Fitch Downgrades US Credit Rating From AAA To AA+ (bbc.com) 349
The US government's credit rating has been downgraded following concerns over the state of the country's finances and its debt burden. From a report: Fitch, one of three major independent agencies that assess creditworthiness, cut the rating from the top level of AAA to a notch lower at AA+. Fitch said it had noted a "steady deterioration" in governance over the last 20 years. US Treasury Secretary Janet Yellen called the downgrade "arbitrary". It was based on "outdated data" from the period 2018 to 2020, she said. Investors use credit ratings as a benchmark for judging how risky it is to lend money to a government. The US is usually considered a highly secure investment because of the size and relative stability of the economy.
However, this year saw another round of political brinkmanship over government borrowing. In June the government succeeded in lifting the debt ceiling to $31.4 trillion but only after a drawn-out political battle, which threatened to push the country into defaulting on its debts. When Congress returns from its summer recess, lawmakers will have to work to reach an agreement on next year's budget before the end of September to prevent a government shutdown. "The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance" relative to peers, said Fitch in a statement.
"In Fitch's view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025," the rating agency said. Ms Yellen said she "strongly" disagreed with Fitch's decision. "Treasury securities remain the world's preeminent safe and liquid asset, and... the American economy is fundamentally strong," she said in a statement.
However, this year saw another round of political brinkmanship over government borrowing. In June the government succeeded in lifting the debt ceiling to $31.4 trillion but only after a drawn-out political battle, which threatened to push the country into defaulting on its debts. When Congress returns from its summer recess, lawmakers will have to work to reach an agreement on next year's budget before the end of September to prevent a government shutdown. "The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance" relative to peers, said Fitch in a statement.
"In Fitch's view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025," the rating agency said. Ms Yellen said she "strongly" disagreed with Fitch's decision. "Treasury securities remain the world's preeminent safe and liquid asset, and... the American economy is fundamentally strong," she said in a statement.
Whatever (Score:2)
Re:Whatever (Score:4, Insightful)
Fitch is doing this just to get into the news? Why would they do that? They want to be on the tongue of everyone due to their economic analysis? That's should excite just about 2 people out of the general pubic.
It very much matters due to the increase in borrowing costs. Somehow those tax decreases in the last alleged administration have come back to bite us. I'll bet the pushers of that narcotic never figured this into their calculations.
Re: Whatever (Score:2, Informative)
Federal tax revenue increased substantially during the years of the alleged administration, by much more in the last term of the prior alleged administration.
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This matters because countries and funds tha
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There is no hope of ever repaying this debt,
There never was, from the founding of the nation, through WW2. Just outdated handringing from the Austrian economics crowd.
and it now seems likely we will never be balanced either.
More BS as well. Its just a matter of political will. The USG came pretty close during the Clinton Administration. Its pretty sad that the federal gov't never considered cutting back its spending temporarily to match inflationary periods, rather than have the Fed trigger a recessionary economic collapse as the answer.
You add things like Ukraine aid, pandemic spending that isnt ending
What utter cluelessness. Where were you during the Iraq/Afghanist
failure to understand expenditure on both sides (Score:4, Insightful)
On the Right, the belief is that personal debt == government debt, and balance must be achieved in the same way a household budget is managed. On the Left, there is a belief that debt - which in the government context means printing money - is not inflationary.
If it were used intelligently as a tool, government debt could be a handy thing. When used as a political football and a way to end-run around providing sufficient sinks for money to match up with income + borrowing, it's quite harmful. It is a great way to avoid arguing about popular but essentially unaffordable expenditures, at least in the short term.
In both cases, a free lunch is being promised, and it's just not true. You pay either way - it just differs in the how. The truth at the end of the day is that standard of living is denominated in goods and services, and not in dollars (or choose your currency).
This is absolutely false (Score:5, Insightful)
The solution to debt is is save money, either by cutting the military budget or by switching to a single payer healthcare system and using the $500 billion in savings to pay off debt, or to take back the $50 trillion we have the 1% [time.com] in the last 40 years.
I like options 2 & 3 ( too much of our version of socialism is tied up in the military budget to touch it).
I especially like taking back that $50 trillion. I mean, if somebody stole your credit card and spent 40 years running up a bill, would you pay it? If you're answer is anything other than "hell no!" you're a sucker.
Re: This is absolutely false (Score:3, Insightful)
A sales tax is the opposite of a fair tax, because the poor wind up spending a larger percentage of their income on necessities. Your plan is inherently regressive and thus unfair. Calling it a fair tax is gaslighting.
Re: This is absolutely false (Score:5, Informative)
That's why advocates for the Fair Tax(tm) recommended a "prebate":
https://www.leg.state.nv.us/26... [state.nv.us]
I still think the entire plan was a little naive, but it does speak to the need for a simpler, cleaner tax code with lower compliance costs.
That's a terrible idea (Score:4, Insightful)
Sales tax is a whole along with property taxes on individual residents are just awful awful things that need to go away. They're regressive taxation specifically designed to force people on the lower end of the spectrum to pay the majority of the taxes while the wealthiest continue to dodge taxes left and right
Re:This is absolutely false (Score:4, Insightful)
China isn't going to take over with violence they're going to do it by encouraging us to continue voting Republican. This isn't me being troll look at my other posts. This entire thread exists and the downgrade happened because the Republican Party failed to stop Trump on January 6th and continues to use the debt ceiling as a cudgel to try and get what they want politically and to hurt the American economy in the hopes and expectation that voters will blame the Democrats for what the Republican Party actually did.
This isn't me in my words this is literally the words of the credit agency here that downgraded the US debt. They stopped just short of mentioning the Republican Party by name but talked about actions that only the Republican Party indulges in
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It's being systematically siphoned off to multinational banks that now control our government. The 2008 financial crisis/ bailout was the triggering mechanism. In 2010 the initial debt ceiling crisis of 14 Trillion was no random number. GDP is ~ 15 trillion. If debt
The primary holders of our debt are simply the hugest multinational banks and foreign governments, whoever can afford to buy T-bills and MBS at the billion-dollar level. There's an extremely complex global shell game, but in essence all cou
Re: Whatever (Score:4, Interesting)
Military is a huge fraction of the budget, 18% if you include veterans benefits, and there's rarely been desire to cut back on it. It's the major source of pork (bringing tax dollars home to your district) and a political football. It's a major industry. It's by far the largest and most successful government jobs, welfare, and healthcare program. And it is chock full of waste from top to bottom.
Re: Whatever (Score:3)
The military is more a subsidy to the rest of the world than anything else, just like the pharmaceutical industry. Most countries in alignment with the US have for decades underfunded their own defense spending because they just count on us to have a military ready when they need it.
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The 1960s want their talking point back. You are simply wrong. Defense is a very small fraction of our total expenses. And moreover, it actually contributes to GDP, unlikely many of our other expenses (such as interest payments or mandatory spending): https://en.wikipedia.org/wiki/... [wikipedia.org]
I know you people won't be happy until defense spending is at zero, but claiming defense is someone the driver of our debt is disingenuous to say the least.
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There is no hope of ever repaying this debt,
There never was, from the founding of the nation, through WW2.
The national debt was paid off, briefly. That was one of Andrew Jackson's pet projects.
I also have to disagree with your dismissal of the importance of political will. Virtually all of our current problems stem from a lack of will to solve them, and the odds of a reversal in that respect seem slim.
For this current thing: eliminating the debt ceiling would get us back our AAA rating. And there's no reason not to do that, the debt ceiling is just a bit of flimflammery which allows politicians to pretend
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Goal post moving.
The person you replied to noted that government revenue went up after lowering taxes so you switched to "well expenditures went up more" which is a different aspect of government disassociated from the tax function.
So the lesson here is to lower both taxes and spending to reduce government debt and deficit. Revenue will go up, expenditures will go down, everyone wins.
Re: Whatever (Score:2)
Re: Whatever (Score:4, Informative)
So the lesson here is to lower both taxes and spending to reduce government debt and deficit. Revenue will go up, expenditures will go down, everyone wins.
in other words, return to trickle-down economics. Trickle-down has been proven to not only not work but also be a great way to make rich people richer
https://www.cbsnews.com/news/t... [cbsnews.com]
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Trickle-down has been proven to not only not work but also be a great way to make rich people richer
But it might work this time! You never know. It might.
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It's not like COVID policies caused the largest wealth transfer from the lower classes to the upper classes in history across the globe or anything.
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one assumption Laffer curve believers almost never seem to acknowledge that the curve is not symmetrical, the research shows that the peak is far to the right but we don't know the shape of the curve as it approaches peak. Is it a wide top? Is it a narrow peak? Does it slowly rise to the peak as you approach the optimum point. does it drop off quickly or slowly
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to your points, I do n
Re: Whatever (Score:5, Informative)
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The debt went from 49.5% of GDP to 34.5% of GDP during Clinton's presidency.
We have a Republican majority in the Senate to thank for that.
https://upload.wikimedia.org/wikipedia/commons/3/3c/US_Federal_Debt_as_Percent_of_GDP_by_Senate_Majority_Party_%281940_to_2009%29.png [wikimedia.org]
Re: Whatever (Score:5, Informative)
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"genetic fallacy"
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To me the main tipping point was the reaction to the 2008 banking crisis, when $10 TRILLION was printed out of thin air and handed out to bankers to both bail them out and keep asset prices artificially inflated instead of allowing markets to properly correct (downward).
Uh, what? The 2008 bailout was $426B, not $10T, and the the program recovered $441B of it, generating a net profit for the taxpayers of $15B.
If you're including all three rounds of QE, running through 2012, that adds another $1.5T, but it's inaccurate to describe it as "handed to the banks", and anyway it's still far short of your claimed $10T.
Where did you get that figure?
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We can easily repay the debt (Score:2, Insightful)
We could of course do a complicated series of wealth taxes in order to take the money
Re:We can easily repay the debt - NOT (Score:5, Interesting)
As for something the gov't is good at, here's an exhaustive list. [youtube.com]
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The right wants entitlements too. Their entitlement though, they don't care about yours. That's why social security and medicare reforms are tough to pass because the elderly are also a major wing of the Republicans. If they can get the entitlements without paying taxes that'd be perfect for them. Medicare though is nearly an essential, because healthcare costs are astronomical and would bankrupt most retirees if they had to pay out of pocket for everything. And even chain smoking cranky pants famously
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I hope Fitch loses money for taking this controversial evaluation.
Yeah, when I worry about the safety of my money, I'm going to the EU with Russia camped on its border, or the Chinese. /s
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They will not. This was an overdue correction. There is no controversy about this, except, as usual, by the ones called out.
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In the EU, none of the Russia border nations have a AAA rating either, nor countries that border Ukraine or Belarus.
China has a worse credit rating than the US.
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Fitch is doing this just to get into the news?
Very, very unlikely. They probably just realized that the fantasy of an AAA rating for the US is exposing them to too much risk at this time. The exact time seems to be strongly correlated with the second federal indictment against Trump. Regardless of validity, a likely presidential candidate for a major party in this situation indicates a nation that is instable and rating agencies are pretty much immune to political propaganda.
They're not doing this to get news (Score:2, Insightful)
Re: Whatever (Score:2)
Re:Whatever (Score:4, Interesting)
"voluntarily" - umm no not "really". The FED is supposed to be independent from the government. In fact Yellen has generally made noises that she isn't in favor of rate increases; and did not believe inflation was actually happening.
In fact the higher rates go the less credit worthy the US Treasury actually is, it means they have raise even more money through borrowing to service the existing debt.
Some people like to argue that debt to equity, and debt to income ratios look pretty good for the US vs its peers. I think think is senseless reasoning because the US does not really have peers. Firstly because the dollar is currently 'the reserve currency' which creates a larger appetite for US debt than any peers. This could change and if it did change I think its likely that the Treasury could see another large 'involuntary' rate increase where it is forced to issue bonds well above the rates FED is setting or notion of an independent FED is abandon and congress steps in and forces the central bank to monetize debt buying up treasuries at below market rates.
Second its about structure not current balance sheet / income statement. Fitch is correct there is no indication our current government is capable of reducing deficits let alone the debt. In our increasingly polar political climate there is less incentive than ever to do anything bi-partisan. Disaffected voters don't cross over they stay home of the 'other side' wins with an increasingly dogmatic electorate. Its why the GOP can't find a footing for anyone not Trump seemingly, and why the left is worried about Biden disappointing progressives. Nobody is courting the middle because there isn't much middle left. The fear is your base won't turn out, even if they don't go for the other guy. What that means though is progressives can never cut an expenditure no matter how obviously ineffective the program (because someone sees it as their sacred cow) and Republicans can never raise revenue not even off foreign labor or investment because it even those things hurt the stock price of someones mega corp or investment bank.
Re:Whatever (Score:5, Interesting)
To reply to my own post and finish the political rant for what its worth I also don't see a paths for this country other than:
1) The success of one political move to the point where it is able to structurally lock the opposition out. Through election laws, gerrymandering, candidacy requirements, changes to ballot access, etc to make it unwinnable for the other side.
2) National divorce after a period of continued self sorting (happening now) where the USA peacefully is dissolved into smaller confederacies of states forming more like minded regions.
3) (most likely) a slow decent into total dysfunction. Where we end up looking more like Russia but governed more like Italy or Greece where the government isnt capable of delivering on anything it promises everyone knows it, and it fails at big things when it tries them.+
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My only major disagreement is when you say there is no middle. There is a huuuuge middle but they don't vote, I assume because politics sickens them or many just don't care. Look at the percentage of adults eligible to register vs those who register. Then look at registered vs actually voted, ever. Then look at casual voters vs consistent voters. At each point in the filter the numbers drop dramatically.
If the rest of the eligible country voted the extremes would get obliterated in a single cycle.
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To reply to my own post and finish the political rant for what its worth I also don't see a paths for this country other than ...
Here's a different perspective. In every two party system, both parties tend to aim for the middle, more or less. If one party was far off the middle, then they'd get fewer votes, and wouldn't get elected. That's why, from the outside looking in, the two US parties seem really close! both of them pretty far to the right and pretty close to each other on economic issues, the kind of ones Marx identified as the key driving forces in society. This theory predicts two outcomes:
1. The way that changes happen is
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"the middle" is in fact growing in most states. In North Carolina, 2004, the N.C. State Board of Elections reports 18% of registered voters were “unaffiliated”. In 2022, that percentage doubled with 36% of voters registering as unaffiliated. Unaffiliated voters are now the largest block of voters in this state, larger than the republicans or the democrats. That really speaks volumes - it means the majority of voters are fed up with how the left or the right are dealing with things, and mo
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What people say and how they register are not how they vote though. The middle is a mirage. If it existed congress with its sometimes single digit approval ratings would not see themselves re-elected over and over again.
People might say they are mad, they might say they want a 'middle' because honestly who is going to tell a pollster - dude I want an extremist to vote for? Reality check - for the most part the people who turned out to vote in 2020 for Donald Trump will NOT be persuaded by ANYTHING to vote
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Considering the United States' history of spending like a drunken sailor and self-sabotage (looking at trashing the economy because waaaah COVID!) and endless deficit spending .
At least they're not thinking of putting Trump in charge again.
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Defending the entire West isn't cheap.
As Putin has shown us and China is threatening to show us, the era of giant wars and invasions is not over.
It's not arbitrary when they do it to others? (Score:2)
You thought big money was on your side, didn't you?
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That's really not totally crazy for a married couple who are in there late 70s or early 80s and have had prestigious academic careers. Keep in mind that a Harvard professor can do consulting work on the side that can be fairly lucrative. And remember that Yellen has a husband with a successful academic career at prestigious institutions. If they actually save and invest their money in index funds, then hitting $20M at 80 years old isn't that strange.
No surprise, long overdue... (Score:2)
In terms of debt/GDP, the US ranked 14th in the world in 2022 [worldpopul...review.com]. Possibly higher in 2023, with the new debt ceiling. In terms of absolute amount owed, the US is in first place.
The new rating is still too high. Other countries with similar debt loads have lower ratings, usually around A or A+.
The US desperately needs to get its fiscal house in order. You cannot just borrow endless amounts of money - eventually, people stop trusting your ability to pay it back...
Seems appropriate to me. (Score:5, Insightful)
The rating downgrades them from "angelic" to "incredibly awesome". That seems pretty defensible, all things considered. Yellen seems to hold the belief that the US should be considered immune from analysis. But a credit rating is intended to be predictive, and from the outside looking in, America deserves some skepticism. This isn't much of that... but it's a little. Were it any other organization nobody would bat an eye.
Re:Seems appropriate to me. (Score:4, Interesting)
The rating downgrades them from "angelic" to "incredibly awesome". That seems pretty defensible, all things considered. Yellen seems to hold the belief that the US should be considered immune from analysis. But a credit rating is intended to be predictive, and from the outside looking in, America deserves some skepticism. This isn't much of that... but it's a little. Were it any other organization nobody would bat an eye.
Sure, but the USA isn't just any unremarkable run-of-the-mill organization, the USA is the most influential economy on the planet, reputations are much easier to lose than they are to gain and they are even harder to re-gain. You can keep telling yourself things like this but what Fitch is saying isn't wrong. This is a direct result of the US indulging itself with petty sectarian infighting, incompetence and corruption and I'm not just accusing the current lot of Democrats, the GOP has it's own list of things to answer for. If the USA wants to beat China the USA had better stop bickering with itself, hoist up it's collective breeches and get its house in order because whining about lowered credit ratings and 'unfair' competition from China will do exactly bupkis to fix the issues the US has.
Re:Seems appropriate to me. (Score:4, Insightful)
Looking at the US from the outside, it doesn't seem wise to rely on the government doing anything or being competent in the future.
Biden seems to be weak, with the GOP half running the show e.g. SCOTUS and the fact that they keep refusing to raise the debt ceiling. Trump will almost certainly be their next candidate for POTUS and his track record is tax cuts for the wealthy and mis-handling a pandemic.
All the things that seem like they would really help the US economy are things that are being contested, e.g. addressing climate change by creating lots of green jobs. The GOP seems more interested in culture war BS, and the Democrats seem weak and unwilling to do what is needed in the face of that.
Plus whoever wins seems likely to want to continue a damaging trade war with China, the main effect of which has been to accelerate China's development of replacements for Western products.
Tell me if I'm wrong, but the outlook doesn't look great from here. And yes, the UK is just as much of a basket case too.
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Looking at the US from the outside, it doesn't seem wise to rely on the government doing anything or being competent in the future.
Biden seems to be weak, with the GOP half running the show e.g. SCOTUS and the fact that they keep refusing to raise the debt ceiling. Trump will almost certainly be their next candidate for POTUS and his track record is tax cuts for the wealthy and mis-handling a pandemic.
All the things that seem like they would really help the US economy are things that are being contested, e.g. addressing climate change by creating lots of green jobs. The GOP seems more interested in culture war BS, and the Democrats seem weak and unwilling to do what is needed in the face of that.
Plus whoever wins seems likely to want to continue a damaging trade war with China, the main effect of which has been to accelerate China's development of replacements for Western products.
Tell me if I'm wrong, but the outlook doesn't look great from here. And yes, the UK is just as much of a basket case too.
What's really funny about all of this is that before anything that didn't involve mining and burning fossil fuel was identified as the evil machinations of Lucifer himself and opposing these things became a pious duty, GOP candidates used to back things like "geen jobs" and accept that climate change is an issue. In fact some pretty red areas in the US seem to have no problem with some "green tech" despite the vitriol of conservative niche media. Some of the fastest growth in wind energy adoption has been s
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Biden seems to be weak, with the GOP half running the show e.g. SCOTUS and the fact that they keep refusing to raise the debt ceiling.
I agree that he seems weak. However, I don't think that's the problem.
In a nutshell, the GOP is simply much better at using all the bits of the political system to their advantage (excluding the least useful bits - like the popular vote). By contrast, the Democrats are a disorganized mess. But they're popular.
Biden can't be strong enough to overcome the simple inability of the Democrats to counter the maneuvering of the GOP. The republicans will turn the screws that democrats won't "stoop to" - and the resu
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I think we're almost entirely in agreement, with a couple of wires crossed. "Were it any other organization nobody would bat an eye" was referring to the US government, not the agency. My apologies.
The problem is that we're treating the USA as a special case - that they shouldn't be downloaded, not because they aren't risky, but because they are the US. I think the AA+ rating is probably too high, to be honest. Were it a company they might be an A.
Re:Seems appropriate to me. (Score:5, Funny)
Huh? (Score:4, Insightful)
"The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance"
So, Fitch's credit rating for the US is now lower than that of the European Union and all three of three hubs of Demonic Socialism; Norway, Denmark and Sweden [tradingeconomics.com]. That should lead to some interesting conversations, ... probably about how the US is begin unfairly victimised here (because this could not possibly have been caused by endless petty political infighting, a holy crusade to make the rich tax exempt and varying degrees of misgovernance by a sequence of presidents from both parties).
Re:Huh? (Score:5, Interesting)
So, Fitch's credit rating for the US is now lower than that of the European Union and all three of three hubs of Demonic Socialism; Norway, Denmark and Sweden [tradingeconomics.com]. That should lead to some interesting conversations, ... probably about how the US is begin unfairly victimised here (because this could not possibly have been caused by endless petty political infighting, a holy crusade to make the rich tax exempt and varying degrees of misgovernance by a sequence of presidents from both parties).
Yes, well, the US is a spendthrift, with a debt/GDP of 128%. Norway, Denmark and Sweden are at 42%, 36% and 35% respectively.
It's not the political infighting that is to blame. It's the fact that the US Congress passes those idiotic omnibus bills, where every Congresscritter gets their favorite pork project funded. In the end, no one dares vote against such a bill, because they would be voting against everyone else's pet projects.Moreover, the bills are so long and complex that literally no one can possibly read them. "We have to pass the bill so that you can find out what is in it." - seriously?
The solution is simple: a bill must have a single purpose. Fund X. Buy Y. Subsidize Z. That makes it possible to vote against a bill.
Re:Huh? (Score:5, Insightful)
It's not the political infighting that is to blame.
Oh I'm not so sure about that. Maybe it's just because the younger generations today don't even remember a time when the R and D factions weren't at eachothers throats like vampires and lycanthropes? The Dems and Reps used to be able to work together on at least some issues that benefited bot but today most US political discourse seems to boil down to "The other guys want to do X so we must threaten national bankruptcy and civil war to prevent it". I sometimes wonder whether the Republicans, for example, would launch a holy crusade to ban the practice of breathing if the Biden administration announced that breathing is good for your health,
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The solution is simple: a bill must have a single purpose. Fund X. Buy Y. Subsidize Z. That makes it possible to vote against a bill.
This, at least partly. IMO, we could go a very long way toward fixing US politics with only three amendments to the constitution:
1 - Single-purpose bills, as you mentioned, so politicians can be held accountable for each decision individually
2 - Automatic 10-year sunset on every single piece of federal legislation (existing laws would have their text fed to a hashing algorithm that assigns a sunset between 12 and 120 months in the future). This along with #1 will force lawmakers to be too busy passing/renew
Re:Huh? (Score:4, Insightful)
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The usual excuse is that the Nordic countries aren't really socialist (because socialism = poverty in their minds, so by definition they can't be) and the EU is... Uh... Look at the riots in France and them turning off nuclear in Germany!
It really is incredible how large populations of people have been convinced to vote against the own best interests, in the fact of strong evidence.
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Petty political infighting is what makes a nation a bad credit risk. And the worse the risk, the higher the interest rates for new loans. The US cannot really break out of that unless it wants to wage war on the whole world.
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You know, it's not petty. One party wants to take away human rights.
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From what I can see, both parties in the US want to do that. One is just more open about it and has a faster time-plan. Anti-human conservatives on one side and anti-human fanatical conservatives on the other side. Hence yes, "petty". On far too many really bad issues, these two parties do agree.
Re: Huh? (Score:2)
That sort of extemeist rhetoric is precisely the problem, and why both parties deserve to lose their mandate. The Republican and Democrat parties are not intrinsic to the United States, and they only hold power because voters vote for them. They need to be reminded of that.
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Hey the next time I have a multimillion dollar income year can you tell me how to avoid paying taxes?
Start by creating and investing all your money in a new company that will lose all your money for you, with the hope that it eventually starts to make money in a decade or two. Until you start making a profit, you won't pay taxes.
Or, we could adopt the stupid model where invest can only put their money in small things that make immediate profits. Then watch as China gobbles up all the international markets.
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Hey the next time I have a multimillion dollar income year can you tell me how to avoid paying taxes?
The last few times my very expensive tax firms couldn't do that.
Thanks! I mean, uh, asking for a friend.
Aw, don't despair. We all know that every American under the sun is a billionaire. Some of you guys just have temporary cash-flow problems.
Peers? (Score:2)
The US has no peers, cleanest dirty shirt forever. I'm thankful to Fitch for strengthening the Euro ka bit, but I still think they're being silly.
the US debt will grow forever (Score:2)
Neither are wrong (Score:5, Insightful)
Yellen is correct that the US economy is fundamentally strong and resilient.
But Fitch is correct that the stability and competence of the US Government's financial governance has been deteriorating and Yellen doesn't address that at all.
The way that the US system of government allows the legislature to commit to spending without committing to equivalent revenue and borrowing is crazy, and no other respectable country does this. The fact that minority factions within the US government continue to exploit this for internal political purposes, thereby destabilising the entire US government's ability to service its debts or operate as a going concern for their own personal political objectives, continues to make the US Government less reliable as a borrower, or even lender.
This started in the Clinton administration, and specifically the long term plan by Newt Gingrich (and his allies) to sabotage the mechanism of government so that US citizens would lose faith in the stability and competence of the government, allowing emotive and populist policies to prevail. Robert Rubin, who was the Treasury Secretary, put it well: "This is no way for a great nation to conduct its financial affairs" [washingtonpost.com]
This is still no way for a great nation to conduct its financial affairs, two decades later.
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"Newt Gingrich and his allies" and Bill Clinton passed our only BALANCED BUDGET in the last 50 years.
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Do you even read the references provided, bro?
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I think it should be "This is no way for ANY nation to conduct its financial affairs".
Any nation which uses such a system will probably crash eventually.
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That the US Government has debt is not the problem. The US Government carrying long term debt is a critical contribution to the economy (because how else can you put your money somewhere where both its value guaranteed by the Gov't and you get a guaranteed rate of return?).
The problem is that the US Government's failure to create a stable government financial management structure, and the continual internal sabotage of government financial management since the 1990s, makes the US government less reliable th
Re:Neither are wrong (Score:5, Insightful)
Why should there be a place with a guaranteed rate of return? Since when did the USC say the Fed is a bank?
It the context of a credit rating, this seems very pertinent. It would be silly to state that predictable returns is unrelated to a credit rating.
I do not think the government is like my checkbook. Quite the contrary the government shouldn't be involved in banking at all. They should levy taxes as necessary for the efficient role of government as specified by the constitution and spend money only as specified by the constitution and get the fuck out otherwise.
Ok, so that stance is at odds with any sort of credit rating at all. It's also at odds with how *every* significant government operates. It would be an unforced error to be "weird" in a way that would constrain our ability to trade with the rest of the world. Like it or not, the global economy expects the participation of government in financial matters, and without that our quality of life is screwed.
Gingrich has been out of office for decades. The lowering of the USG's credit rating has nothing to do with him.
They are attributing it to his strategy, rather than him directly causing it. The credit ratings that have been downgraded have had everything to do with unforced errors rather than fundamentals. One may disagree on how the fundamentals look, but that's not the motivation of S&P nor Fitch for why they downgraded the US. They are effectively punishing US for fomenting insurrection and creating extreme uncertainty over borrowing for internally arbitrary reasons (debt limit fights, in 2011 and again this year, and this year being a much more extreme and dramatic fight, pushing things to the utter limit, or at least be willing to give that impression).
Re:Neither are wrong (Score:4, Insightful)
We have had a bullshit budgeting system since long before Gingrich and Gingrich himself was decades ago but only this week the rest of the world noticed and dinged the Fed's credit rating? C'mon....
Again, it's not the budgeting system, but the playing games with the debt ceiling. Gingrich was the first to lead with using the self-imposed debt ceiling as a negotiating tactic. At the time our credit stayed intact because, well, for all anyone knew it was a one-off. But that was cemented as a strategy to use to get what you want by holding our borrowing hostage.
Then it happened again in 2011, and then S&P dinged our rating over it, then again in 2013, 2021 and then again in 2023. Basically any time the Republicans had enough seats to obstruct but didn't have the presidency, they threw a fit and openly threatened screwing over borrowing.
Contributing to this, by many accounts, was the happenings of January 6th and how some of the currently sitting republicans continue to condone it.
So however messed up you see the debt and deficit, *that* is not what dinged opinion, it was the government threatening to screw up borrowing in various ways for policy goals.
Doesn't matter (Score:2)
Basically oil is traded in USD. This means that the USA can get away with as much debt as it wants, because everybody needs USD in order to buy oil. If something were to happen to this status of the USD, it would be absolutely disastrous to the USA and its allies.
This is why China is such a "problem" recently (since a couple of years ago): it launched an oil contract denominated in Yuan (the Chinese currency). All of a sudden the US and it's allies do everything in their power to sabotage the economy of Chi
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Basically oil is traded in USD. This means that the USA can get away with as much debt as it wants, because everybody needs USD in order to buy oil.
That is a non-sequitur.
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Read my post very carefully again.
Almost no country has any concern for the human rights situation in another country, most certainly not the USA. Human rights are almost always used as a pretext (i.e. what is told to the public) to try and get another country to do something which conveniences your country, or to prevent another country from doing something which inconveniences your country... something they probably have a hard time explaining to you.
Remember: the only thing your politicians are intereste
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I wonder what the rest of the world would think of a country that attacks other countries for no good reason.
Wait, something doesn't add up. (Score:2, Interesting)
So, how the hell are they pointing to an agreement to go deeper into debt as a positive? "Notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025"? Are you out of your f-ing minds? THAT is what should have signaled to Fitch that our credit rating is too high.
Holding to the debt limit would NOT have meant defaulting
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The rating is actually not only about existing debt, but about the risks for new debt. A reason for that is that nations on the way to bankruptcy typically pay interest with new debt. If a nation only pays for existing debt but cannot sustain new debt, the rating will reflect that and tell anybody asked for new credit by that nation "stay away". Also no capacity for new debt _always_ comes with a significant risk of defaulting.
Don't kid yourself. Except for psychological factors, the US is at best a BBB rat
Punish both parties at the polls. (Score:2, Interesting)
Both parties deserve to lose their mandate. I do not feel I have representation with either party, and I am sick of "vote for the choice you hate the least." > voting for the lesser evil implies the lesser evil has my approval, or a legitimate mandate. If Democracy requires we vote for one of two failed parties, then the Democracy experiment has failed. Punish both parties at the polls and end the undemocratic unpatriotic self-fulfilling prophecy. Vote No Labels or Forward.
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I've listened to No Labels a few days ago, the problem is that they present no compelling candidates, Joe Manchin and some unknown other senator can't pull tickets, Joe Manchin has no spine. The best solution would be to go with the runners-up of both parties, a DeSantis-Kennedy ticket or something.
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"No labels" is disaster and a Republican front. They are not the droid you are looking for.
The fact of the matter is that the system created by the Constitution will ALWAYS result in a 2-party system over the long term. A third party cannot survive in a "winner take all" first-past the post voting system only the party in control of a given branch of government has any power. Therefore, absent a massive Constitutional rewrite where we move to a parliamentary system or ranked-choice voting, the way you influ
$31T (Score:2)
An absurd, absurd number. But let's pile a trillion here, another trillion there, it's no biggy and ridiculously call it inflation reduction!
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Lets call it what it is, shall we: An assured bankruptcy at some time down the road.
Still vastly overrated (Score:2)
After the regular drama about the budget, an BBB rating would be charitable. Actions have consequences.
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Why Credit Ratings are worthless (Score:2)
(Ratings Agency) "So, let's talk about deb..."
(US Gov) "Thirty trillion in the hole, and adding more."
(Ratings Agency) "Ah, well that's just a minor inconvenience. Of course you still have a AA+ rating."
And you wonder the US stock market, WILL crash again. Fucking worthless ratings games.
Austrians groom financially illiterate (Score:2)
From the movie and book "The Big Short"... (Score:2)
From the movie and book "The BIg Short" the government will just go down the street and find someone else to give them a AAA rating.
Check out... https://www.youtube.com/watch?... [youtube.com]
Although the "credit check" organizations I wonder what Fitch's real motive is...garner headlines, come off as as "objective" or something else?
JoshK.
Good. We deserve it (Score:3)
We need RESPONSIBLE politicians that want to do the right things and not just make $ for themselve.
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Almost every American is rich relative to the rest of the world. $34k/yr (in USD) put's you in the global 1%. We have a problem living within our means in the US due to a long period of cheap and easy credit and those chickens are coming home to roost.