United States loses AAA credit rating from S&P • Hacker News Board

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

#261

Post by Cushman » Sat, Aug 06, 2011, 5:04 AM UTC

orangecat wrote: post #246

Cushman wrote: post #146

Earlier quoted context omitted.

This economic crisis isn't about economics, it's about politics. When the GOP goes off on "cutting spending", they're not being fiscally responsible. Ideally, they would literally like to cut every dollar that isn't going to the Pentagon. "Spending cuts" is a dog whistle for the idea that the Federal government shouldn't exist at all. It doesn't matter if borrowing and spending (some might call it "investing") money…

"Spending cuts" is a dog whistle for the idea that the Federal government shouldn't exist at all. Please. The government spent far less during Clinton's administration (the last vaguely fiscally responsible president), and I don't recall having to step over that many starving homeless people to get to work.

Um, yes? We could certainly be spending less and providing more social services. That's not what the tea partiers mean when they say "cut spending", though.

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

#262

Post by giardini » Sat, Aug 06, 2011, 5:05 AM UTC

bmelton wrote: post #76

_delirium wrote: post #36

Earlier quoted context omitted.

Treasuries act as a money store for large institutions that I think would be hard for them to replace in practice. They use T-bills in particular as more or less a jumbo-sized version of an FDIC-insured bank account. Where would they move that money to? I.e., who else provides a similarly safe account where you can deposit $50 billion? Can't be to a bank account, because all the major banks have even lower ratings. T…

You could, for example, move your money to Canadian treasuries, which are AAA rated, couldn't you? I am admittedly learning much of this as I read, but it seems to me that a large concern would be the amount of money that might simply shift out of our economy to economies with better (safer) credit ratings.

Everybody's missing the point here.

The credit rating agencies (S&P, Moody's and Fitch) don't know what they are doing! They enabled the financial meltdown. Their ratings are not useful. Their numbers are bad. They are either corrupt, inaccurate or both.

It would be nice and easy to believe that, since S&P puts a "AAA" beside a company's name, that the company is solid. We now know that is false.

Pay attention to Nicholas Taleb's writings: the financial models commonly in use don't work - don't trust them. Use more conservative measures. Avoid markets where you cannot quantify risk.

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

#263

Post by chrischen » Sat, Aug 06, 2011, 5:08 AM UTC

dupe123 wrote: post #177

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?

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.

"Those employees go spend their money on goods and services produced in other countries"

Is that a rule?

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

#264

Post by CamperBob » Sat, Aug 06, 2011, 5:12 AM UTC

imcqueen wrote: post #79

I just got a NYTimes news alert that S&P is in fact holding off on downgrading the US based on the math error that was discovered. Did anyone else see that come through? Is NYT just behind a little?

If so it might be an interesting political tactic on S&P's part. Issue a downgrade to show you're serious, but include a 'math error' that justifies an almost-immediate retraction.

If a ratings agency feels that it's necessary to use scare tactics, that's scary enough in itself.

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

#265

Post by hnal943 » Sat, Aug 06, 2011, 5:16 AM UTC

eazolan wrote: post #180

jellicle wrote: post #173

Earlier quoted context omitted.

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?

Because the one thing almost every economist agrees on is raising taxes in a bad economy makes it worse.

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

#266

Post by seehafer » Sat, Aug 06, 2011, 5:22 AM UTC

dpark wrote: post #238

twoodfin wrote: post #165

Earlier quoted context omitted.

It's fairly widely understood (though I guess not by Professor Krugman) that Medicare offloads some of its own costs onto the private sector by the below-market rates it pays providers. He's also neglecting to make a real comparison of the services that private health care provides vs. Medicare. Sure, private insurance premiums may have risen faster than Medicare spending during the '90s, but Medicare wasn't even pay…

> It's fairly widely understood (though I guess not by Professor Krugman) that Medicare offloads some of its own costs onto the private sector by the below-market rates it pays providers. This is fairly widely claimed, but it's a pretty weak claim. Doctors are not required to accept Medicare. They choose to do so. They choose to accept the rates Medicare offers. When one party offers an amount for a second party's se…

They choose to accept the rates Medicare offers. When one party offers an amount for a second party's services, and the second party accepts, they have just established the market rate for that transaction.

Not when second party holds a monopoly on a certain patient population, as does Medicare for the elderly. The healthcare market is so distorted by government intervention that calling anything a true 'market rate' is laughable.

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

#267

Post by dvogel » Sat, Aug 06, 2011, 5:24 AM UTC

ubernostrum wrote: post #200

sbierwagen wrote: post #194

Earlier quoted context omitted.

There already is one? Other departments can't touch the SSA's budget-- because it's the SSA's budget.

Except for the gaping hole in the fence, which dictates that the trust funds have to invest in Treasury bonds. Which means the money goes in and straight back out again, and that threats of default carry an implicit threat of "Social Security won't be able to pay out".

Thus far the risk of investing the SS surpluses into any investments other than US treasuries far out-weighed the risk of the US choosing to make SS forgive the debt incurred by said treasuries.

I've often argued that SSA should be allowed to invest some portion of the surplus (perhaps 10-20%) in AAA-rated municipal bonds. Perhaps the downgrade today will prompt more people to consider this.

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

#268

Post by seehafer » Sat, Aug 06, 2011, 5:28 AM UTC

ericd wrote: post #244

dglassan wrote: post #213

Earlier quoted context omitted.

Tearing the healthcare system down to it's nuts and bolts would costs a lot more than to continue reforming. I spent some time consulting hospitals an implementing electronic medical record systems for hospitals. It costs a hospital millions of dollars and thousands of hours to install and train people for these systems. Too many hospitals are too deep in these EMR systems to start from scratch again. Their margins a…

A hospital's margins are only 1-2%? Do you have a source for that? Maybe they can pull that off by paying themselves all the profits, but there's no way that I buy that hospitals have thinner margins than grocery stores before that. Hospital administrators are very well off on average. Their fees are way too large to be running so close to the wire, given their expenses.

Do you have a source for the expenses that the average hospital incurs?

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

#269

Post by araes » Sat, Aug 06, 2011, 5:38 AM UTC

CamperBob wrote: post #247

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…

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. Once you realize that the military is not a collection of armed forces so much as it is the US's largest social welfare program, these policies and figures start to make more sense.…

True, and numerous families across the US depend on the active and guard pay of the armed forces. However, by bringing troops home, there are a number of secondary costs that can be reduced, or eliminated. For example, one of the more famous recently has been the discussion of AC in Afghanistan. Per the NPR article:

http://www.npr.org/2011/06/25/137414737/among-the-costs-of-w...

We are spending 20 billion a year to truck energy supplies across some of the worst terrain in the world so that we can provide AC to thousands of horridly inefficient tents for our soldiers in the field. For comparison, that's more than the entire yearly budget of NASA. And its only one of numerous logistics and support costs we incur in our active warzones.

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

#270

Post by IbJacked » Sat, Aug 06, 2011, 5:47 AM UTC

usaar333 wrote: post #155

darksaga wrote: post #142

Earlier quoted context omitted.

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…

Trillions in debt is perfectly fine for an economy as large as America's. It's tens of trillions where you have a problem long-term. I agree that you should just run the short-term deficits. That said, if we have to cut short-term deficits (which I don't think is a wise strategy), it is significantly better to tax the rich than cut benefit programs. Finally on military, I'd feel it'd be a better use of resources to t…

>> Trillions in debt is perfectly fine for an economy as large as America's.

No it's not. Wouldn't it be much better to not have to constantly pay billions to simply pay the debt's interest? We aren't even reducing the principal, which is why we have to keep raising the debt ceiling.

That's like saying it's perfectly fine to maintain a large credit card debt because you have a high income.

Just because you can handle it, doesn't make it wise.