Both S&P and Moody's make good points, but have a different assessment of the uncertainty. Compared to other nations, The U.S. has a surprisingly healthy budget. Cut out the bush tax cuts, end the wars, stabilize health care spending, and you could create a surplus in no time. Few other countries have that luxury. However, it has not only become questionable whether Washington will be able to make the necessary changes in the foreseeable future, the corruption that underlies this inability is very hard to get rid of and may cripple the government even further.
I think these two different ratings appropriately reflect the uncertainty of the situation.
However, it has not only become questionable whether Washington will be able to make the necessary changes in the foreseeable future, the corruption that underlies this inability is very hard to get rid of and may cripple the government even further.
The issue in the US is that there is a genuine ideological split between the two parties about what the US government should look like. The Democrats want a big government, which takes in a lot of taxes and provides a lot of services to everybody. The Republicans want a small government, which takes in minimalist taxes and provides minimalist services. (I'm not interested in debating the relative merits of these two ideologies today.) And this isn't just the parties' ideologues, either -- the same ideological split genuinely exists in the US public (contrast to many other countries where the "big government" types seem to have largely won the argument).
Either party could easily balance the budget on its own, given unlimited power. However, because of the way the US political system just happens to work, it's very hard to do anything without getting at least some of the other guys on board.
The Republicans have for many years had a "starve the beast" strategy, figuring that if you keep on cutting taxes then eventually the Democrats will have to agree to cut spending as well. In recent years the Democrats have invented the opposite "gorge the beast" strategy, in which you figure that if you keep on increasing spending then eventually you'll be able to pressure the Republicans into agreeing to tax increases. And the poor beast being starved at one and and gorged at the other starts to... wait, no, this analogy is breaking down.
What's the solution? There really isn't one. The ideological split in the American public is real and it isn't going away any time soon, and folks need to stop proposing "solutions" which basically just come down to "all we need is for the other side to come over and agree with us and it'll all be rosy." That's not gonna happen.
But perhaps the first step is to acknowledge that this ideological split is genuine, and real, and does actually reflect the ideological split within the US population. Perhaps we can compromise, but first we have to acknowledge precisely what it is we're compromising about.
edit: Wow, I can't believe this got modded down. I guess the true believers in the "No really, it's the other guys' fault" die hard.
I'd caution against taking the Republican's word that they want a 'small government'. History contradicts this assertion -- the last 3 republican administrations increased the budget deficit.
I think Republicans want to allocate funding differently from the Democrats, but I'm not so sure they want to do any kind of 'small government'.
Amen. 100% of problems mentioned by grandparent (Bush tax cuts, Medicare prescription bill, wars in Afghanistan and Iraq) were enacted by a Republican president.
Can you find me a recording of any Democratic officeholder saying they're "for Big Government"? I don't think even Bernie Sanders is on the record with something like that. Fox News saying what democrats think is not what democrats think.
Which Democratic spending initiatives are contributing to the current deficit? The Democratic war in Iraq, or the Democratic Homeland Security Dept? The Democratic Medicare Part D? You can argue the stimulus but that spending was all temporary and is gone by next year. The healthcare bill reduced gov't healthcare spending (and the tea party ran against it on a obama-is-taking-away-your-medicare scare campaign, I remember the attack ads, irony is not dead).
1999 wasn't that long ago. We had a surplus. The ideological split is mostly the result of opportunism by Tea Party commentators/legislators and the complete illegitimacy of any Democratic president in the eyes of about 50% of Republicans. Democrats will bend over backwards to not be perceived as ideological, as we saw last week.
> Which Democratic spending initiatives are contributing to the current deficit? The Democratic war in Iraq, or the Democratic Homeland Security Dept? The Democratic Medicare Part D?
With all of those repub approved initiatives, the last deficit under a repub congress was $160B/year and the trend was downwards.
The deficit jumped to $460B when the Dems took Congress (and Bush was still president).
Speaking of Medicare Part D, care to name three congressional Dems who objected to it on the basis that it cost too much? It's easy to find those who objected because it cover more, that is, cost more.
And, wrt Homeland Security, feel free to identify Dems who want to spend less on it. The vote on unionization will help you identify those who wanted to spend more.
> You can argue the stimulus but that spending was all temporary and is gone by next year.
Obama and the CBO disagree. They both project >$1T/year deficits for the forseeable future. (They disagree on how much over $1T.)
> The healthcare bill reduced gov't healthcare spending
Umm, no. The claim was the overall cost of healthcare would go down, but that govt spending would go up, being paid for by additional taxes and $500B in medicare "savings". (The scoring "worked" because the taxes started before the benefits.)
The medicare "savings" consists of paying doctors less, the "doc fix". That's been on the plate several times, but each time Congress has pulled back because doctors have said that they won't accept medicare patients if they're paid less.
> The ideological split is mostly the result ... and the complete illegitimacy of any Democratic president in the eyes of about 50% of Republicans.
Ah yes, no Dems ever questioned BushMcChimpHitler's legitimacy or were at all ideological about him.
This kind of silly tribalism is the exact reason that nobody can get anything done. You're now saying ignore the votes, pay attention to how they talk about the votes? A bunch of points about actual actions, and you're so invested in being a Republican that you change the subject to how they talked about the actions?
Are you sure you're not being played for a sucker?
Yes, Democrats were more offended by the gross inefficiency of Medicare Part D than by the general idea of Medicare as a program. They voted against Part D. Republicans voted for it.
Having a projected deficit next year is hilariously orthogonal to the undisputed fact that stimulus spending ends this year.
And the point about Democrats questioning Bush's legitimacy is a great one. Here's someone who actually was arguably illegitimate for his first term, and what did Democratic officeholders and commentators do? Fall over themselves to disassociate themselves from the crazy hippies, and proclaim that we as a country need to move forward. There was no Democratic tea party, and frankly if the Republican tea party is honest about their concern with deficits, where were they prior to January 2009?
> You're now saying ignore the votes, pay attention to how they talk about the votes?
We agree that Medicare part D is bad. You claim that the fact that Repubs supported it and Dems didn't implies that Dems would have done better if they'd had their way. One problem with that argument is that it assumes that all alternatives are better. That's clearly false.
That's why I said that we should look at what the Dems wanted instead of Bush's Medicare Part D. What they wanted was 40% more expensive, so if you think that Bush's Medicare Part D is bad because of the cost ....
> Having a projected deficit next year is hilariously orthogonal to the undisputed fact that stimulus spending ends this year.
As I've pointed out, almost everyone else thinks that next year's deficit, post-stimulus, will be over $1T and that the same is true the year after and for the forseeable future under current law. (There's some disagreement over whether the trend is $1.2T or $1.5T.)
If you're correct, why isn't Obama shouting your number?
1) Medicare Part D managed to spend a boatload of money while providing an absurdly small amount of care, most of it going straight to drug companies. I'm sure you could do worse if you actively tried, but you'd really have to try pretty hard.
2) And, the stimulus isn't contributing to that deficit, hence the comment about it being "hilariously orthogonal". It was also 1/3 tax cuts if you don't remember. Anyways, medicare Part D, the war in Iraq, the Bush tax cuts, and the near-doubling of military spending are contributing to that deficit, as well as tax base shrinkage due to recession. If we're counting relative to the last time we ran a surplus.
> Medicare Part D managed to spend a boatload of money while providing an absurdly small amount of care, most of it going straight to drug companies.
As I said, we agree that it's bad. You've yet to establish that the Dem's proposal, which was more expensive, was better.
> And, the stimulus isn't contributing to that deficit, hence the comment about it being "hilariously orthogonal".
You're the only one talking about the stimulus. I've pointed out that the post-stimulus deficit is >$1T, while the pre-Obama deficit was $460 and the last Repub Congress deficit was $160B, both with the bush tax cuts and more war spending and the recession hadn't kicked in then.
Bush owned the first > 1 trillion dollar deficit, that budget was passed while he was still president. If we're doing stupid technicalities.
But again, that's silly partisan point scoring and totally beside the point. Pulling one-sided stats with a total lack of intellectual honesty in order to try and claim my side's better.
You're actually arguing here, "but if we cherry pick from the peak of the housing bubble, my side looks great! Just don't look at the following year".
I don't blindly cheer for democrats like they're a football team, I try to objectively evaluate what's going on. If more republican football fans did the same, we might actually have a deficit reduction deal, or a plan to help the jobs situation.
> Bush owned the first > 1 trillion dollar deficit, that budget was passed while he was still president.
Yup, and Obama has gone deeper.
I'm not claiming that Bush was good - I've said that he's bad. I'm pointing out that Obama and the Dems have been worse.
> If we're doing stupid technicalities.
One "stupid technicality" is that the Obama and the Dems haven't been all that interested in passing budgets.
That's why I talk about spending.
> but if we cherry pick from the peak of the housing bubble, my side looks great! Just don't look at the following year".
You've repeatedly claimed that there will be a huge difference in spending after this year because the stimulus will be over. That makes a comparision with pre-recession reasonable.
Oh, now I get it, you're claiming that the current deficits are due to spending by the Obama administration?
Can you point out which spending? I'm under the impression that they're structural deficits created by Bush programs and exacerbated by the recession. But if you could point out some large Obama spending plan that passed, I'd change my mind.
This week, we found out that they scored the subsidies based on single people with no kids while the coverage goes to dependents as well, so the subsidies will cost a lot more than predicted.
Every week or so, there's another $100B or so of spending in the bill that we find out about that wasn't scored.
Pelosi was right - we had to pass the bill to know what's in it.
> And the point about Democrats questioning Bush's legitimacy is a great one. Here's someone who actually was arguably illegitimate for his first term, and what did Democratic officeholders and commentators do?
They, along with the rest of polite society, when some "brave artist" ranted about Bush's assassination.
> if the Republican tea party is honest about their concern with deficits, where were they prior to January 2009?
Actually, a lot of us were screaming about the bush deficits, ,which got a big boost in 2006, when the Dems took congress, something that you completely ignore.
However, as I point out, there is a difference between $160B deficits and $1T deficits.
Sure, you want to blame the economy, but even if that's the only cause, why is it reasonable to keep spending as if times are flush when they clearly aren't?
I think the point he is trying to make is that where were the Dems when these charges were run up, and I agree with the point. Why are we suddenly hitting the debt ceiling? Does noone in Washington have a calculator?
In the opposition? With a minority of votes, voting against this stuff? That's not good enough?
We aren't suddenly hitting the debt ceiling, we've been hitting it every year or two like clockwork for decades. It was raised over a dozen times during the Reagan administration, for example. Suddenly?
You won't find any Democrats using the phrase "Big Government" because it's a loaded, derogatory phrase. Nonetheless, the Democratic platform is generally in favor of spending on social services, like welfare, unemployment benefits, Social Security, and education, as well as generally favoring higher amounts of regulation for businesses and industries. Some of these positions are relative: keep the same amount of environmental regulations instead of reducing them, or cut education but by a smaller amount than oil subsidies. Some of them are contingent on the economic climate: avoiding cuts instead of increasing spending. But in general, yes, the Democrats do envision a larger government role in society (excepting defense/security) than Republicans do. They just don't come out and say so because that would be politically disadvantageous.
But in general, yes, the Democrats do envision a larger
government role in society (excepting defense/security)
than Republicans do.
How can you just toss "excepting defense/security" in a parenthetical like that?
I'll never understand how some people can be discussing the size of size of government and then essentially ignore military spending (of which much has little to do with defense or security) and governmental abuses of power for the sake of security theater.
NPR? Big government.
PBS? Big government.
Rendition and torture? Not so much. Belongs in a parenthetical.
Can you find me a recording of any Democratic officeholder saying they're "for Big Government"?
The ideological split is not between Democrats and Republicans. They are wings of the Washington, D.C. Nationalist Party. The Democrats are the emotionalist wing, the Republicans are the rationalist wing, but the motto of both wings is "We're from Washington, and we're here to help!"
1999 wasn't that long ago. We had a surplus.
Funded by a bubble.
The ideological split is mostly the result of opportunism by Tea Party commentators/legislators ...
The Tea Party is one public face of the decentralist sentiment that opposes the Washington, D.C. Nationalist Party. By their very nature decentralists do not organize national movements like the Tea Party until the situation is completely out of hand (as with the Regan Revolution). They give the centralists a real thrashing, spend a few years chainsawing the worst crap out of the government, then go back home. The centralists then start rebuilding power for the next showdown in another 30 years.
I don't know, but I think that you are reading far too much into each party's alleged ideological stances. As far as I can tell, both modern political parties seem to agree that spending is the best way to go about governing.
Yes, I know that one party talks about cuts a lot and the other party talks about spending a lot, but what do they actually do?
Wars? Wars are expensive. Entitlements? Well, entitlement spending is also quite expensive. Neither party will be the first one to threaten social security. Neither party will be the one to threaten medicare. Sure, there will be lots of hand-waving and other forms of gesticulation, but no elected politician in their right mind will take a hatchet to the programs that benefit America's senior citizens. It's just not good politics in a nation with a rapid electoral cycle. (Who votes? Answer that question and you can usually go from there.)
Ideologies - they don't matter. Grandiose claims of some great idealogical divide are wonderful to hear (and great for motivating the base), but what is actually done in practice? Well, the answer is whatever gets you re-elected. Which tends to be lots of sound and lots of fury but very little in the way of action.
In genereal, I agree with what you have written. However, it seems the OP's debate, and most of others, overlook an adjacent idea that used to be one of the more serious disputes of our country. That is: The debate over Federal vs. State governments, and which entity should be concerned with which issue(s).
I would prefer that states that want more government involvement implement that at the state level. The states could then better compete as more people (and companies) would move to the states where they agreed more fully with the rest of the population.
If one looks at the US Constitution, it appears (IMO) most concerns were originally and explicitly intended to be left to the states, and reading Jefferson's writings it appears even more so. This has the added benefit that we can probably bring more transparency and accountability to state legislators because of the smaller network size.
I don't recognize your description of the political landscape. Republicans don't do any more to shrink government than Democrats do to expand it. This has never been true. They do have different priorities. Republicans think the government should be like your father who protects good citizens from harm by fighting bad citizens and foreign threats. Democrats think the government should be like your mother who nurtures and cares for all of its citizens.
As science and economics are showing us a mixture of father and mother turns out to work best, the political differences between Republicans and Democrats are shrinking every year. As a consequence, the parties feel it is necessary to distantiate themselves more and especially the Republicans have spent several decades creating a vast narrative around where their priorities lie. Unfortunately, this has led to big changes in voter's habbits and ideological perspectives.
Wealthy opportunists have helped promote and taken advantage of the narrative to push an agenda of lower taxes for the rich in return for lavish campaign funding. A group of people bought into the narrative too deeply and now think that the myths about taxes they heared over the years are the hard facts, and that Democrats have misguided beliefs. Supported by the wealthy opportunists, these people have taken control of the Republican party and its policies. This is a corruption that has taken many years to develop, but now runs deeply into the belief systems of voters and the wallets of politicians.
While I agree that there is a fundamental division of ideologies of what precisely the federal government ought to be amongst the American people, I disagree that it is a division between the two parties.
In my opinion, the establishment in Washington consisting of the bureaucracy and life-long politicians is generally pro-government and pro-spending. The Republicans pay a lot of lip service to small government, but it is only the Tea Party types like Ron Paul that actually fight for smaller government.
You wrote, "the Republicans want a small government." Do you believe that the attributes of a "small government" include endless wars, redition, torture, warantless wiretapping, racial profiling, police brutality, merger of church and state, etc.?
Makes you wonder if the real answer is to split up the US.
Happened plenty of times to other countries over ideology- though each half could stand to lose a lot, seeing as various capabilities and industries are not evenly spread across the nation.
There's a saying that goes, "If you owe the bank $100, that's your problem. If you owe the bank $100 million dollars, that's the bank's problem." (I've seen it attributed to John D. Rockefeller, but certainly other people had the same idea before hime).
s/million/trillion/g, s/bank/China/g and s/you/United States/g and you've got my take on the current situation. Lots of the rest of the world's economy is based on selling things to the United States; it's pretty much China's explicit strategy for growth. If the US goes to everyone in turn and says, "Hey remember that $50 billion I said I'd get you last week? Yeah...I can give you $10 million," there will be a lot of grumbling, and hopefully some restructuring in the long term, but they'll still take the deal. Where else are they going to go?
TL;DR US has a monopsyny on monkey shaped shower curtain rings.
The US treasury is currently borrowing at the lowest rates in 70 years. To obtain the lowest rates possible, about half of the US debt is in bonds that mature in less than a year. This means huge quantities of bonds are constantly maturing and being resold. Any change in interest rates will quickly result in much higher interest payments.
These rates are so low because the fed is buying the bonds and treasuries are currently the safest place to park huge amounts of cash. The rates even go negative at times because US bonds are are safe place for cash. If the treasury starts defaulting on its debts, that will change very quickly. Not only that but the status of the USD will change very quickly.
The current account has very little to do with the US Debt problems.
The current account relates to the balance of trade[1], ie: the amount of good and services purchased from overseas vs sold overseas. The US Debt is money borrowed by the US Goverment[2], which isn't really related to trade directly at all.
There is a Wikipedia article that lists the different types of deficits: http://en.wikipedia.org/wiki/Deficit. The current debate in the US is over deficit budgets, whereas a Trade Deficit is a different problem,
I think these two different ratings appropriately reflect the uncertainty of the situation.