

Absolutely nothing strange about expecting something to happen.

Yes there is. It indicates a real unfamiliarity with the way Washington works.

Anyway it looks like maybe it was the failure to reach an agreement and maybe more concern about the dysfunction than the brinksmanship.

It seems to me these rating agencies would be satisfied with a pledge to cut money in the future.

Sammy – I don’t think it was any coincidence, why would you?

That sounds strange. Were they really expecting something to happen because of the debt ceiling?

Why wouldn’t they expect something to happen? President Obama had pledged to restore fiscal responsibility and even appointed a commission to make recommendations to help him to it. Absolutely nothing strange about expecting something to happen.

But I will send a sample:

If the reason for the downgrade in 2011 was solely because of the underlying debt dynamics, and had nothing to do with political wrangling, then why did it happen just at the time of the debt ceiling fight?? Was that a big coincidence?

That was not an expected time to get these issues settled.

Now the Standard and Poor’s credit rating agency said what happened was at that point they realized that an agreement that would stop the debt from eventually climbing so high that it would start creating risks of nonpayment
(avoiding that is what they mean when they talk of the debt being stabilized) was not in the cards – that there was a lower chance than they had thought a few months before that things would get worked out.

That sounds strange. Were they really expecting something to happen because of the debt ceiling?

And that’s as close as you can get to an underlying issue. It’s not so much the issue itself, as that you can see it’s not going to be resolved.

The Republicans were not strong enough to settle it on their own, even if you thought they were
on the right course. They were just strong enough maybe to paralyze the government, and that didn’t help anything, even if you think that didn’t itself cause a problem.

But there was also was then and now, fear that these games of chicken would itself do something bad. I’m not sure what – it sounds like maybe it’s only fear that massive austerity would create a recession (which isn’t true I think – that Keynesism and ignores monetary policy, which is dominant. But people believe that, including the credit rating agencies.)

I’m not sure what these people in the credit rating agencies expect or hope for – it might be a mathematical impossibility,m since too quick debt reduction is supposed to be bad for the economy.

In my local weekly rag, a letter writer slams another writer because they complained of the profligate ways of the current administration.
To buttress his argument, he cites the $11T Debt “passed on by one of the worst Presidents in history”, never mentioning that GWB “inherited” half that from his predecessors. He also glibbly skips over the part that Obama’s deficts have increased the debt by another $5-6T in just four-years, where the same amount was added by Bush but over 8-years.
Also, in breaking out the debt increases by partisan control of both ends of PA Avenue, you get this:
FY-02 (the first Bush/GOP Congress budget) to FY-07: the debt increased by an average of $533B/yr;
FY-08 (the first Pelosi/Reid budget) saw a debt increase of $1.017B, followed by $1.885B (this was the year that started with a continuing resolution, with a budget signed by Obama on 21 Jan 09); and then $1.651T in FY-10, $1.228T in FY-11, and $1.224T in FY-12!
It should be noted that the last Budget passed by both houses of Congress, and signed by the President, was in April-09, presumably for FY-10.
Ever since the Stimulus, which ramped up the baseline, the deficit has soared from an avg of $553B under Bush/GOP, to $1.4T/yr under Pelosi/Reid/Obama,
with the GOP-led House only able to prevent it from getting worse.
It is very difficult to take accusations of Bush, and the GOP, being spendthrifts when looking at these numbers – even though Conservatives were very upset with the Hastert/DeLay House for their spending priorities, and the fact that GWB never vetoed a spending bill.
The Dem record on spending, particularly for special interests, is absolutely mind-numbing, and (I hate using this word, but it fits) OBSCENE!

I often say that we’re far more leftwing today compared with over 70 years ago. And we are from a social-cultural standpoint.

But I have to admit that as dumb as things are in the 21st century — and as foolish as the modern-day liberal is — the desire to ratchet up tax rates to a level as confiscatory and absurd as the upper 70-percentile range (as was done by both Herbert Hoover and, of course, Franklin Roosevelt) isn’t a part of the political handbook.

Nonetheless, I imagine that Barry Obama and his cabal are salivating over what France’s socialist/ultra-liberal president is enacting or favoring. Perhaps also what Argentina’s president, the super-leftwing Cristina Kirchner, is promoting in her mess of a country.