Sunday, August 7, 2011

My initial thoughts on the S&P Downgrade of the U.S.

From the S&P comments on the downgrade:

"The outlook on the long-term rating is negative. We could lower the long-term rating to 'AA' within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case."

It doesn't talk about raising taxes or fairness.

The comments go on to say:

"We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process."

See the Paul Ryan plan.

The comments go on to say:

Our revised scenarios also take into account the significant negative revisions to historical GDP data that the Bureau of Economic Analysis announced on July 29. From our perspective, the effect of these revisions underscores two related points when evaluating the likely debt trajectory of the U.S. government.

Grow the economy

The comments go on to say:

When comparing the U.S. to sovereigns with 'AAA' long-term ratings that we view as relevant peers--Canada, France, Germany, and the U.K.--we also observe, based on our base case scenarios for each, that the trajectory of the U.S.'s net public debt is diverging from the others .....
However, in contrast with the U.S., we project that the net public debt burdens of these other sovereigns will begin to decline, either before or by 2015.

Cut Spending

If the electorate can stop electing big spending Liberals and RINO's, there is hope. In the past 30 years, five nations - Australia, Canada, Denmark, Finland, and Sweden - have regained their AAA rating after losing it.

Elections Matter

1 comment:

  1. Obama is now officially the worst President in history.


No profanity, keep it clean.

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