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

treasury.gov

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

#111

Post by mkr-hn »

fauigerzigerk wrote: post #106
orijing wrote: post #88

Earlier quoted context omitted.

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?

Because it's been raised with minimal problems for the law's near century of existence.

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

#112

Post by mattvanhorn »

mgkimsal wrote: post #38
16s wrote: post #32

Earlier quoted context omitted.

They deserve to be called out. This isn't their only mistake . These clowns are the same bunch who kept giving AAA scores to complex mortgage-backed securities during the housing boom. http://www.bloomberg.com/news/2011-04-13/moody-s-s-p-caved-t...

Well, they were raked over the coals (though more should have been done) when they were too lenient. Now they're being too strict, and are still getting crap for it. I'm not a big fan, but from a 'credit worthiness' standpoint, I'm not surprised the US was downgraded. With the sorts of people running the show, we demonstrated that we were cavalier enough to nearly get to a point where we couldn't pay our bills. And t…

I think it's more along the lines of them pressuring the government to change the law that now holds them accountable for the kinds of things they were doing in 2008. See here: http://www.law.illinois.edu/bljournal/post/2011/03/29/Dodd-F... and here: http://firedoglake.com/2011/08/05/is-standard-and-poors-mani...

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

#113

Post by fauigerzigerk »

mkr-hn wrote: post #111
fauigerzigerk wrote: post #106

Earlier quoted context omitted.

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?

Because it's been raised with minimal problems for the law's near century of existence.

Good point. I didn't know the rule was that old.

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

#115

Post by Bungholio »

Bullet, meet foot. Given that this downgrade was triggered entirely by the poor behavior of U.S. politicians, how can it be in the U.S. interest for the Treasury to come across as whiney and paranoid? If the treasury had also mentioned the perfectly reasonable reasons for a downgrade there may be some balance, but to talk of S&P "making political decisions" puts them in exactly the same bracket as the poorly behaving politicians! Would you do business with this lot?!

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

#116

Post by Zumzoa »

jholman wrote: post #110
jerf wrote: post #104

Earlier quoted context omitted.

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…

This article http://www.economist.com/node/21524889 covers some of it.

"Health spending will rise by 5.8% each year from 2010 to the end of 2020, according to actuaries at the Centres for Medicare and Medicaid Services (CMS). In 2020 health care will account for one-fifth of America’s economy."

The article goes on to point out that surveys suggest that the Federal government will be liable for a huge amount of medical obligations... and all this will occur in the country which has the most expensive healthcare in the world.

Something has to break.

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

#117

Post by alnayyir »

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'…

Our tax burdens are not the lowest by any means. My total tax rate partially due to living in California (although it is mostly Federal) is ~40%. There are plenty of countries in Europe that would be happy to tax me less.

My buddy in Singapore pays about 8% all told and he's in the same income range.

The temptation to become an expat gets stronger as I earn more money.

My sin is not being a fat cat living off capital gains. I have to actually earn my income, so I get fucked.

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

#118

Post by dreamdu5t »

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…

Infinite borrowing and defaulting are consequentially the same. I'm absolutely amazed that people believe otherwise.

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

#119

Post by tlear »

asg wrote: post #57
CWuestefeld wrote: post #48

Earlier quoted context omitted.

Sure, if you choose to look at it that way. But if you're going to make "Non-convertible floating FX currency regimes (ie fiat money) ... can meet any and all financial obligations by issuing currency", then you've got to consider that entire reference frame. Issuing currency is identically equal to inflation, which is itself nothing more than a tax levied against those holding assets denominated in that currency. Us…

Sure, it can cause inflation, but it is incontrovertible that governments can always replay local currency debt by issuing currency (except the EURO, where priting money has been offloaded to an external entity). Which is why sovereign debt in local currency is always the risk free credit, by definition. And the US is in the enviable position where, due to the nature of the dollar being the global reference currency,…

Yes they can.. unless an angry mob whose life savings they just stole does not overthrow them. There are limits on how much you can do this and stay in power, they don't figure in the economics calculations but they do exist in real life.

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

#120

Post by Maascamp »

alnayyir wrote: post #117
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'…

Our tax burdens are not the lowest by any means. My total tax rate partially due to living in California (although it is mostly Federal) is ~40%. There are plenty of countries in Europe that would be happy to tax me less. My buddy in Singapore pays about 8% all told and he's in the same income range. The temptation to become an expat gets stronger as I earn more money. My sin is not being a fat cat living off capital…

Singapore's not quite the oasis you make it out to be. Have a look at how much it will cost you for a car once you get over there.
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