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

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

#391

Post by shiftpgdn » Sat, Aug 06, 2011, 3:15 PM UTC

Bertil wrote: post #349

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 seem to have forgot one point: the trillions spent in the Middle-East are to protect the supply of cheap Oil — so step 0. is: Sell your car, insulate your house.

We get more oil from the gulf and Canada than we do from the Middle-east. That's not to say energy savings are a lost cause.

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

#392

Post by danenania » Sat, Aug 06, 2011, 3:25 PM UTC

bokonist wrote: post #376

danenania wrote: post #219

Earlier quoted context omitted.

Paying back creditors in severely devalued dollars isn't exactly meeting obligations. Presumably the ratings would take this into account. That said, I agree these ratings don't have much basis in reality. As others have commented, look at how S&P and similar organizations rated subprime debt. They're part of the Wall Street club. They might nibble a bit on the hand that feeds them for political reasons, but they cer…

Issuing currency to back the "debt" is not a devaluation. Imagine you hold $100k in treasury bonds. The Federal reserve then prints a bunch of money, buys those bonds from you, and gives you cash. Are you then going to be willing to pay twice as much for a car, twice as much for a loaf of bread, etc? No. Your financial position has not changed. No change in your financial page, no inflation, no devaluation. All buyin…

"The Federal reserve then prints a bunch of money, buys those bonds from you, and gives you cash. Are you then going to be willing to pay twice as much for a car, twice as much for a loaf of bread, etc?"

It doesn't matter if you're "willing" to pay more for things or not. If the Fed monetizes debt, more money enters the system, there are more dollars bidding for the same amount of goods, prices rise, and creditors will get less for their money. Simple supply and demand.

If you were right, the Fed could just write checks for the whole $14.5 trillion debt in one go and we'd have a balanced budget overnight. Do you think that would be a good idea? Hell, why not create a quadrillion or two more on top of that and make us all millionaires??

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

#393

Post by commandar » Sat, Aug 06, 2011, 3:29 PM UTC

IbJacked wrote: post #270

usaar333 wrote: post #155

Earlier quoted context omitted.

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…

>Because of those low rates, the amount the U.S. government pays to service its debt is, relative to the size of the economy, less than it was paying throughout the boom years of the 1980s and 1990s and for most of the last decade. The Congressional Budget Office estimates that net interest on the debt (which is what the government pays to service it) would be $225 billion for fiscal year 2011. The latest figures put that a bit higher, so let’s call it $250 billion. That’s about 1.6% of American output, which is lower than at any point since the 1970s – except for 2003 through 2005, when it was closer to 1.4%.

http://moneyland.time.com/2011/07/15/the-u-s-is-not-drowning...

Yes, we should do what we can as a matter of course to pay down the national debt, but we really weren't any worse off in our ability to pay than we've been in decades.

At the very least, manufacturing a crisis out of the matter -- and this one was completely manufactured by the GOP -- that has resulted in making it harder to pay down the debt we already have was a completely daft move.

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

#394

Post by bhickey » Sat, Aug 06, 2011, 3:31 PM UTC

wonnage wrote: post #295

simonsarris wrote: post #233

Earlier quoted context omitted.

The Hayekian view here seems patently false according to Moody's research firm, which determined in 2008 that the most cost effective stimulus was food stamps and the least effective was business incentives such as tax breaks for buying new equipment. http://money.cnn.com/2008/01/29/news/economy/stimulus_analys...

Oh yeah, reference Moody's, they did such an awesome job rating mortgage securities a few years ago. My own wholly unfounded reasoning goes as this: give a broke guy some food stamps, he'll spend it on food. So the government is essentially buying this guy food. Food and groceries happen to be some of the the lowest-margin sectors of the economy - Safeway's operating margin hovers a little under 3%. So yeah, the guy…

I think your reasoning is unfounded.

Safeway's doesn't have a huge margin, but so what? They employ people directly and indirectly: cashiers, truckers, stock clerks, people who work in canneries, farmers, chemists who formulate fertilizers, etc. It isn't as if a dollar spent at Safeway's ends up in an incinerator while a dollar spent at Apple mates with another dollar to make change.

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

#395

Post by watchandwait » Sat, Aug 06, 2011, 3:36 PM UTC

encoderer wrote: post #366

winestock wrote: post #206

Earlier quoted context omitted.

First, both parties have raided Social Security, not just Republicans. In fact, both parties have been complicit in the government's financial misfeasance for a long time. Second, you mention the money "to pay back the workers who contributed." There was never any money to pay back. Social Security was always a pay-as-you-go system. Current revenue pays for current appropriations. There was never any "trust fund," an…

First, you're right, both parties have diverted Social Security surpluses. But only one party -- the GOP -- is trying to avoid paying it back, using the SS deficit as a tool to dismantle or alter the program. Second, that doesn't change the social contract we have with people who have spent their entire lives paying out up to $6000 a year in wages to the fund. Third, yes, while baby boomers retire, it will run a defi…

How, exactly, do you propose "paying it back"? Social Security is already a TERRIBLE deal for current workers. The only options are to either limit benefits to retirees, who are already getting more than they paid in (payroll taxes are higher now than they were before 1983), or to make Social Security an even worse deal by taxing current workers even more.

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

#396

Post by dpark » Sat, Aug 06, 2011, 3:37 PM UTC

vital_sol wrote: post #388

dpark wrote: post #241

Earlier quoted context omitted.

> There's no such thing as an unfunded liability for Social Security. This is wishful thinking. Social security benefits have been promised to a lot of people, and the money isn't there. It's all well and good to say they will just reduce benefits, but that's just a nice way of saying that they'll default on the liabilities. In reality this is no different from Medicare or Medicaid, or the military budget, or anythin…

Social Security and Medicare are different from Medicaid and military budget, because they have different funding. Social Security and Medicare are funded by payroll taxes. Medicaid and military budget funded from Federal income tax. If you cut military budget 100%, you will save ~900 billions (or whatever the right number is) a year. If, on the other hand, you cut Social Security or Medicare, the savings are 0, beca…

This is a strange belief. Why in your mind would payroll tax be necessarily cut just because social security expenses drop? You do realize that social security is actually still running in the black, right? They are, right now, bringing in more money than they spend.

Guess what happens to the rest of the money: It gets spent elsewhere. Social security buys US Government debt with any excess, meaning it goes directly into the budget. In theory the SS trust has assets, but in reality the money is gone. It's one account holding a bunch of IOUs from a second account, and both accounts are owned by the federal government.

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

#397

Post by natnat » Sat, Aug 06, 2011, 3:43 PM UTC

encoderer wrote: post #367

forgottenpaswrd wrote: post #355

Earlier quoted context omitted.

"The US is rich for the same reason Rome, England, and Spain were" Not really, have you been in England, Rome or Spain? Rome legionaries were used to make roads and bridges and mining 90%of their time. If I show you the extensions of the land they "washed" to get mineral you won't believe it(you can see it using google earth, e.g in the north of spain, look for grooves around mountains). England made itself rich beca…

Where do you think the money goes ? Military spending is still government spending. It's going to contractors, vendors and soldiers. They are, respectively: making jobs and selling to everybody (not just the gov't), and buying cars and houses.

When the government spends a million dollars building a bridge, it creates a bunch of jobs because people need to design the bridge, extract the raw materials for the bridge, and build the bridge.

When the government spends a million dollars building a bomb, it also creates a bunch of jobs for the same reason.

The thing is, a bridge gets you a useful public resource that makes lost of people's lives better and encourages economic growth by making trade easier. A bomb blows up, kills some people, and disappears.

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

#398

Post by gte910h » Sat, Aug 06, 2011, 3:45 PM UTC

BrianLy wrote: post #210

gte910h wrote: post #198

Earlier quoted context omitted.

The terms of the debt ceiling deal look like it will force one/the other/both: http://www.editedforclarity.com/2011/08/01/debt-ceiling-deal...

I listened to an NPR segment on this topic and it seems like Congress has several ways around doing the things that journalists think can be forced through. I'm an immigrant to the US so this a learning exercise for me, perhaps someone else can explain in more detail.

I'm guessing "This is just a law. They can of course, just pass a different law that disregards the old laws, as new laws have primacy over old".

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

#399

Post by Dove » Sat, Aug 06, 2011, 3:46 PM UTC

clarkevans wrote: post #338

latch wrote: post #135

Earlier quoted context omitted.

Social security shouldn't be cut, it should be turned into a purely social program (and grandfathered in at that too). Instead of being an entitlement program, it should become like welfare and enabled for the bottom X % of the population. Specifically, the burden for retirement for the middle class should be placed on individuals rather than government. For too long, babyboomers have relied on social security as a s…

You completely underestimate how the average person finds something more important to spend money on now rather than saving for their future. The reason we have social security is because people don't save what they need to. If you don't have this, most of the population will be in poverty when they retire. Social security also has things like survivor's benefits: payments to children and dependents who have lost a w…

If that is true -- people universally don't save what they need to -- than the proposed social security program of taxing everyone to give to the poor will be identical to what we have now.

It isn't entirely true, though. If you look at any net worth by age chart, the values go up with the age categories. People do save, just maybe not enough.

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

#400

Post by Dove » Sat, Aug 06, 2011, 3:53 PM UTC

prostoalex wrote: post #216

geuis wrote: post #108

Earlier quoted context omitted.

Is it the government's job to keep people employed for the sake of employing them? No! There are times in history where government spending can help , like during the Great Depression. The government spent a lot of money on public works projects to help put some people back to work. But this didn't do much to actually end the depression. It was the onset of WWII and the subsequent ramp-up to a war economy that really…

Right, I'm not arguing the philosophical aspect of employing people for the sake of employing people. However, laid off militants are likely to apply for unemployment benefits + whatever other entitlement programs they have. So in terms of pure numbers there might be some win, but when you cut $100 of military salary, you don't magically save a total of $100, you generate some liabilities on the other end. All those…

However, laid off militants are likely to apply for unemployment benefits + whatever other entitlement programs they have.

Perhaps initially. The military population in general is disciplined, educated (or even technically inclined), proud, and self-reliant. I've got to think that demographic is more likely to respond to unemployment by going out and doing stuff than any other.