Bill Wilson, ALG:
Standard & Poor’s issued a dire warning this week stating a 50 percent likelihood that the nation’s gold-plated Triple-A credit rating will be downgraded in the next 90 days. Not because of any failure to increase the debt ceiling, but because it appears there will be no longer-term plan that substantially reduces the deficit.
S&P said that unless an agreement is reached that results in a fiscal consolidation plan of at least $4 trillion, that the nation’s debt-to-Gross Domestic Product (GDP) will continue to increase over the next decade.
And, critically, according to the report, “We view an inability to timely agree and credibly implement medium-term fiscal consolidation policy as inconsistent with a ‘AAA’ sovereign rating, given the expected government debt trajectory noted above.”
S&P measures debt owned by the public at nearly 75 percent of GDP, rising to 84 percent by 2013. But, if one counts debt owed to the Social Security and Medicare trust funds, the picture looks even worse.
Under that metric, total debt-to-GDP is already at 95 percent, and will likely top 100 percent within a year.
This makes an upcoming vote on Wednesday in the U.S. House of Representatives critical to restoring order to the nation’s fiscal house. Then, members will be voting on the “Cut, Cap, and Balance Act.”
The legislation increases the $14.294 trillion debt ceiling, conditioned on hundreds of billions [actually, only a little over $100 billion – ed] of immediate spending cuts, capping spending at 18 percent of GDP, and a Balanced Budget Amendment being sent to the states by both houses of Congress.
Because it includes a constitutional amendment, it may be the only proposal that would meet S&P’s criteria of an agreement that “would be enacted and maintained throughout the decade,” resulting in S&P reaffirming the nation’s Triple-A credit rating.
[…]
The S&P report vindicates observers who have been saying that the debt crisis is not a long-term problem, it is a problem now. Soon the national debt will become so large that it cannot possibly be repaid.
Already the nation’s total debt service ratio, a measure of average principal and interest owed every year over thirty years, stands at 41 percent. That includes $483 billion of principal and $430 billion of interest compared to $2.174 trillion of revenue.
If the current budget baseline is allowed to grow without any changes to current law, that ratio will likely rise to over 60 percent — if not worse — by 2021 when the debt reaches $26 trillion. That assumes tax revenues rise to about $3.5 trillion, which very much depends on some form of an economic recovery.
By then, interest rates are projected by the government to have returned to their historical norm of 5 percent, resulting in an annual interest payment obligation of over $1.3 trillion. Principal by then would be $866 billion a year.
At that point, repayment would probably be deemed impossible, leaving a catastrophic default as the only remaining option for taxpayers to get out from under the crushing burden.
That makes “Cut, Cap, and Balance” the only proposal on the table that can actually do anything about it. It is the only plan that cuts spending immediately, keeps it down, and balances the budget, and without the crushing tax increases Obama seeks — all the while avoiding a default now and in the future.
It therefore merits serious consideration by members of both houses. The nation can ill afford to kick this can one more time.
— Unfortunately, that penultimate assertion — that CCB “merits serious consideration by members of both houses” — presupposes that both parties share a common objective.
And given the Democrat’s failure to propose a budget, or offer any specific plans to combat the debt crisis save voting to give themselves more borrowed money to spend, it should now be clear even to the Rick Morans of the world that what Obama wants to do is “fundamentally transform” the country, and one way of doing that is to crash the system, enact emergency measures, then rebuild the institutions in the image of democratic socialism, laying the remaining legal and bureaucratic foundations necessary to complete the transformation.
The last two years have been surreal, as we watch happening here what evidently most people believe simply cannot happen — that we’ve voted ourselves a government that is working actively and diligently to marginalize the Constitution, grow the power of the federal government through the Executive and the bureaucracies, and is looking to reform America in the image of a European socialist state, where all rights spring from the state, and all welfare is dependent on “benevolent” state largess.
We have a President who simply invents statistics out of thin air, repeatedly lies with no compunction, and he’s protected by an activist media class pretending to be the watchdogs protecting us against the powerful.
It’s all a giant ruse, and the left’s march through the institutions is right here and right now trying to assert itself in an overthrow of our Constitutional republic.
We need to correctly identify who and what it is we’re fighting. The time has come. Obama is a Good Man, if you happen to be a Marxist ideologue bent on power and control. But if you value freedom and individual liberty, he is anything but, and those who show themselves eager for 4 more years of this kind of transformation are enemies of the framework government, one that sought to limit the power of a federal authority and promote individual liberty and inalienable rights, set up by our founders and fought for in war after war.
The enemy is within. And yes, I “question his patriotism.” It’s time to pull him out by the root clear the ground over which he spreads like bindweed.
what’s so magical about four trillion exactly other than that’s the number bumble affixes to his fictitious unicorns n rainbows plan?
so is Bachmann gonna vote for CCB? If Team R doesn’t speak with one voice on this there’s precious little hope for failshit America’s credit rating I think.
bumblefuck loves to exploit him some cracks, you see.
laying the remaining legal and bureaucratic foundations necessary to complete the transformation
Who says most of that infrastructure isn’t already in place? Go through those massive 1000-page bills and lookie what got passed!
It’s time to pull him out by the root & clear the ground over which he spreads like bindweed.
Nice thing about bindweed? Nearly indestructible:
But given the choice, I’d rather have the actual bindweed than what the proggs have in store for us.
Did I suggest it wasn’t?
Obama has already vowed to veto. Politics for me, but not for thee!
Seems like within 10 minutes of Obama’s decalration to veto any bill that contained CC&B, the bond vigilantes weighed in with their opinion
http://www.zerohedge.com/article/obama-says-he-will-veto-any-republican-cut-cap-deficit-bill-long-bond-dragged-slaughter-hous
Sellin’ the 30 year variety like there’s no tomorrow, and in their eyes that’s exactly what such a sale means. What’s next? Greece baby, because when the 10 year variety start to increase as well, that’s when all of the domestic financial instruments, such as car loans, mortgages, etc, increase too-because those rates are mostly based on a “bond rates plus” formula…
http://www.conservativecommune.com/2011/07/good-news-misery-index-now-at-28-year-high/
Folks think the misery index is high right now? Just wait and see…
If the House GOP does as they promise, and passes a series of measure “options”, ranging from short term breathing room to the full magilla, and nothing ultimately comes of it, well, all I can say is I hope y’all have paid your credit cards down; “he said knowingly, as one who remembers 20+ percent rates…”
Part of me really hopes that S&P and Moody’s follow through and downgrade federal debt 90 days from now, as they’ve hinted at doing. The resulting upheaval will be ugly and painful, but less so than if we continue to kick the can down the road. I mean, what’s worse — paying an extra 50 basis points on our $14 trillion debt, or waiting ’til we have $20 trillion and then paying an extra 400 basis points?
Per Jeff’s observation, the sticking point is that people like me prefer the pain now, while it might still be (barely) manageable, whereas our “Good Men” on the other side want to orchestrate as much chaos and carnage as possible, the better for them to swoop in and pick up the pieces (so long as we agree to their terms).
I’m left wondering if they were planning for a crash in 2011/12 all along, or if the cratering of Teh Won has caused them to accelerate their plans.
Wrong button. All gone.
For the best, I suppose. I just wish I didn’t spend so much time writing it…
But don’t be mistaken. I am pissed…
Check out Ann Barnhardt.com. I tried to paste it, but I can’t get it to paste….Computer illiterate, I suppose.
Sorry.
http://www.barnhardt.biz
It’s on, Cantor has said the House will pass CC&B tomorrow
http://www.zerohedge.com/article/cantor-announces-house-vote-cut-cap-and-balance-act-tomorrow
But I have to wonder if Obama will really veto it if it get’s through the Senate?
Barack Obama is quite clearly a leader of men.
Exactly. Well put.
Ann Barnhardt is a patriotic American
paying an extra 50 basis points on our $14 trillion debt, or waiting ’til we have $20 trillion and then paying an extra 400 basis points?
400bpts if we are lucky. Risk scales in a non linear fashion. Ask Lehman Brothers.
For the Squishy Chris Wallace’s that would argue bond market warnings – the core of the issue is whether having artificial low interest rates that spawned the last financial crisis is the right recipe to preventing the next one as well as engineering the economy out of the ditch.
I mean its as if the Captain of the Titanic had backed up the engines to put a matching set of scrapes on the aft of the ship.
F* these people.
Bankruptcy, here I come!
it looks like this move has indeed nudged Bachmann to the left of where she was
Somewhere, Rick Moran just fainted dead away.
400bpts if we are lucky. Risk scales in a non linear fashion.
You’re right, of course. I mentioned before that the drop from AAA to AA will take a while to happen, but the drop from AA to BBB will take very little time at all.
Everybody, I’d like to introduce you to Barry and Michelle Kirchner!
Did I suggest it wasn’t?
Explicitly? No.
But I’m pretty sure that’s what you intended. My spidey-sense tells me so.
Drill Baby Drill.
Cut Baby Cut.
Do both.
The Won explicitly threatens a veto of CC&B. That even gets Ed Morrissey to say Call his bluff GOP
Sorry
THAT’S OFFENSIVE to those of us nursing toothaches and hoping they go away before our wives notice.
I’d tell you to bite the bullet and see a dentist, but that would, you know, hurt.
You could go to a political rally and have some SEIU goon punch out your teeth. It’s just one more way that Obama is making health care cheaper and better!
The sad thing is, this tooth didn’t hurt until I brushed my teeth this morning.
THAT’S OFFENSIVE to those of us nursing toothaches
It’s also offensive to those of us who were stung by a wasp at the base of the right index finger and are still logey two days later.
::it itches ussssssssssss::
you can try garlic for a toof ache until you can get to the dentist
the thing about putting an aspirin on it is a myth you’re supposed to swallow the aspirin, as you might have imagined
Did you see this in the report?
Look what the cat dragged in.
how exactly would there ever be an “agreement” that didn’t have support of the leaders of both political parties?
I wouldn’t drag that. just sayin’
More like what the cat horked up.
Tyranny in the little paper cup returns again.
[…] spells it out, starkly and accurately: Unfortunately, that penultimate assertion — that CCB “merits serious consideration by members […]
I love that Cutty Suck can take the nugget that served as the source of Jeff’s thesis, and completely ignore the fact that it served as the nugget of Jeff’s thesis.
Here, Cutty, lemme spell it out for you again, in small words: “support from leaders of both political parties” assumes that both political parties have the same goal in mind. Given that the Democrats have been pressing with all their might for the last four years to bankrupt and ruin the nation, we’re guessing that they might not be on board with the whole “saving the Republic” thing.