US debt downgraded

Standard and poor has recently downgraded the US government´s debt. Not surprisingly in many circles, especially in the mainstream media, there has been a lot of finger pointing at the supposedly “evils” of the tea party movement. It appears that in many circles everything that is wrong with America is the fault of the tea party movement. They’re just so many people that are itching to get back at the tea party movement.

The fact is that the US should have had its debt downgraded years ago, and standard and poor is merely catching up very belatedly to this reality. Trying to get angry at a rate ratings agency is like trying to shoot the messenger. It seems that nobody wants the pain to come, but the more we delay it the worse it does becomes. The fact is that if the ratings agencies had fiercely downgraded US debt five or six years ago it might have actually prodded the status quo to start to confront the problem. Instead, nobody raised the alarm and the debt bomb has been allowed to grow and grow and grow. Now finally someone is raising a small red flag, and everyone is upset that someone has sprinkled a few drops onto their never ending debt party. Thus, the vitriol against the tea party movement, which appears to be the only political movement in America that actually wants to confront the deficit problem.

The fact is that the sooner we confront problems the easier they are to resolve. The more we leave debt problems for later, the harder they become to fix. But, the mentality in Washington, and among the elites, is that the debt is not a problem, and we should just try to put off worries for as long as we possibly can, until it all blows up sometime in the future… hopefully once everyone is retired and out of office.

A lot of people are unhappy with the ratings agencies in Europe because they’re the ones that helped to initiate the crisis there. But the fact is that the crisis is only based on the fact that for decades governments have spent than their means, and the European Union provided an especially convenient vehicle to run up ever greater debts. The fact is that the European debt crisis should have been confronted years ago, but due to complacency and indifference it was allowed to grow and grow. Now the rating agencies have come along and popped the bubble, which has initiated much needed reform. But, the reform has also forced politicians to make difficult choices, and for groups that depend on government largess to do with somewhat less, all of which has created a lot of opposition. Dealing with long festering problems is usually not fun. But, I’m glad that at least the Europeans are confronting their problems, and not allowing them to just grow and grow. Better late than never.

The US because it can always print as much money as it wants, and because it’s the world’s reserve currency, has been able to ignore the problem that Europe has had to face recently. But, they can’t ignore it forever, and events like the ratings downgrade are showing that we will also have to start confronting our budget dysfunction.

Of course, I see no interest in Washington to reduce government spending, because almost all government spending is based on rewarding a special interest group, or bloc of voters, who helped elect politicians. Cutting the budget, and living within our means, would mean directly undermining the base of support upon which politicians rest… and they are resisting it mightily. The politicians don’t want to deal with problems. They have chosen to blame the messenger or the tea party for the current crisis. Like in Europe’s case, this crisis is not the fault of Standard & Poor’s or the tea party. It is the fault of an out-of-control deficit with no end in sight. It is not just the political class that prefers to not deal with the problem and blame Standard & Poor’s and the tea party. The media happily goes along as well, giving the impression that if everyone were is positive the deficit problem would just disappear.

In the status quo would like us to believe that the solution to our problems is simply to “stimulate” the economy, and run up deficits indefinitely, all the while justifying that their profligacy is okay because they have some never to be realized mystical goal, that in the long run they will deal with the problem-just not now. It’s like the saint who said, “Lord, make me virtuous, but just not yet.” We have been playing the same game for decades now, and time is seriously running out.

Witness the latest grand compromise budget deal, which the media and almost everyone else in an official capacity has praised to the sky. Their only complaint is that apparently it was too harsh and severe in terms of budget cutting. The reality is that the recent budget deal is little more than smoke and mirrors. It is a Potemkin village of budget responsibility, whose only purpose is to keep the gravy train going, while only appearing to deal with the problem. In any case, if things go wrong they can always blame the tea party.

Just check out this article by the economist which I believe represents the typical mindset of those from power.

http://www.economist.com/blogs/freeexchange/2011/08/sps-credit-rating-cut?page=1

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2 Responses to US debt downgraded

  1. Joji Y. says:

    How to solve following 3 issues with just one action:

    1-USA, EU and Japan’s debts.
    2-Eliminate poverty in Undeveloped Nations.
    3-Bring New Economy Boom Worldwide.

    Simply ask USA to increase their Debt to at least 50% of their National Reserve.
    Then USA should call International Minister of Finance meeting and demand all the Nations to issue 50% more of their currency.

    By doing above, USA no longer has debt, poor nations government got 50% more money, which can spend to elevate lowest of lowest citizen;s lifestyle, got money to by foreign good from G* nations which over produces Edible Goods and Durable Goods, what will brings Economic Boom.

    • internationalguy says:

      What you are proposing is that everyone print or create a whole lot more money. Simply increasing the amount of money is not going to do anything except at most provide a temporary boost, and create a lot of inflation. Simply having more dollars that are worth less does not help anyone except for a few insiders and speculators. We need to produce our way out of problems, not print our way out.

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