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United States loses AAA credit rating from S&P

reuters.com

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Re: United States loses AAA credit rating from S&P

#171

Post by ohyes »

darksaga wrote: post #142
ohyes wrote: post #73

Earlier quoted context omitted.

Don't think it this really matters. The US still has the strongest economy of pretty much anyone (even with recession). There isn't going to be a massive dumping of US bonds. The AAA credit rating is helpful, but is only used by certain investors, and those big enough to make a real difference have their own assessors of risk. I think the cutoff for the smaller guys to be legal to invest in is something like AA-. We…

Even if you tax the hell out of the rich, it still leaves this country TRILLIONS in debt. It's a fact - you don't tax your way out of a recession and you sure as hell don't tax people to create jobs. It simply doesn't work. And yeah, great idea. Let's cut military funding while we're fighting a war on terror in three countries. Apparently you don't remember Clinton's military cuts which removed almost 300,000 people…

>It's a fact - you don't tax your way out of a recession and you sure as hell don't tax people to create jobs. It simply doesn't work.

If it is a fact, where is the data?

Economies are stimulated by people spending money.

A tax cut to someone making 50,000 dollars a year is going to have a greater percentage of it spent than a tax cut to someone making 5,000,000 a year. Conversely, a 5-10% tax increase isn't going to drastically change the spending habits of someone making 5,000,000 a year, where as it might make the person making 50,000 a year cut back on a number of things.

The important part is that money finds its way back into the market. The rich have 90% of the money. It would make sense to either tax the rich and spend it on infrastructure (or stuff like scientific research and education). Or tax the rich and spend it on the poor (who will actually spend the money).

I hope we cut down on military spending because I think war is bad. We should stop having it. I can't imagine justifying fighting 3 wars on the basis of possible unemployment.

Re: United States loses AAA credit rating from S&P

#172

Post by jlmendezbonini »

winestock wrote: post #111
prostoalex wrote: post #98

Earlier quoted context omitted.

What constitutes defense spending nowadays? Is it largely salary payments to current troops? Wouldn't we have to deal with a large unemployment problem in case we laid off a bunch of military employees and told them to go find a job somewhere else? Or is it payment to defense contractors, such as Valley's own Lockheed Martin? Wouldn't this cause a large number of people to be unemployed, contributing to recession?

That is an excellent question. I'm too lazy to search for the answer, but, with our luck, I'd say that the Defense budget is about evenly split betwixt personnel and hardware. Therefore, cuts to defense spending will cause unemployment for both defense contractor engineers as well as veteran grunts.

Taking over your laziness I found the 2010 budget. It doesn't really provide an accurate personnel versus hardware comparison but it looks like this:

Maintenance and operations 41.35% Military personnel 22.5% Procurement 20.45% Research, Development, Testing & Evaluation 11.54% Military Construction 3.49% Family Housing 0.145% Total 99.45% (I'm lazy too and rounded too much. Hey it's just 359.6775 millions that are missing...)

http://en.wikipedia.org/wiki/Military_budget_of_the_United_S...

Re: United States loses AAA credit rating from S&P

#173

Post by jellicle »

watchandwait wrote: post #87
quandrum wrote: post #63

Earlier quoted context omitted.

Why would you cut Social Security? It's in no danger. And frankly, medicare wouldn't be if we killed the payroll tax cap. I never understood why it's ok for payroll taxes to be regressive.

Social Security is supposed to be a pension program, not an income redistribution program. So you are making "contributions", not paying taxes, in the official lingo. Of course the program is most regressive for younger workers, who pay the most and will get the least in return. Social Security is in serious trouble, by the way, although it is not the driver of the current budget crisis. In just a couple of years the…

There's no such thing as an unfunded liability for Social Security. By law, SS is funded solely by payroll taxes. If payroll taxes are insufficient, benefit payments are reduced to match.

Social Security can never go bankrupt, and it can never be in debt.

Re: United States loses AAA credit rating from S&P

#174

Post by bokonist »

Mindboggling. Does the S&P understand that the U.S. debt is all denominated in a currency that the U.S. government can print at will? If the U.S. government doesn't have an AAA rating, what does an AAA rating even mean?

At the moment, the national "debt" is over $10 trillion dollars, while the total supply of currency is about $2 trillion, and total government profits are about negative $1.5 trillion. If we assume that the government will not use it's powers as fiat-currency-creator to back the national debt, than the proper credit rating of the U.S. is F. There is no way it could possibly pay back the debt. The debt is five times greater than the total supply of dollars. It's debt to profits ratio is way worse than many bankrupt companies. On the other hand, if we assume that the government will continue to use its power of fiat to back the debt, then the rating is AAA. It's safer in nominal terms than any other sort of debt. It is the baseline, the reference point. No other dollar-denominated debt can possibly be safer.

So you have two possibilities for the U.S. "debt" - AAA or F. Rating it anything else just demonstrates extraordinary ignorance.

Re: United States loses AAA credit rating from S&P

#175

Post by n09n »

jerf wrote: post #90
j_hightower wrote: post #80

Earlier quoted context omitted.

"Given China's rise, its wise long-term to keep a presence in the region." Why? China will surpass the United States in soft and hard power eventually. This is demographically and economically inevitable. Even sooner, if not already, China will become an unshakable hegemon over all of Asia. So why fight it in the most expensive and futile ways possible, i.e., by maintaining the fiction that we will be able to exercis…

"This is demographically and economically inevitable." Oh, no it's not. First China has to hold together over that time frame. This is feasible... this is not inevitable . There's a lot of tensions over there. Then even if they pass that test, there's other things they're going to have to deal with. Right now, there isn't a single world power that's looking to be "inevitably powerful" in the next 50 years, it's reall…

China doesn't need to hold together for that to happen. China has a far stronger ability than most other countries to collapse, reform, and remain "China."

Re: United States loses AAA credit rating from S&P

#176

Post by eric-hu »

jerf wrote: post #90
j_hightower wrote: post #80

Earlier quoted context omitted.

"Given China's rise, its wise long-term to keep a presence in the region." Why? China will surpass the United States in soft and hard power eventually. This is demographically and economically inevitable. Even sooner, if not already, China will become an unshakable hegemon over all of Asia. So why fight it in the most expensive and futile ways possible, i.e., by maintaining the fiction that we will be able to exercis…

"This is demographically and economically inevitable." Oh, no it's not. First China has to hold together over that time frame. This is feasible... this is not inevitable . There's a lot of tensions over there. Then even if they pass that test, there's other things they're going to have to deal with. Right now, there isn't a single world power that's looking to be "inevitably powerful" in the next 50 years, it's reall…

"Right now, there isn't a single world power that's looking to be "inevitably powerful" in the next 50 years, it's really "anybody's game"."

The Vatican?

Re: United States loses AAA credit rating from S&P

#177

Post by dupe123 »

prostoalex wrote: post #98
geuis wrote: post #52

(Reference: http://www.federalbudget.com/ ) Steps to recovery: 1) End all offensive military actions overseas. Finish winding down Iraq and abandon Afghanistan wholesale. These actions have cost several trillion dollars over the last 10 years. We can't get that money back, but we can stop spending more. 2) Defense spending is in the top 3 highest budget expenditures. Cut it by 1 third across the board. Maintain impor…

What constitutes defense spending nowadays? Is it largely salary payments to current troops? Wouldn't we have to deal with a large unemployment problem in case we laid off a bunch of military employees and told them to go find a job somewhere else? Or is it payment to defense contractors, such as Valley's own Lockheed Martin? Wouldn't this cause a large number of people to be unemployed, contributing to recession?

Spending money on government employees who provide no value is not sustainable. Those employees go spend their money on goods and services produced in other countries (where the workers are actually providing useful services) and you get a net flow of cash out of the U.S.

Re: United States loses AAA credit rating from S&P

#178

Post by gnosis »

geuis wrote: post #52

(Reference: http://www.federalbudget.com/ ) Steps to recovery: 1) End all offensive military actions overseas. Finish winding down Iraq and abandon Afghanistan wholesale. These actions have cost several trillion dollars over the last 10 years. We can't get that money back, but we can stop spending more. 2) Defense spending is in the top 3 highest budget expenditures. Cut it by 1 third across the board. Maintain impor…

You forgot the War on Drugs. Get rid of it, free all the people in prison for non-violent drug-related offenses, and tax the newly legalized drugs.

This should free up a lot of money that's being wasted on ruining people's lives right now, and make more money from taxing legal drugs.

As a bonus, it'll get rid of a lot of organized crime. Witness what happened with the repeal of Prohibition.

Re: United States loses AAA credit rating from S&P

#179

Post by chicagobob »

Please note that there are two other credit rating agencies, Moody’s and Fitch, and both of them have stated that they have no current plans to downgrade US debt from AAA, although one of them did place a negative outlook on the US. So, generally as long as one of the three agencies has a AAA rating the debt is usually fine for most investment / trust purposes.

Re: United States loses AAA credit rating from S&P

#180

Post by eazolan »

jellicle wrote: post #173
watchandwait wrote: post #87

Earlier quoted context omitted.

Social Security is supposed to be a pension program, not an income redistribution program. So you are making "contributions", not paying taxes, in the official lingo. Of course the program is most regressive for younger workers, who pay the most and will get the least in return. Social Security is in serious trouble, by the way, although it is not the driver of the current budget crisis. In just a couple of years the…

There's no such thing as an unfunded liability for Social Security. By law, SS is funded solely by payroll taxes. If payroll taxes are insufficient, benefit payments are reduced to match. Social Security can never go bankrupt, and it can never be in debt.

Why couldn't they just raise taxes?
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