Now that S&P has downgraded Federal debt, watch for state and municipal debt to be downgraded as well. Then watch state and municipal pensions get raided (where they still exist at all). Then all hell breaks loose. Cf. the Pension Tsunami.
The ruckus that nearly paralysed the US economy last week, and led to the loss of its AAA rating from Standard & Poor’s, arose from a confrontation over the most basic principles of American life.
The Tea Party faction within the Republican party was demanding that, before any further steps were taken, there must be a debate about where all this was going. They had seen the future toward which they were being pushed, and it didn’t work. …
… contrary to prevailing wisdom, their view is not naive and parochial: it is corroborated by the European experience. By rights, it should be Europe that is immersed in this debate, but its leaders are so steeped in the sacred texts of social democracy that they cannot admit the force of the contradictions which they are now hopelessly trying to evade.
Also collapsing before our eyes is the lodestone of the Christian Socialist doctrine that has underpinned the EU’s political philosophy: the idea that a capitalist economy can support an ever-expanding socialist welfare state.
We have arrived at the endgame of what was an untenable doctrine: to pay for the kind of entitlements that populations have been led to expect by their politicians, the wealth-creating sector has to be taxed to a degree that makes it almost impossible for it to create the wealth that is needed to pay for the entitlements that populations have been led to expect, etc, etc.
Emphasis added. Via If we are to survive the looming catastrophe, we need to face the truth – Telegraph.
<snark>Obama keeps saying he inherited the war in Iraq, the war in Afghanistan, the bad economic situation, etc., the implication being there’s not much he can do about those things. You know what else he inherited? A triple-A credit rating from the S&P.</snark> (Shamelessly stolen from Jeff Underwood.)
When Bush took office in January 2001, the debt was about $5.7 trillion, according to Treasury Department figures. When Bush was sworn in for his second term in January 2005, the debt stood at about $7.6 trillion. When Bush left office in January 2009, the debt was $10.6 trillion. He had increased the national debt almost $2 trillion in his first term and $3 trillion in his second, for a total increase of nearly $5 trillion over both terms. (Of that $3 trillion increase in Bush’s second term, $2 trillion came under a Democratic Congress.)
The debt stood at $10.6 trillion when Barack Obama took office in January 2009. Now, it’s about $14.4 trillion. The president has increased the national debt nearly $4 trillion in his first two and a half years in office. By the time Obama finishes his first term, he will have increased the national debt by somewhere in the $5 trillion-to-$6 trillion range — more than Bush did in two terms.
None of this is to say that George W. Bush had a good record on spending. He didn’t, and he’s fair game for criticism. But is it honest to condemn reckless spending in "eight years of Republican rule" when Democrats controlled the Senate for four of those years and the House for two? Is it honest to talk about the "cost" of the Bush tax cuts when federal revenues increased significantly while they were in effect? And is it honest to refer to Bush’s ballooning deficits when deficits actually trended down for much of his presidency — at least before Democrats won control of Congress?
China called on the United States to "cure its addiction to debts" and "learn to live within its means" in a searing commentary published Saturday by the official New China News Agency in response to Standard & Poor’s historic downgrading of the U.S. government’s credit rating a day earlier.
China, the largest foreign holder of U.S. federal debt, blamed "short-sighted political wrangling in Washington" for creating the current financial morass that now threatens to undermine the global economy.
"China, the largest creditor of the world’s sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China’s dollar assets," the commentary said.
"If no substantial cuts were made to the U.S. gigantic military expenditure and bloated social welfare costs, the downgrade would prove to be only a prelude to more devastating credit rating cuts, which will further roil the global financial markets all along the way," it continued.
Bank of New York Mellon Corp. on Thursday took the extraordinary step of telling large clients it will charge them to hold cash.
Bank of New York Mellon is preparing to charge some large depositors to hold their cash, in the latest sign of the worries roiling global markets. Liz Rappaport has details.
The unusual move means some U.S. depositors will have to pay to keep big chunks of money in a bank, marking a stark new phase of the long-running global financial crisis.
The shift is also emblematic of the strains plaguing the U.S. economy. Fearful corporations and investors have been socking away cash in their bank accounts rather than put it into even the safest investments.
The giant bank, which specializes in handling funds for financial institutions and corporations, will begin assessing a fee next week on customers that have been flooding the bank with dollars, Bank of New York told clients in a note reviewed by The Wall Street Journal.
The decision won’t affect individual savers, who already are stuck with near zero interest rates as the Federal Reserve keeps rates low to support a soft economy. But it is a glaring sign that corporate executives, bank leaders and money-market fund managers are fleeing from risk and hoarding cash as the recovery threatens to peter out.
… here’s my back-of-the-envelope balanced budget, with no tax increases:
1. Social Security: Yeah, they’ll say you’re throwing Granny off the cliff. But it’s her or the grandkids. So implement aggressive means-testing and other reforms to cut 20 percent of spending for $150 billion in savings.
2. Medicare: Ditto, for $100 billion in savings.
3. Keep on going and reduce Medicaid and other health-care services spending by 10 percent: $33 billion.
4. National defense: Republicans will howl, but there’s room for a 10 percent cut to all national-defense spending, including non-DoD activities such as DoE’s work maintaining our nuclear arsenal. That nets $74 billion in savings. Surely we can slaughter hapless desert barbarians more cheaply.
5. “Other income security.” That’s the welfare state bits and pieces not included in Medicare, Medicaid, Social Security, food stamps, etc. Welfare of the checks-from-Uncle variety. Eliminating it entirely saves $159 billion.
6. Welfare for bureaucrats: Making federal-employee retirement and disability systems totally self-funding saves $123 billion.
7. Eliminate federal education spending entirely: elementary, secondary, and higher-ed. Leaving it to the states and to the market saves us $106 billion. Harvard will figure something out.
8. Eliminate “community and regional-development” spending, a.k.a. boondoogles and slush funds, except for disaster relief: $15 billion.
9. Get farmers off welfare: $19 billion. Suck it up, Elmer.
10. Foreign aid, international development, international-security assistance, etc. Quit meddling abroad and propping up Third World potentates, and save $44 billion.
11. Cut all the “energy” spending on “energy information,” “energy emergency preparedness,” etc. — all the energy spending that doesn’t actually produce any energy. And throw federal energy-conservation spending on the fire, too. Cutting the bureaucratic answer to Jimmy Carter’s sweater saves $12 billion.
12. “Advancing commerce” doesn’t. We’re looking at you, SBA et al.: $23 billion.
13. Federal law enforcement: Cut spending by 10 percent. Legalizing it saves us $3 billion.
14. Space flight: We aren’t flying in space anymore. Staying grounded saves $17 billion.
15. Downsize Smokey the Bear: Cutting land-management, recreation, natural resources, etc., by half saves $21 billion.
16. Quit subsidizing suburban sprawl: Cutting transportation spending by 10 percent saves $10 billion.
17. Save $36 billion by cutting health research and training. Let Pfizer do it.
18. The real-estate market isn’t going to make a comeback. So eliminate federal housing assistance and save $60 billion.
19. Cut food stamps by 10 percent, save $11 billion.
20. I know, I promised no tax increases, so that’s a 19-point plan to balance the budget: Just over $1 trillion in savings. No. 20 is a bonus tax hike: Eliminate the stupid and destructive mortgage-interest deduction and have the national debt paid off by the time the kids being born this year graduate from college.
"We’re going to read this document," Rep. Sheila Jackson Lee, D-Texas, said Monday, referring to the debt ceiling agreement reached Sunday night. "We’re going to understand it before we vote for it."
Lee, who helped rush the 2,000-page Affordable Care Act through the House before nearly anyone had a chance to read it, promised to pore over the 74-page Budget Control Act in what turned out to be an unsuccessful effort to stop trillions of dollars in federal spending cuts.
Last year, after the passage of Obamacare, Republicans running for the House included in their "Pledge to America" a promise to allow the public sufficient time to read bills before lawmakers voted on them. "We will give all representatives and citizens at least three days to read the bill before a vote," the pledge said.
Then came the debt bill, which was finished Sunday evening and released to the public Monday morning. In their race to finish work Monday night, well before the Treasury Department’s midnight Tuesday default deadline, Republicans ended up violating their own read-the-bill pledge.
Vice President Joe Biden joined House Democrats in lashing tea party Republicans Monday, accusing them of having “acted like terrorists” in the fight over raising the nation’s debt limit.
Biden was agreeing with a line of argument made by Rep. Mike Doyle (D-Pa.) at a two-hour, closed-door Democratic Caucus meeting.
“We have negotiated with terrorists,” an angry Doyle said, according to sources in the room. “This small group of terrorists have made it impossible to spend any money.”
Biden, driven by his Democratic allies’ misgivings about the debt-limit deal, responded: “They have acted like terrorists,” according to several sources in the room.
Biden’s office declined to comment about what the vice president said inside the closed-door session.
Earlier in the day, Biden told Senate Democrats that Republican leaders have “guns to their heads” in trying to negotiate deals.