S&P Downgrades US!

[joepistole]

The fact that so many people are blaming one party or the other shows that the smoke and mirrors show is still working. Follow the money and you'll see that behind all the democrat or republican sham, the US government does exactly what its paymasters demand and that's not the American people. The whole game is transferring wealth from the masses to the elite and they have a multitude of scams to do it starting with Wall Street.

Stop watching the show and start paying attention to what's really going on. You might then be able to make a difference.

There is some truth to what you are saying. But that does not change the facts on the ground in this debate. We have two parties, one being irrational (Republican/Tea Party) and one trying to compenstate with ultra rationalism (Democrats).

I think what has happened here is that Republicans and their financial backers thought that they could control the Tea Party. They thought, they could control the Tea Party and corrupt them as they had many times before with newbies.

It turns out the Tea Party movement has gotten a bit out of control and bit the hand that has fed it. That became very apparent to Republican financial sponsors when Boehner was unable to control his caucus in the House. Up to that time Republican leadership had been telling Wall Street that there would be a debt deal, and they were just doing a little old fashioned political posturing. Main line Wall Street bought it, hook line and sinker. But the smart investors were not buying it and had pulled their money out of the markets.

My guess is next election cycle you are going to see a lot of money move against the Tea Party and for good reason. Republicans and their financial sponsors have created an irrational beast that will destroy the nation if given half a chance. But it might be too late for redemption.

The problem with the Republican stance is they cannot govern with their ideology. They might be able to get votes with their control over the media, but they will never be able to govern.

If Democrats are ever able to achieve a hegemony in the United States similar to what the Republicans have exercised these past 10 years, then indeed they too will be subject to corruption the likes we now see in the Republican Party. But the facts are one party, the Republican/Tea Party is fighting desperately to maintain its control over all aspects of American government. They are desperate and will do any thing to regain power and the money that will flow from that power.

The United States needs to change the way it elects officials. We need public financing of campaigns. We need an educated and well informed voter base - something we do not have. And we need a press that accurately communicates the issues - something we do not have. What we have is 24 hour PR agencies masquerading as news and informed discussion (e.g. Fox News, Clear Channel Communications, et al.)

 

[iceaura]

It's spelled "loses", OK? L O S E S. Likewise all related words.

 

[Billy T]

To madanthonywayne More evidence supporting post 77's point that Trickle Down has closed US factories, exported jobs, reduce IRS tax collections, etc:

You can see the US’s growing trade deficit with China, month by month here: http://www.census.gov/foreign-trade/balance/c5700.html
but here is a quick summary (of what Western capital “trickling down” to build better factories in China with lower labor cost can do to the US’s trade deficit with China):
1985 – -6.0 million dollars
1990 – -10,431.0
1995 – -33,789.5
2000 – -83,833.0
2005 - .-202,278.1
2010 -. -273,063.2

Or perhaps you want to deny “trickle down” capital from the west building new factories, etc. made a 45,510 fold increase in China’s trade surplus with the US in 25 years and give the credit to the Chinese Communistic Party?

Do you still think it would be a mistake to increase revenue by reversing GWB's tax relief for the very wealthy?

 

[OnlyMe]

He's a confused capitalist, don't listen to him.

While I do not agree with your social political position and that is not saying there is no merit in some of what you say, I do appreciate the way that you present your views. Absent the vulgar and hate filled Commentary of some on these forums.

What about the famines of the third world, due to Western imperialism and capitalism?

Most third world famine that I have been aware of over the last 40 years has not been the result of capitalistic actions. Take the famine in the north eastern part of Africa which has been going on for 30 to 40 years now. It began with an extended drought, resulting harvests that could not support the existing population, let alone the continued population growth and competition between ethnic, cultural and religious groups with long histories of conflict, exasperated by the famine conditions.

While it is true that the action and assistance that the west (US & Europe) provided was not up to resolving the famine issues, it is not likely that any actions that did not include population controls or redistribution would have been successful.

What about the fact that people starve on the streets, or are denied education or health care, while others dine on roast pheasant and laugh all the way along?

If your comments here are directed domestically to the US: The health care issue you raise is legitimate, we need a better universal health care system. Personally I don't see a way that health care can remain a function of the capitalistic market myself. Single payer would probably be the least expensive solution, though it carries its own risks and downsides.

As for starving on the streets, I offer only the following comment from personal experience. Not that I have been starving on the streets. Where I live in Southern Calif. there are almost always homeless, usually most noticed near freeway access or shopping center parking. Most of these carry signs generally saying that they are hungry... On many occasions I have offered food and been rebuffed.., that is not what many if not most of them want. They want money. You can do your own figuring as to what they want if for.

Two situations.., on one occasion I was on my way to, I think it was the price club at that time, as I got off the freeway there was a ragged homeless man with a sign asking for food in exchange for work. While doing my shopping, I picked up a case of chili beans with meat. Heading home I went out of my way to return to where the man with the sign was and offered the case of "food". The response was, "I don't want that! I want money." I tossed the case to the side of the road anyway and drove away.

The second situation(s) occur in shopping center parking areas. Someone, a man or woman approaches and says they are hungry, can I spare any change. I never just give out cash in that situation, instead I offer to buy them something to eat at a near by fast food restaurant. There is almost always one near by. Most of the time the offer is declined. However, on occasion it is accepted. Generally, if the offer is accepted after paying for the food, I turn and give the person $20. The only cash I usually carry is a $20 bill for emergencies.

The stories could go on, but the point is that those who seem to actually be hungry on the streets are out numbered at least 4 to 1 by those just pan handling for cash. Cash which in many cases is converted to drugs or alcohol.

The homeless is a significant problem not just domestically but globally. I do not know what can be done to resolve it. A lower unemployment rate would have some impact, but the problem is in some respects systemic to civilization. Hunger and starvation are also a significant problem. I see no realistic way for the world to solve starvation that is long term drought/climate based without affecting population densities in the affected areas. Just supplying food breaks the local economies and replaces them with a welfare system that over time can be more destructive to the population than starvation, because it does not stop the starvation and yet result in populations no longer able to sustain theirselves.

We should certainly have social programs to deal with hunger on our streets and neighborhoods. And in this you are correct in that the capitalistic structure of our economy inhibits effectively addressing domestic hunger.

Still capitalism itself is not the devil here. Yet, unregulated capitalism is at least a part of the problem. My brother in law, used to say that one day he would write a book. The title would be,"Me First". Once a society evolves beyond that small social group where everyone knows and depends upon one another, that Me First, mentality, unchecked becomes a threat to society as a whole.

Communism is not the answer. Capitalism in good times does a far better job of raising living standards for the general population. However, capitalism unregulated does become a monster contributing to the woes of society.

I do believe that a democratic or representative socialistic society, allowing for regulated capitalism is most likely the best solution. The problem is keeping an eye on the regulation and regulators, such that the needs of the society as a whole are addressed above the needs of a select upper economic class and corporate structure.

Communism isn't perfect, but why is it wrong that I believe we ought to work for the good of humanity and share and get along?

You are not wrong in believing that we should work for the good of humanity. And we should share and get along.

Communism has not proven itself to do either of those, except in small groups and to some extent within the context of the remnants of the social culture of the Peruvian highlands.

 

[madanthonywayne]

Why not return to the tax rates that did balance the budget under Clinton?

if you'll also cut spending to the levels we had under Clinton I'd be with you 100%.

Wealthy people are not idiots. Of course they will invest (build factories) where the rate of return is about 10 times higher than in the US due to low labor cost and an a very unsaturated market.

And raising taxes alters that equation in what way? Don't high taxes just make the US an even less attractive place to do business? Wouldn't high taxes simply hasten the exit of companies from the US?

China sold 18 million cars while the US only sold 11 million and most went to first time buyers

China has over three times our population, and we're in the midst of the worst economy since the great depression.

.Where would you build a new factory that makes, for example, refrigerators? In the US or in China, where more than the entire US population will be buying their first refrigerator in less than a decade.

Today's refrigerators only last ten years if your lucky. So people in the US will be constantly replacing their refrigerators. Plus, many of us have multiple refrigerators (I have three in my house and there are three more at my places of business). So I would imagine the market for refrigerators will remain strong in both countries.

GWB's tax relief for the already wealthy REDUCED jobs in the US. - Helped make Detroit a basket case. 10 years ago wealthy Chinese imported US cars.; Now BYD motors builds luxury models they buy and Detriot sells none to China

. I don't buy that. You're saying that these supposedly smart wealthy people would have simply paid the higher taxes and not invested in developing markets in the absence of the tax cuts? Aren't taxes paid on profits? Couldn't these wealthy people have simply invested the extra money they would have paid in taxes if they took it as income and then claim it as an expense? They can afford damned good accountants and tax lawyers, after all. Furthermore, I would imagine that high tax rates in the US would actually encourage the wealthy to invest in developing nations rather than taking the money as income and having to pay taxes on it

Warren Buffet is a good example of how GWB's trickle down actually works. He invested in China, and now owns 10+% of BYD motors. Not only directly did his tax relief reduce revenues to the IRS, but all the factories in Detroit his Chinese factory helped to close are not paying taxes either. Nor are their former workers - instead they are COLLECTING unemployment.

Again, you think Warren Buffet wouldn't have figured out a way to do that and not pay taxes on it anyway?

.Tax relief for the upper middle class does tend to make jobs in the US. Either they spend more or if unhappy with their job, may open their own business and directly hire others.

Any tax relief increases the funds available to the productive private sector. Making the US an attractive place to do business increases the likelihood that the money will be invested in the US.

Get realistic and drop your silly ideology that GWB's tax relief for the already rich was good for the US via "trickle down." -It has been great for China, but a disaster for the US! Return to the tax rates that balanced the budget

I would gladly pay higher taxes if I actually believed it would balance the budget. However, I see giving this government more money to be akin to giving more alcohol to a drunk or more crack to a crack addict. The more you give them, the more they use.

 

[iceaura]

Why not return to the tax rates that did balance the budget under Clinton?
”
if you'll also cut spending to the levels we had under Clinton I'd be with you 100%.

See my post above, where that scenario is laid out. You buying in?

Don't high taxes just make the US an even less attractive place to do business? Wouldn't high taxes simply hasten the exit of companies from the US?

That would hardly be possible, in the first place.

In the second, we're talking about taxing the wealthy, on their incomes. They are not going to move to China.

. I don't buy that. You're saying that these supposedly smart wealthy people would have simply paid the higher taxes and not invested in developing markets in the absence of the tax cuts?

The assumption is they would invest in China anyway, of course. But we would have revenue to pay for our country's needs, instead of all the money leaving as now.

Aren't taxes paid on profits?

On income to rich people.

Furthermore, I would imagine that high tax rates in the US would actually encourage the wealthy to invest in developing nations rather than taking the money as income and having to pay taxes on it

How do imagine taxing income heavily would encourage the wealthy to take more money out of their business as profit or income, to invest elsewhere? Wouldn't it be more likely that they would keep the money invested in their business, safe from the IRS, expanding their business and hiring more employees and so forth?

Again, you think Warren Buffet wouldn't have figured out a way to do that and not pay taxes on it anyway?

So you think these smart people with their omniscience have been simply wasting all this money they have been plowing into politics and lobbying for tax cuts?

You think the Koch brothers are acting out of charity, throwing hundreds of millions of dollars of their money away on a cause of purely ideological interest to them?

 

[Billy T]

... Don't high taxes just make the US an even less attractive place to do business? Wouldn't high taxes simply hasten the exit of companies from the US? ...

Yes higher CORPORATE tax rates do encourage building business and factories in other countries with lower CORPORATE tax rates. Ireland created a industrialization boom for itself by lowering corporate tax rates. The simple progressive rate tax plan I suggested in posts some years ago fits on a 3x5 index card in part because there is no corporate tax. (Corporations can only hold profits, instead of distributing them to tax paying individuals for 10 years max. Any held longer than that go 100% to the IRS, with the interest the funds have earned too. Corporations do need to be able to retain profits for expansion / investments etc. but 10 years is long enough.)

Read my full "3by5 index card" tax plan in this more than three years old post: http://www.sciforums.com/showpost.php?p=1792841&postcount=1

Perhaps the new "special committee" charged with revising the tax code should consider it?

... You're saying that these supposedly smart wealthy people would have simply paid the higher taxes and not invested in developing markets in the absence of the tax cuts? ... They can afford damned good accountants and tax lawyers, after all. Furthermore, I would imagine that high tax rates in the US would actually encourage the wealthy to invest in developing nations rather than taking the money as income and having to pay taxes on it

No, If for example Warren Buffett gets a million dollars of income, it makes no difference to his taxes if that was earned from his Chinese factory or US investments. I am saying that letting them pay less US taxes allows them to have more funds to invest. Not being idiots, they invest in China, etc. where the middle class is rapidly expanding, the salaries are increasing about 15% in real purchasing power, and the market is far from saturated.

I know they have "damned good accountants and tax lawyers" so can avoid taxes on their investment profits, so what I really want is a new simple, impossible-to-avoid "transfer of funds" tax applied to job creating investments made by the very rich outside of the US. For example, If Warren Buffett sent 50 million dollars to China to expand BYD motors, then he must also send 50 million dollar to Uncle Sam (IRS) to help pay for retraining the workers in Detroit's closed auto plants that can no longer compete with BYD for the luxury car market in China as they once did.

... Again, you think Warren Buffet wouldn't have figured out a way to do that {invest in China's BYD motor} and not pay taxes on it anyway?

Yes I agree. With the present tax system and his clever tax lawyers, etc. I tend to think that he is able to duck paying a lot of taxes. The "funds transfer tax" would be very hard to duck. (New Chinese factories are not zero cost to build.)

... Making the US an attractive place to do business increases the likelihood that the money will be invested in the US. ...

Yes, but you seem to have a very confused, self contradictory POV, in part because you are mixing corporate investment considerations with personnel ones.

I was not suggesting increase of corporate tax rate, which I think the US could lower to zero. I was suggesting the PERSONNEL tax rates go up on those making more than $250,000 each year.

Which is it?
(A) These very rich, like Warren Buffett, have "damned good accountants and tax lawyers" so can avoid taxes on their investment profits, even when building new factories in China so would have done so even if their personnel tax rates were higher.
OR
(B) If those making $250,000 or more were compelled to pay the tax rates they did under Clinton, then they will not invest {anywhere} as those taxes discourage investment?

 

[joepistole]

if you'll also cut spending to the levels we had under Clinton I'd be with you 100%.

If that were the case, then where were you when President Obama and the Democrats made and even more modest proposal on taxation?

And raising taxes alters that equation in what way? Don't high taxes just make the US an even less attractive place to do business? Wouldn't high taxes simply hasten the exit of companies from the US?
China has over three times our population, and we're in the midst of the worst economy since the great depression.

Because what is being discussed is tax on profit, not product. Clinton did not tax products, he taxed profit - a major distinction. What would be helpful to US manufacturing and trade balances would be to do things that you don't want to discuss:

* Use of alternative fuels (e.g. natural gas) to become energy self sufficient/This would save a billion dollars a day in oil imports
* Reduce healthcare costs to what we see in other industrial countries. That alone would save 10 percent of GDP.
* China has a huge potential market but they also have a lot of people who cannot afford to purchase products.

Today's refrigerators only last ten years if your lucky. So people in the US will be constantly replacing their refrigerators. Plus, many of us have multiple refrigerators (I have three in my house and there are three more at my places of business). So I would imagine the market for refrigerators will remain strong in both countries.

You must be really hard on refrigerators. I suggest buying better more quality brands.

. I don't buy that. You're saying that these supposedly smart wealthy people would have simply paid the higher taxes and not invested in developing markets in the absence of the tax cuts? Aren't taxes paid on profits? Couldn't these wealthy people have simply invested the extra money they would have paid in taxes if they took it as income and then claim it as an expense? They can afford damned good accountants and tax lawyers, after all. Furthermore, I would imagine that high tax rates in the US would actually encourage the wealthy to invest in developing nations rather than taking the money as income and having to pay taxes on it.

The George II tax cuts provided the wealthy additional capital to invest. And they invested it in China, not the US.

Additionally, US tax rates for the wealthiest Americans are the lowest they have been in more than 70 years. The wealthiest one percent pay and effective rate of less than 17 percent, courtesy of George II.

Your attempt to say that the George II tax cuts did not benefit the wealthy, just flies in the face of reality yet again.

Again, you think Warren Buffet wouldn't have figured out a way to do that and not pay taxes on it anyway?
Any tax relief increases the funds available to the productive private sector. Making the US an attractive place to do business increases the likelihood that the money will be invested in the US.
I would gladly pay higher taxes if I actually believed it would balance the budget. However, I see giving this government more money to be akin to giving more alcohol to a drunk or more crack to a crack addict. The more you give them, the more they use.

Again your attempts to say that the George II tax cuts had no effect on the wealthy just don't line up with reality. If what you were saying were true, why are Republicans/Tea Partiers fighting tooth and nail to extend the George II tax cuts? And why is it experts (CBO) say that it added a trillion dollars to the debt?

And finally, your claim that you would gladly pay more tax if you belived it would balance the budget is a cop out and a lie. You had no problems with George II and his merry band of Republicans including "deficits don't matter Cheney" when they were adding trillions to the debt and passing out tax cuts. But now when you get an administration and Congress that is serious about paying the nation's bills and restoring economic and fiscal sanity to Washington all of a sudden you get a case of fiscal extremism and pass the blame.

 

[Stoniphi]

I gotta go with Ice on this one, Squirrel.

Why? Because our government is not doing the job we hired them to do. No, I have no idea how to fix that at this time.

 

[Billy T]

What I find strange is that the US's external debt to GDP ratio is 95%, more than 6 times higher than Brazil's 15% yet Brazil is rated BBB.
Data by countries is here: http://en.wikipedia.org/wiki/List_of_countries_by_external_debt

Brazil has a trade surplus, more than 200 billion in reserves, (and unfortunately is the fourth largest holder of US Treasury paper)* and approximately a balanced budget and a currency that has gained 40% against the dollar in the last year! (The market knows Brazil is better "safe haven" than the US, and just does not need to issue any ways near as much in borrowing bonds.) I told you to buy Brazilian ADRs about 5 years ago - too bad for you so many thought I was "full of it."
In dollar terms you would have about 1,000% gain now.

Unfortunately, in less than 5 years more I probably will not be able to resist telling you at least once that GWB's tax policies, wars and favored treatment of the very rich allowed me to predict, while GWB still had two years more as POTUS that GWB's depression was coming. (It starts with a run on the dollar before Halloween 2014) But of course, I'm just full of it, again.

Until then, Go figure why Brazil is only BBB.

* 1, 2 & 3 are China, Japan, & England.

 

[NMSquirrel]

can anyone explain to a less than amateur person in as simple as possible terms..

why does america have such a high credit rating to begin with?
is it a true indicator? or is it a political trick?
what is the problem with the budget plan?
where does that put us in the future?


some may have been answered..but like i said..i have very little knowledge/understanding in this area..

 

[nirakar]

Standard and Poors announced Friday night that they were downgrading US debt from AAA to AA+.

Standard & Poor’s announced Friday night that it has downgraded the U.S. credit rating for the first time, dealing a symbolic blow to the world’s economic superpower in what was a sharply worded critique of the American political system.

Lowering the nation’s rating to one notch below AAA, the credit rating company said “political brinkmanship” in the debate over the debt had made the U.S. government’s ability to manage its finances “less stable, less effective and less predictable.” It said the bipartisan agreement reached this week to find at least $2.1 trillion in budget savings “fell short” of what was necessary to tame the nation’s debt over time and predicted that leaders would not be likely to achieve more savings in the future.

“It’s always possible the rating will come back, but we don’t think it’s coming back anytime soon,” said David Beers, head of S&P’s sovereign debt rating unit.

The decision came after a day of furious back-and-forth debate between the Obama administration and S&P. Government officials fought back hard, arguing that S&P’s analysis of the potential for political agreement was flawed and that its initial report, which was flagged by the Treasury earlier in the day, contained mathematical errors. The company had overstated the U.S. deficit over 10 years by $2 trillion.

“A judgment flawed by a $2 trillion error speaks for itself,” a Treasury spokesman said Friday.

The downgrade to AA+ will push the global financial markets into uncharted territory after a volatile week fueled by concerns over a worsening debt crisis in Europe and a faltering economy in the United States.​

http://www.washingtonpost.com/busin...redit-rating/2011/08/05/gIQAqKeIxI_print.html​

So, what now?

The credit ratings agencies don't try hard anymore to make accurate ratings.

A good article : http://seekingalpha.com/article/203193-a-look-at-ratings-agencies

from Moody's
"Most of Moody's revenues come from rating fees (approximately 90%) paid by security issuers, this makes Moody's profits sensitive to the volume of debt securities issued in the global market. "

There was a time when Moody's revenue came mostly from their research subscribers. As the ratings agencies research declined in quality and timelyness and as many other sources of better research become available the ratings agencies lost their subscribers. But the ratings agencies more than made up for the lost subscriber revenue with fees paid by bond issuers.

In this age of ethically challenged MBAs being rewarded for short term increases in efficiency it makes sense that the ratings agencies would stop wasting their money on research when the revenues come from doing essentially public relations work for bond issuers.

I noticed in my investing experience that the rating agencies ratings of existing corporate bonds seemed to imitate the stock price but with a one month time delay. My conclusion was that the ratings agencies were not doing research but were rather relying on the market to tell them how to rate bonds. Highly volatile stocks sometimes resulted in bond ratings that also went up and down.

I have never seen anyplace where the rating agencies say that they have a different grading standard for municipal bonds than they have for corporate bonds but the default risk for municipal bonds is much much much lower than the default risk for equally rated corporate bonds.

So what does the downgrade of the USA's debt mean? Damned if I know. It is hard to figure out what motivates the ratings agencies other than the fees they collect. I know the ratings agencies do PR damage control by doing things like downgrading Enron well after most investors finally figured out Enron was a fraud. Does downgrading the USA's debt make the ratings agencies look informed? Has some financial institution client of the ratings agencies requested the downgrade of US debt in order that they financial institution can profit? Has some client placed a bet on a small increase in US interest rates?

As Greenspan pointed out today the USA will print (really electronically money create) it's way out of debt before it defaults. There is no default risk to US debt. US debt is the safest debt possible and should have the highest possible ratings if you are not concerned with with inflation destroying the bond's real inflation adjusted value. If the USA money creates it's way out of debt then inflation will destroy the value of US government debt but then inflation would also destroy the value of all existing dollar denominated corporate bonds; so US debt should still be higher rated than corporate debt even if the ratings agencies considered inflation risk.


The ratings agencies don't pretend to consider inflation risk. The ratings agencies only pretend to consider default risk. So once again the ratings agencies have publicly made fools of themselves among the economically sound thinkers when they downgraded the USA's debt. But privately the ratings agencies may have a rational self serving reason for the downgrade.

The downgrade may move interest rates slightly because many people are not yet ready to right the ratings agencies off as being useless.

But Google ( "ratings agencies" + "useless" ) and you can see that for quite a few years now many people have thought the ratings agencies were useless.

 

[joepistole]

can anyone explain to a less than amateur person in as simple as possible terms..

why does america have such a high credit rating to begin with?
is it a true indicator? or is it a political trick?
what is the problem with the budget plan?
where does that put us in the future?

some may have been answered..but like i said..i have very little knowledge/understanding in this area..

The downgrade is because of the political situation. The United States has since at least WW II been viewed as the risk free investment. Because the United States was the worlds largest economy; the strongest military power, and the most stable government.

Now you can cross of the "stable government" portion of that equation due to the actions and reactions of the Tea Party. The reaction of Boehner and other Republican leaders to the announcement was unfortunately more of the same inane, insane, inflamatory rhetoric that took us to the brink of default.

The actions of the teabaggers have shown the world the US can no longer be counted on to govern itself rationally. It can no longer make financially responsible decisions. This is just round one, round two comes in November when the super committees try to solve the fiscal problems.

A contractionary/tight fiscal policy is exactly the wrong thing for the US government to do at this time given the current economic situation. But that is what congress is doing, in no small part to the efforts of the teabaggers and the lack of leadership in the Republican Party.

The great tragedy here is that it doesn't have to be this way. We know the problem. We know how to fix the problem. What we do not have is a political system or the leadership that is capable of doing what needs to be done.

The problem is actually quite simple. The reason the economy is growing slowly is because demand for goods and services has dropped. We have more supply than demand. Why did demand wane? Because the private sector got scared. The Financial Crisis of 2008 scared businesses and they cut spending. That is why they are now sitting on trillions of dollars in cash. And the teabaggers holding the nation hostage to their demands, threatening to move the nation into default if they did not get exactly what they wanted, did not improve business/investor confidence. In fact the fear now is that the teabagger stunt has moved us into another recession which will ironically require more government spending while at the same time driving up the cost of US debt. It was a really stupid stunt. But then when has the Tea Party ever been concerned about doing stupid and crazy things? And that is the danger. It is a very real and present danger.

The answer to our economic problem is to prop up demand. Traditionally, this is done by government spending, to prop up demand and restore business confidence. Government spending increases demand, and gets the economy back to fully employment. And as time progresses, private businessses become more confident, and government withdraws its spending/stimulus as private sector demand increases. Government then uses its growing tax revenues to pay down any debt incurred while "stimulating demand" in the economy.

 

[OnlyMe]

can anyone explain to a less than amateur person in as simple as possible terms..

why does america have such a high credit rating to begin with?
is it a true indicator? or is it a political trick?
what is the problem with the budget plan?
where does that put us in the future?


some may have been answered..but like i said..i have very little knowledge/understanding in this area..

1. As joepistole said, the US bond rating at AAA has been due to the fact that the US has and remains the world's largest and strongest economy. The down grade to AA+ is a small step and as far as bond investments are concerned not really significant. It may have a more significant effect for the scare factor. We will have to wait on the markets to know.

2. It is as true an indicator as you could get, setting aside the questionable motives and competence of the rating institutions.

3. The budget plan attached to the debit limit increase was and is a joke. A political ransom paid to extend the debit limit. It may even work against recovery. We will have to wait and see what comes next and how things shake out.

Again as joepistole explained, normally it is the Government who must step in to keep an economy going while the problems in the market place and employment recover.

4. In a perfect world our congress would get to work and overhaul the tax code, to reduce red tape and maximize revenues, while making what reductions to spending we can without.., again tanking the economy. Will they. Let them know they must.

------

As a side note tax revenues are down now because unemployment is high and people are scared. Most of the political retoric only makes that worse by playing on people's fears.

The cut and cap... Plan promoted by the right wing of the GOP is not a good deal. The debit we are now facing has less to do with the future than is has to do with the money the congress has spent or authorized in the past.

In a way unemployment is the same for the government as it is for a family. It reduces the money you have to pay bills. The problem with the GOP plans so far is that is like saying we don't need a job (more money) all we need to do is stop eating. That kind of plan is OK for the wealthy, but for working folks not so good.

In the short term I see no way to get out of this debit problem without raising taxes on the higher income levels, who can afford it. Raising taxes on people already in financial trouble would only make things worse. Once things stabilize and the debit is under control taxes can be readjusted as needed.

While doing that we do need to take a hard look at expenditures, military as well as social welfare programs. (There are what 177 countries in the world now and we have about 750 military bases outside the US, maybe 450 in the US?) Medicare Part D prescription drugs, a GOP plan is not paid for and does not even get the cost discounts insurance companies do. Bad plan. When the congress closed domestic bases around the country whole communities went into recession. A military base adds a lot of cash to the local economy.

I don't like raising the retirement age as those who need Social Security most usually have worked at jobs that wear people out. How many 70 year old iron workers do you see on any job? Social Security should be transformed into the safety net it was meant to be. Bill Gates and Ross Pero don't need a government retirement check. And the income cap on contributions should be raised. Hard changes.

Health care needs to change. We need to get the lower income uninsured out of the emergency rooms and hospitals for routine care. My mother before she passed away had an out patient surgery at a clinic surgical center. It cost just over $2000.00. The lab results were inconclusive. She was advised that they needed to do the same procedure again in a hospital where they had a pathologist available during surgery. That bill came in at just under $14,000.00, not including the doctor's fees. And it was the same procedure. (the pathologist was useless and they still had to send out for testing.) I was told that it was because the hospital has to cover operating costs for the uninsured. You know those emergency room visits for the flu.

This only scratches the surface but it is far more than I had intended so I will leave you with a disclaimer...

I am retired on a fixed and yet secure income. Not yet eligible for Social Security, but in about a year. I will need Medicare. My current insurance expires in another two years and will not be renewable, unless the laws change.

This economic recession has not been as bad on me as it has on most. I paid everything off, house and car, as I retired and as I said I have a stable though fixed monthly income.

Some of the things I suggested above could even affect me, (adversely) but more likely folks with a bit more income than I currently enjoy.

Sorry this went on longer and got more involved than I had intended.

 

[NMSquirrel]

In the short term I see no way to get out of this debit problem without raising taxes on the higher income levels, who can afford it. Raising taxes on people already in financial trouble would only make things worse. Once things stabilize and the debit is under control taxes can be readjusted as needed.

legalize marijuana. (see california and colorado for testimonies of it helping)

I don't like raising the retirement age as those who need Social Security most usually have worked at jobs that wear people out. How many 70 year old iron workers do you see on any job?

what?? NOOOO!!!(this is the first i have heard of this..) i am ready for retirement NOW (48) If i survive till 65 i want that SS check.(maybe they are counting on ppl to die so they don't have to pay)

Sorry this went on longer and got more involved than I had intended.

thank you. it did answer my questions more concisely and simply...

 

[OnlyMe]

legalize marijuana. (see california and colorado for testimonies of it helping)

I live in CA and let me tell ya it doesn't solve economic troubles. It is just that when you're high you don't care about anything but what ya got to munch on.

what?? NOOOO!!!(this is the first i have heard of this..) i am ready for retirement NOW (48) If i survive till 65 i want that SS check.(maybe they are counting on ppl to die so they don't have to pay)

There was some talk of raising the age to maybe 67. i think that was for full retirement benefits. I never heard anything about raising the 62 age of elgibility. I hope they were not talking about the age of elgibility being moved to 67. I think that would be bad. Would not affect me but it would be bad thing generally.

thank you. it did answer my questions more concisely and simply...

Glad it helped.

 

[NMSquirrel]

I live in CA and let me tell ya it doesn't solve economic troubles. It is just that when you're high you don't care about anything but what ya got to munch on.

thats not what msnbc (?) claims in its 1 hour special (can't find the link)

humbolt county claims that the medical marijuana market has helped the income of that county, same also with colorado.

besides the city making money on it, so will local cheetos distributers..

 

[OnlyMe]

thats not what msnbc (?) claims in its 1 hour special (can't find the link)

humbolt county claims that the medical marijuana market has helped the income of that county, same also with colorado.

That is because it is the primary business in Humbolt Co. And they oppose legalization. It would cut into their profits.

But Humbolt is a very small fragment of the CA economy.

besides the city making money on it, so will local cheetos distributers..

you got me laughing with this.

 

[NMSquirrel]

That is because it is the primary business in Humbolt Co. And they oppose legalization. It would cut into their profits.

But Humbolt is a very small fragment of the CA economy.

damn i wish i could find the link to the show i watched..
and why should it cut into profits?..

<edit> did find this one..not sure if it is the one i watched, i did scan through it and found afew sound bites relevent..

 

[OnlyMe]

damn i wish i could find the link to the show i watched..
and why should it cut into profits?..

Because if it were legalized competition would increase. Everyone would be growing pot. The big worry for that area is that the tobacco companies would get involved on a scale that would burry the local economy.

For the state, taxes would be good. Legalized sales would be taxed just like cigarettes. Mostly the medical marijuana is untaxed right now. I think there is regulation in the works that would allow some local taxation on dispensaries, but I am not really up to date on that.

I probably saw the MSNBC special, so don't spend too much time looking.