US Credit Rating Downgrade - Bad News for Obama

FISMA

The news just keeps getting worse and worse for Obama.

The history books will now read that he was the President for the first time the country's credit rating was downgraded.

Obama is in some trouble. There is still time for him to turn things around. However, that time is running out at a rate that feels like it is increasing.

The closer we get to the Nov election cycle, the worse things get.

I have to wonder when we'll see Democrats fleeing his side. Keep a watch on those Democrats up for election in Nov.

If there's any more bad news, I am unsure if Christie will be able to stay out of the race - just too tempting.

If I were Obama I think I would remind people that these credit agencies were the same ones that gave AAA ratings to mortgage back securities.;)

Overheal

History will look bad on him, but current events will look bad on the Republican Party as well. The refusal of the 112th Congress to pass anything until the 11th hour is just as responsible for creating this situation, as is the failure to agree on cuts that actually matter. Take this chart for example:



This is the outlook of the National Budget, prior to the Compromise Deal passed by Congress just a few short days ago.




Now, this is our outlook, thanks to the Compromise deal:





And still, Republicans refuse to renege on their asinine 'no-tax' pledge, and the Democrats refuse to make serious cuts to Entitlements. And both of them will need to agree to military cuts as well. Otherwise, this country is ****ed, and the only thing Obama is absolutely to blame for here is not invoking the 14th Amendment, which to be fair would have done nothing to fix the actual problem.

matthew8

Thank god for raising the debt ceiling eh? There's no way we can predict the deficit in 2021, especially because the Keynesians would love a good world war. The shìt must at some point hit the fan and they can only throw ordinary people in front of it for so long until they've run out.

jank

It was going to come regardless of who was in the White House.

matthew8

jank wrote: »

It was going to come regardless of who was in the White House.

I would've downgraded far more while Bush was in the whitehouse, but these rating agencies are idiotic.

Overheal

Durbin gets it in one:

http://thehill.com/blogs/blog-briefing-room/news/175679-videos-durbin-

"They say the approval rating of Congress is between 6 and 19 [percent] — I don't believe we have that many relatives. So, the numbers are inflated."

ILikeBananas

FISMA wrote: »

The news just keeps getting worse and worse for Obama.

The history books will now read that he was the President for the first time the country's credit rating was downgraded.

Obama is in some trouble. There is still time for him to turn things around. However, that time is running out at a rate that feels like it is increasing.

The closer we get to the Nov election cycle, the worse things get.

I have to wonder when we'll see Democrats fleeing his side. Keep a watch on those Democrats up for election in Nov.

If there's any more bad news, I am unsure if Christie will be able to stay out of the race - just too tempting.

If I were Obama I think I would remind people that these credit agencies were the same ones that gave AAA ratings to mortgage back securities.;)

Looking at this news in the light of what it means to the presidency seems to be almost parochial. Having the country's credit rating reduced for the first time in 94 years is more of a commentary on the direction where America has been heading for a long long time.

The entire culture in America is propped up by debt from their low fuel costs, to their seemingly endless foreign wars. The country needs a good dose of austerity measures but nobody seems willing to accept both higher taxes and reduced spending.

The recent debt ceiling crisis may have triggered this ratings cut but really it was just the straw that broke the camel's back.

gargleblaster

Senator Bernie Sanders on S&P downgrade:

I find it interesting to see S&P so vigilant today in downgrading the US credit rating. Where were they 4 years ago when they, and other credit rating agencies, helped cause this horrendous recession by providing AAA ratings to worthless sub-prime mortgage securities on behalf of Wall Street investment firms? Where were they last December when Congress and the White House drove up the national debt by $700 billion by extending Bush's tax breaks for the rich?

Hayte

S&P are playing politics but for what reason I don't know. After the Treasury pointed out that their math was wrong and they were $2 trillion dollars out, S&P dropped the financial reason for the downgrade leaving only political ones.

Its too far out from the 2012 election to for this kind of show to be effective in influencing the outcome so I doubt thats it.

It could be that S&P is trying to assert its influence on Congress because trust in credit rating agencies is very low. After the financial collapse, S&P along with Moodys were raked over the coals by the Senate Permanent Subcommittee and the Financial Crisis Inquiry Committee (composed of members of the House) where both exposed the rating system for RMBS/CMBS between 2005 and 2010 as having been almost completely arbitrary. Thus it called the credit rating agency's sole function into question.

It smells like the act of a company operating within an institution that is fundamentally broken but where the company is trying desperately to justify its existence. One way to do that (I guess) is to show you are still relevant with political intervention.

There is probably a grain of truth in the idea that the US government cannot service its long term debt through spending cuts indefinitely. At some point the US war machine needs to be curtailed or this political aversion to taxation needs to be quashed, but the best misdirection always has to have that grain of truth to sell the lies. I don't think S&P gives a f**k about the working man or the US government's ability to service its debt (which historically has been remarkable). I think it just wants an unregulated place in whatever world emerges post financial crisis, so S&P can keep on doing what its always been doing without anyone asking uncomfortable questions or god forbid, regulating their activities.

FISMA

Hayte wrote: »

S&P are playing politics but for what reason I don't know...

I think they are trying to get ahead of the curve on this one to make up for their tarnished reputation.

Amerika

So, President Obama is going to speak at 1 pm today regarding the downgrade.

Wondering whom he will blame... GW Bush, Republicans, the Tea Party, S&P, or Zombies?

Because we know he’ll never take any responsibility.

Overheal

Keep your Dow and Nasdaq tickers open

matthew8

Overheal wrote: »

Keep your Dow and Nasdaq tickers open

Gold still going up though. Good news for the Austrian investor.

gargleblaster

Only the most partisan ideologues will be able to convince themselves otherwise:

Is the US Credit Rating a Victim of GOP Sabotage?
By Daniel Gross | Contrary Indicator – Fri, Aug 5, 2011 10:16 PM EDT

(snip)

S&P, which covered itself in a substance other than glory during the mortgage crisis, may have a poor record and strange methodology when it comes to sovereign ratings. France, which has a far higher debt per capita ratio than the U.S., still enjoys a AAA rating. And a downgrade, alone, doesn't mean U.S. interest rates will spike -- on Monday or at any time in the future. Japan's credit rating was downgraded several years ago, when the interest rates its government paid on bonds was already extremely low, and they've generally trended lower in the years since.

(snip)

But that doesn't mean we should ignore S&P's Friday evening shot across the bow. In downgrading the U.S.'s credit rating, S&P points out what has long been obvious: Washington's inability to come to an agreement on how to close the large fiscal gaps that have emerged since the recession began is troubling. Recent events have sapped the agency's confidence that the government can and will do what is necessary to align revenues with spending commitments. And it's difficult to escape the conclusion that America's credit rating was intentionally sabotaged by Congressional Republicans.

It has long been obvious to all observers -- to economists, to politicians, to anti-deficit groups, to the ratings agencies -- that closing fiscal gaps will require tax increases, or the closure of big tax loopholes, or significant tax reform that will raise significantly larger sums of tax revenue than the system does now. Today, taxes as a percentage of GDP are at historic lows. Marginal rates on income and investments are at historic lows. Corporate tax receipts as a percentage of GDP are at historic lows. Perhaps taxes don't need to rise this year or next, but they do need to go up in the future.

(snip)

But Congressional Republicans deserve much more of the blame. For this calamity was entirely man-made -- even intentional. The contemporary Republican Party is fixated on taxes. It possesses an iron-clad belief that the existing tax rates should never go up, that loopholes shouldn't be closed unless they're offset by other tax reductions, that the fact that hedge fund managers pay lower tax rates than school teachers makes complete sense, that a reversion to the tax rates of the prosperous 1990's or 1980's would be unacceptable.

In the past two years, this attitude has combined with a general hostility to playing ball with Democrats on large legislative issues, a near-blanket refusal to conduct business with President Obama, and, since the arrival of the raucous Tea Party freshman, a cavalier attitude toward the nation's obligations. It was common to hear duly elected legislators argue that it wouldn't be a big deal if the government were to pierce the debt ceiling and default on its debts.

This downgrade is the logical outcome, to a degree, of the long-running "Deal or No Deal" dynamic in Washington. For much of the last two years, President Obama and various fiscal reform groups have urged a grand bipartisan deal that would make a dent in the short- and long-term deficits. Every group -- from the bipartisan Bowles-Simpson Commission on down -- argued that a large package of spending cuts and tax increases or reforms would be the way to go. Polls showed that American voters generally endorsed a mix of spending cuts and tax increases. And plenty of neutral observers thought that the approach of the debt ceiling expiration would help forge a grand bargain.

Many observers (including this one) argued that such efforts were doomed to failure. For President Obama, all the incentives weighed toward making a big deal, even one that would upset his base. It would show an ability to work on a bipartisan basis and make concrete progress and take the issue off the table for 2012. But for Republicans, all the incentives weighed against a big deal. By definition, anything that is acceptable to President Obama and Democrats is unacceptable to today's Congressional Republicans. It almost doesn't matter what the substance is. Why would they sign off on any measure that would include revenue increases that the president wanted? Congressional Republicans don't believe in higher revenues as a matter of ideology, as a matter of economics or, most importantly, as a matter of political tactics. Top Congressional Republicans have expressed a desire to deny victories to the president.

And so, in a completely predictable pattern, every time the discussions got around to revenue increases, Republicans pulled back. House Speaker John Boehner was willing to entertain the possibility of several hundred billion dollars of increased revenues, until he realized he couldn't sell it to his own caucus. The anti-tax radicalism of the Congressional GOP took revenues off the table and made a large deal impossible. The result was a lengthy manufactured crisis and a small deal that relied solely on spending cuts, and even that was opposed by a big chunk of the House GOP caucus.

(snip)

Daniel Gross is economics editor at Yahoo! Finance.

Overheal

12:30 - Obama to speak at 1:00PM

1:05 - Obama to speak at 1:30PM

1:39 - Obama to speak 'soon'

I know theres such a thing as Presidential Prerogative, but come on.

matthew8

The USA has had a great history of servicing its debt and the markets thought the democratic/republican parties would just constantly borrow to pay back the old loans forever, until the tea party came along and wanted them to stop borrowing. Of course the rating will be dropped if a group comes along who don't want borrowing to repay debt and don't want ordinary Americans burdened with more debt.

Amerika

Overheal wrote: »

12:30 - Obama to speak at 1:00PM

1:05 - Obama to speak at 1:30PM

1:39 - Obama to speak 'soon'

I know theres such a thing as Presidential Prerogative, but come on.

Give him a break... doesn't it sometimes takes all of us 48 minutes to get from one part of our house to another? :rolleyes:

Nothing new from him... so either he was late to his downgrade speech, or early to his concession speech.

FISMA

If you do not have the time to watch the entire Obama speech, here it is in 2 seconds.

https://www.youtube.com/watch?v=8YHmUXUU2MU

gargleblaster

Scintillating discussion. Really. :pac:

cyberhog

Very interesting comments coming out of China.

"Since the collapse of the Soviet Union, the United States, as the world's sole superpower, has relied on its powerful military to meddle everywhere in international affairs, advancing hegemony, and paying no heed to whether the economy can support this," said an editorial on the official Xinhua news wire

"Now is the right time for the United States, trapped in economic hardship, to reflect on its domineering thinking and deeds," it added.

http://www.telegraph.co.uk/finance/economics/8689371/Chinese-state-media-attacks-America-following-downgrade.html


Good to see the Chinese getting more assertive with the meddling Americans. This could become quite interesting in the near future.

SeanW

cyberhog wrote: »

Very interesting comments coming out of China.



http://www.telegraph.co.uk/finance/economics/8689371/Chinese-state-media-attacks-America-following-downgrade.html


Good to see the Chinese getting more assertive with the meddling Americans. This could become quite interesting in the near future.

Because any sane person REALLY wants to see more Chinese Commie influence across the world? I don't think so.

There's an old saying "Out of the frying pan and into the fire."

matthew8

Interestingly, why would S&P downgrade after the debt ceiling fight it the tea party is to blame. Surely there would have been a greater risk during the fight than after it if the risk was that the US would stop borrowing money to balance the budget.

Overheal

Because in the end they could have passed a Balanced budget, that cut spending and raised taxes, and would have projected us actually paying down our national debt in the future.

But we didn't.

Either way they had to wait to see what we would do. And how effective were our collective efforts? See post #2.

FISMA

matthew8 wrote: »

Interestingly, why would S&P downgrade after the debt ceiling fight it the tea party is to blame...

I cannot see how anyone can honestly blame the country's downgrade on the tea party - pure rhetoric.

We have known this day was coming for 40 years: neither democrats or republicans prepared. Now the democrats are blaming the tea-party?

The US was downgraded at least in part because the S&P realizes there are no cuts in this bill. What they are calling cuts on 30 second sound bytes are caps on future spending.

Finally, I agree with a credit rating agency.

matthew8

FISMA wrote: »

I cannot see how anyone can honestly blame the country's downgrade on the tea party - pure rhetoric.

We have known this day was coming for 40 years: neither democrats or republicans prepared. Now the democrats are blaming the tea-party?

The US was downgraded at least in part because the S&P realizes there are no cuts in this bill. What they are calling cuts on 30 second sound bytes are caps on future spending.

Finally, I agree with a credit rating agency.

I love the way the cuts are increases and how the American public has been so blatantly conned by the media. One thing that really annoyed me was John "if you're dumb join the army (despite the fact that it's a decent career choice)" Kerry saying that the media have a responsibility to give less time to the tea party despite the fact that they are the only ones offering alternative views in Washington.

vetinari

It's quite obviously due to the tea party. I'm amazed that people think otherwise even members of the tea party!

the downgrade is in large part due to the utter mess that occurred around this debt ceiling increase. It's supposed to be a routine piece of business. By attempting to sabotage the US, the tea party erased any small bit of confidence that was left in Congress.

FISMA wrote: »

I cannot see how anyone can honestly blame the country's downgrade on the tea party - pure rhetoric.

We have known this day was coming for 40 years: neither democrats or republicans prepared. Now the democrats are blaming the tea-party?

The US was downgraded at least in part because the S&P realizes there are no cuts in this bill. What they are calling cuts on 30 second sound bytes are caps on future spending.

Finally, I agree with a credit rating agency.

Amerika

vetinari wrote: »

It's quite obviously due to the tea party. I'm amazed that people think otherwise even members of the tea party!

the downgrade is in large part due to the utter mess that occurred around this debt ceiling increase. It's supposed to be a routine piece of business. By attempting to sabotage the US, the tea party erased any small bit of confidence that was left in Congress.

Hmmm….. So the fact that we’re spending ourselves into oblivion has nothing to do with the crisis?

The Tea Party? I don't know what is worse, blindly buying into the talking points that it's the Tea Parties fault, or not believing we are in a real crisis of spending.

So we’ve gone through the gambit of blaming GW Bush, then The Tea Party, and I guess next people will be blaming our troubles on zombies.

AGHAST! :mad:

FISMA

vetinari wrote: »

It's quite obviously due to the tea party. I'm amazed that people think otherwise even members of the tea party!

the downgrade is in large part due to the utter mess that occurred around this debt ceiling increase.

vetinari,
Would you say that the debt ceiling has a direct correlation to the debt?

Whose fault is the debt?

gargleblaster

FISMA wrote: »

vetinari,
Would you say that the debt ceiling has a direct correlation to the debt?

Whose fault is the debt?

Well that's obvious, isn't it?

As for the tea party downgrade - well, they're cheering about being blamed for it, so there you go.

sarumite

FISMA wrote: »

I cannot see how anyone can honestly blame the country's downgrade on the tea party - pure rhetoric.

We have known this day was coming for 40 years: neither democrats or republicans prepared. Now the democrats are blaming the tea-party?

The US was downgraded at least in part because the S&P realizes there are no cuts in this bill. What they are calling cuts on 30 second sound bytes are caps on future spending.

Finally, I agree with a credit rating agency.

Democrats are blaming Tea Party republicans, Tea Party republicans are blaming democrats. Niether the Democrats or Tea party republicans have shown any interest in reducing the deficit. Democrats want to protect social program spending and the tea party republicans want to protect tax cuts.