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Just the Facts: S&P's $2 Trillion Mistake

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Re: Just the Facts: S&P's $2 Trillion Mistake

#101

Post by fauigerzigerk »

jongreenlee wrote: post #85
fauigerzigerk wrote: post #50

S&P's mistake is certainly incredibly embarrassing but apart from that I'm asking myself a much more fundamental question: Why is the ability to pay considered at all when it comes to the US? A country that is indebted in its own currency can theoretically never default on its nominal obligations. Not due to inability to pay at least. I don't think that credit rating agencies even try to pass judgement on the likelyh…

>>voted in favor of default It was framed this way by some involved parties, but it's a second independent decision to let that happen. The other option was for the Treasury to stop issuing checks at a rate higher than than it's inflows. This is similar to what many of us might have done at some point (college might be one), riding as close to your limit as possible, but making minimum payments and reducing spending…

I don't think anyone who is forced to "set priorities", meaning he can only honor some obligations but not all of them, deserves a AAA rating.

Re: Just the Facts: S&P's $2 Trillion Mistake

#103

Post by guard-of-terra »

fauigerzigerk wrote: post #50

S&P's mistake is certainly incredibly embarrassing but apart from that I'm asking myself a much more fundamental question: Why is the ability to pay considered at all when it comes to the US? A country that is indebted in its own currency can theoretically never default on its nominal obligations. Not due to inability to pay at least. I don't think that credit rating agencies even try to pass judgement on the likelyh…

As far as I understand, the field in which AAA and AA and B exist is defined by the stable dollar, among other things. Once this axiom is invalidated, all ratings lost meaning, and therefore they can't account for this possibility in their rating. That, or add a separate class. Which wouln't be useful.

Re: Just the Facts: S&P's $2 Trillion Mistake

#104

Post by jerf »

lucisferre wrote: post #100
sachinag wrote: post #94

Earlier quoted context omitted.

Our downgrades aren't about our ability to pay - it's about our willingness to pay. That has gone out the window. As S&P says, the Republican Party is now so rabidly anti-tax that their new baseline assumes the indefinite extension of the '01 and '03 Bush tax cuts, meaning that we will run structural deficits forever.

Hate to just post a +1, me too, but this, it seems, just isn't be said or recognized enough. The US, with one of the lowest tax burdens in the western world ( the lowest?) can easily afford to pay down it's debts but without any support for raising taxes in the slightest, not just amongst republicans but from what it seems are a vocal and loud minority (majority?) of Americans, no one can really act surprised by S&P'…

It isn't our current debts that have people concerned. It's the combination of current debts and unsustainable future obligations, which are so large that they in fact can't be paid down by just raising taxes. Barring an adjustment in what they are, they grow to the point that they eventually consume 100% of the economy in something like 40 years in conjunction with interest payments, but of course they become completely unsustainable long before then.

There's no solution that doesn't involve cuts, and lots of them. That's not a political statement, at least to me it isn't... it's a math statement. We have obligations in excess of what we could possibly pay down even if we hypothesize a 100% tax that somehow magically draws from a perfectly healthy economy while its happening. The only questions are who gets them, how we do them, and when we do them. Failure to do them at all means we choose the default choice of economic collapse, at which point obligations will still not be paid. There's no solution where we simply honor all of our current "obligations".

(And I would point out that I can't emphasize this point enough. If we do nothing, the default answer is still that we default on everything when the economy collapses. If you value Medicare, Social Security, and everything else, truly value it and not just valuing it the way politicians do as a vote-buying mechanism, you ought to be leading the charge to turn them into something managable, because the worst case scenario doesn't come from Evil Repulicans, it comes from economic collapse. The "evil Republicans" are the only ones taking actions that may mean that Social Security still exists for anyone in 2050.)

Well, there is, technically, which is that some amazing breakthrough in technology suddenly makes us all a lot wealthier very quickly, which is such a long shot it's hardly worth talking about. (And still not worth planning for; should we become radically wealthier we can work out ways to use it when we have it.)

Re: Just the Facts: S&P's $2 Trillion Mistake

#105

Post by gareim »

jackpirate wrote: post #84
gareim wrote: post #62

Earlier quoted context omitted.

You know, I'm not against people downvoting me, but I'd like to know why. I'd like people to tell me why they disagree so I can at least learn from my mistakes.

You are whining. There are lots of legitimate reasons to complain about teachers. You gave one legit (changing course requirements midway), and lots of illegitimate ones. You do not have a respectful tone. Plus, the fact that you would have only gotten a D makes you look retarded in the eyes of most on HN. It's hard to get sympathy from an intellectually snobby group by bragging about your failure to excel. In short,…

What were the illegitimate reasons? I suppose the one about someone else accidentally taking my homework? I don't think I could have helped that and any reasonable teacher might have given me half credit.

I got a bad grade for lots of reasons. I hated the class. This was a teacher that tried telling me light travels at 300 meters a second. She also arbitrarily handed out grades, marking one of my answers wrong (0m/s^2) when another student got hers right (0m^2/s) when the correct unit was actually meters per second squared.

My original point was that if the Treasury was correct and S&P gave them a bad grade based on mistakes, then yes, the USA should be complaining since the bad grade does have a negative impact.

Re: Just the Facts: S&P's $2 Trillion Mistake

#106

Post by fauigerzigerk »

orijing wrote: post #88
fauigerzigerk wrote: post #68

Earlier quoted context omitted.

I believe that the US government has an obligation under current law to make payments to Medicare and SS recipients. It's not a voluntary donation. I don't think the government can simply stop making those payments tomorrow without violating current law. You see, it is this entire attitude of political parties negotiating in the 11th hour about whether or not to honor this or that obligation that isn't exactly encour…

How can that be? Suppose our debt limit were hit. Law says we can't issue more debt; another law says we must pay social security. Until more taxes start rolling in, we'd be breaking one law or the other.

That's a very good question. In my view, it's simply incompetent, populist, law making. How can it be that a country can even have such a rule on the statute books without getting downgraded on the spot?

Re: Just the Facts: S&P's $2 Trillion Mistake

#107

Post by njharman »

fauigerzigerk wrote: post #68
cop359 wrote: post #58

Earlier quoted context omitted.

No one was seriously suggesting that we never pay our debts ever again, There really was two things proposed: One was too not raise the debt ceiling and use SS and Medicare funds to pay off the debt; The other was to default but just for a short while so as to provide more pressure on the Democrats. If we defaulted for say a month; it would hurt a minuscule fraction of the debt holders. If it actually would hurt debt…

I believe that the US government has an obligation under current law to make payments to Medicare and SS recipients. It's not a voluntary donation. I don't think the government can simply stop making those payments tomorrow without violating current law. You see, it is this entire attitude of political parties negotiating in the 11th hour about whether or not to honor this or that obligation that isn't exactly encour…

Um, you do realize the US government makes (and changes) those laws you seem to value so highly.

Re: Just the Facts: S&P's $2 Trillion Mistake

#109

Post by fauigerzigerk »

njharman wrote: post #107
fauigerzigerk wrote: post #68

Earlier quoted context omitted.

I believe that the US government has an obligation under current law to make payments to Medicare and SS recipients. It's not a voluntary donation. I don't think the government can simply stop making those payments tomorrow without violating current law. You see, it is this entire attitude of political parties negotiating in the 11th hour about whether or not to honor this or that obligation that isn't exactly encour…

Um, you do realize the US government makes (and changes) those laws you seem to value so highly.

What makes you think I do not realize that? It's exactly why I took (small) pains to say "current law" and not just "law".

Under the rule of law, the government has to honor its own laws even though they can change them. They cannot make a law that incurs costs, take on debt, and then stop paying down their debt just because they could potentially change the law that caused those bills to run up in the first place.

Re: Just the Facts: S&P's $2 Trillion Mistake

#110

Post by jholman »

jerf wrote: post #104
lucisferre wrote: post #100

Earlier quoted context omitted.

Hate to just post a +1, me too, but this, it seems, just isn't be said or recognized enough. The US, with one of the lowest tax burdens in the western world ( the lowest?) can easily afford to pay down it's debts but without any support for raising taxes in the slightest, not just amongst republicans but from what it seems are a vocal and loud minority (majority?) of Americans, no one can really act surprised by S&P'…

It isn't our current debts that have people concerned. It's the combination of current debts and unsustainable future obligations, which are so large that they in fact can't be paid down by just raising taxes. Barring an adjustment in what they are, they grow to the point that they eventually consume 100% of the economy in something like 40 years in conjunction with interest payments, but of course they become comple…

My apologies if this is just rampant ignorance talking (including ignorance of American future obligations), but it appears to me that "The US has future obligations so large that even a magical 100% tax in a magically healthy economy cannot pay for them" is, as they say, an extraordinary claim requiring extraordinary evidence. Or at least some evidence.

And even were that proven (or at least were that to be slightly persuasive), there's still substantial arguing yet to be done, to argue that a refusal to raise taxes at all is an action in _favour_ of coping with debt (indeed, allegedly the only such action).

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