[Quag]

Basically what do you people think should be done about the Debt/Deficit problems facing the USA toady?

[gvg]

Dawh: Yeah, you're probably right. Ah well.

Oh, and what do you all think of the roller-coaster ride known as the stock market this month?

Quag: I'm sorry that I haven't answered your stuff, but with vacation and school work (only two weeks of summer vacation left =() I haven't really done much. I dunno when i'll get to it.

[gvg]

I did the NY Times thing again, and i do think this time I'm a bit more balanced. Still though, it doesn't have some of the things I'd want.But anyway: http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html?choices=gmusn9qt

[Quag]

Sorry been away on vacation, ran a triathlon and didn't come in last (near the bottom but not last )

How about working for some of those? Maybe a job creating thing included in one of these cuts? A second stimulus maybe? (One that isnt 40% tax cuts. The last stimulus was considered too small.

Umm gvg you think the solution to what is basically a debt problem is actually to create more debt?

ref the article: I still think ya got too much tax too little cuts and I agree there is a lot of things missing. I had a colleague at work try it, he came out a bit more taxes than me but less than you. Seems everyone will have a different solution. I think that is actually part of the problem. I believe (or would at least like to believe) that all (most) politicians have same goal in mind (no not just get elected) but to create a better world. Problem is when you think you have the correct solution and that the other guys ideas will lead to ruin, it is kinda hard to compromise, if you think that compromise will lead to ultimate disaster for the county. Still something has to be done, on the bright side you Americans are finally starting to realize the deficit/debt is a problem. It happened to us in the 90's when we got downgraded from AAA. That shift in public awareness/opinion on the matter finally gave the politicians the gonads to actually start to do something about it. Now we are in better shape than any of the other G8 countries due to that realization and action on the issues.

Edited September 1, 2011 by Quag

[Guest]

Sorry been away on vacation, ran a triathlon and didn't come in last (near the bottom but not last )

Umm gvg you think the solution to what is basically a debt problem is actually to create more debt?

ref the article: I still think ya got too much tax too little cuts and I agree there is a lot of things missing. I had a colleague at work try it, he came out a bit more taxes than me but less than you. Seems everyone will have a different solution. I think that is actually part of the problem. I believe (or would at least like to believe) that all (most) politicians have same goal in mind (no not just get elected) but to create a better world. Problem is when you think you have the correct solution and that the other guys ideas will lead to ruin, it is kinda hard to compromise, if you think that compromise will lead to ultimate disaster for the county. Still something has to be done, on the bright side you Americans are finally starting to realize the deficit/debt is a problem. It happened to us in the 90's when we got downgraded from AAA. That shift in public awareness/opinion on the matter finally gave the politicians the gonads to actually start to do something about it. Now we are in better shape than any of the other G8 countries due to that realization and action on the issues.

I would point out that S & P didn't downgrade US credit because of the debt/deficit, they downgraded because of the brinkmanship that almost led to the government defaulting. In their reasoning, they fairly specifically called out the Republicans for playing political games with the country's financial priorities. None of the rating companies (or investors) currently seem to have any qualms about the US's creditworthiness. When the market tanked, people were running to the safety of US Treasury notes.

The debt is a long-term problem, no question, but with certain simple, marginal changes in direction, most of the problems go away. If all of the Bush tax cuts expire, most of the deficit problems reduce down to manageable levels. Even if only the cuts on the top 2% of wage earners is allowed to expire, most of the fiscal problems the country is facing will be manageable.

Debt is not the "Be all and the End all" of our fiscal soundness. If you have a mortgage on your house, then you are in debt, probably deeply in debt (several years' salary-worth). Even so, your credit-rating isn't in the dirt with that monumental debt hanging over your head because you can continue to pay it off over the long-term. And while analogies between government and household economics are of limited use, the government's situation isn't really much different. So long as the promise to pay off the debt remains and regular payments are made, it's possible to rack up a large debt while maintaining a strong credit-rating.

I don't think that we need far-ranging changes to our financial system to remain afloat (though I'm sure that there are plenty of things we could do that would improve our situation drastically), but we do have a broken political system in this country and that is what is likely to destroy our country and cause us to default (or otherwise self-destruct).

The Republicans have fairly clearly demonstrated that they aren't interested in governing this country. They are only interested in power. The Senate Minority Leader, Mitch McConnell, said that it was his goal to ensure that Obama is a one-term President. That's not something that a real public servant should ever say. Obama is the President. McConnell may not like it and he might not agree with that, but if he were really interested in governing this country, he would work with the President to help right our economy and put people back to work, even if that likely meant that Obama would be elected to another term.

But instead, the Republicans are taking their ball and going home. If the economy recovers before November 2012, most analysts believe Obama has a strong chance of being reelected. However, if the economy is in the dumps and unemployment is high, then the public might be more inclined to vote for the other guy (whoever that turns out to be). Looking at everything that the Republicans in Congress have done so far this term, can you say that you think that they are really trying to turn the economy around? They insisted that this Congress would be about "Jobs, jobs, jobs," but as I stated before, they haven't passed a single jobs-related bill that stands a chance of passing both chambers and being signed into law.

They want the economy to be in the dump because it gives them the best chance to get their guy into the White House in the next election. I don't see how else you can slice it. And these austerity measures that everyone is taking for granted is one way to ensure that that will be the case come November 2012. I think that the debt and deficit worries are a distraction from the real problem. Unemployment is high, not because companies don't have capital, they have capital in spades. The Fortune 500 companies have been more profitable in the last year and a half than they ever were before the crash. Their not hiring because people aren't buying. And people aren't buying because they don't have the money. And they don't have the money because they don't have jobs. And they don't have jobs because companies aren't hiring...it's a vicious cycle that the market can't correct on its own without a lot of people hurting for a long time.

The government can short-circuit this cycle and reduce the pain by spending money and hiring people itself. If you put people back to work and give them money to spend, they'll spend it and the economy will start moving again of its own accord. Fiscal austerity is about the last thing a potentially strong economy like America's needs. We need more investment, not less.

[/rant]

[gvg]

Sorry been away on vacation, ran a triathlon and didn't come in last (near the bottom but not last )

First off, welcome back. Where'd you go?

Umm gvg you think the solution to what is basically a debt problem is actually to create more debt?

Second, this was referring to creating jobs, not to fixing the debt.

ref the article: I still think ya got too much tax too little cuts and I agree there is a lot of things missing. I had a colleague at work try it, he came out a bit more taxes than me but less than you. Seems everyone will have a different solution. I think that is actually part of the problem. I believe (or would at least like to believe) that all (most) politicians have same goal in mind (no not just get elected) but to create a better world. Problem is when you think you have the correct solution and that the other guys ideas will lead to ruin, it is kinda hard to compromise, if you think that compromise will lead to ultimate disaster for the county. I agree. Still something has to be done, on the bright side you Americans are finally starting to realize the deficit/debt is a problem. Oh no... you misunderstand. The tea party decided to be a lady about the debt. before that, no one cared because they were told it didn't matter (cue Dick Cheney) It happened to us in the 90's when we got downgraded from AAA. As dawh pointed out, we weren't downgraded due to the debt. That shift in public awareness/opinion on the matter finally gave the politicians the gonads to actually start to do something about it. Now we are in better shape than any of the other G8 countries due to that realization and action on the issues.

I will begin what will probably be a rant by saying that i've decided that the debt does matter, but we have bigger issues now. Specifically, unemployment.

We should definitely begin to take steps to reduce the debt. Cut military spenidng, raise the SS and Medicare age to 68 for those below 50 (or whatever)... yes, those we should do.

but there's a reason that I chose more taxes than cuts: As Dawh said, austerity measure would cripple us. We can't move to fast and we can't slice too much. What we need to do is to get more people working. I care more about that. I'm going to quote Dawh here:

The debt is a long-term problem, no question, but with certain simple, marginal changes in direction, most of the problems go away. If all of the Bush tax cuts expire, most of the deficit problems reduce down to manageable levels. Even if only the cuts on the top 2% of wage earners is allowed to expire, most of the fiscal problems the country is facing will be manageable.

Debt is not the "Be all and the End all" of our fiscal soundness. If you have a mortgage on your house, then you are in debt, probably deeply in debt (several years' salary-worth). Even so, your credit-rating isn't in the dirt with that monumental debt hanging over your head because you can continue to pay it off over the long-term. And while analogies between government and household economics are of limited use, the government's situation isn't really much different. So long as the promise to pay off the debt remains and regular payments are made, it's possible to rack up a large debt while maintaining a strong credit-rating.

and dawh's right.

in my view, the debt is something we have to work on when we are NOT on the borderline of another recession with unemployment as high as it is. i know this may not be what i implied above, but the tea party was right to lady about the debt. What they didn't do right was the timing, and the method (and of course, they have a political thing going behind it, as Dawh pointed out, but that's a seperate issue). We need to put people to work, THEN focus on the deficit/debt. we currently have 47% of Americans who dont pay income tax. Why? They're either unemployed or too poor. We need to change this, not with the flat tax or other similar proposals, but with pushing people OUT of this set.

That's why I can't agree to cutting government jobs. They may be funded by tax payer dollars, but they're jobs, and they give people money to pour back into the economy (thus indirectly funding the economy... with government. Who knew? =)) Of course, we can't fix it with only public jobs... obviously that wouldn't work. o, we have to take a few hits and possibly do some things that may or may not negate and of the changes i mentioned above to reduce the debt (of course, tax raises would help get rid of this problem... but that won't happen anytime soon, i assure you). the things i'm talking about include possibly a second stimulus and the like. but they also include common sense things.

For instance, lowering the Corporate tax rate (and closing loopholes). Common sense, in my view. i'm not going to go reduce it to like 10%, but I could see how lowering it (instead of just closing loopholes and keeping the rate as is) would help lure corporations back. And add tax money.

Also, there are overregulations that have to be dealt with. For instance, in some cases it's very hard to get a small business. For instance, to get a taxi company going, you need a medallion ( i think that's what it's called) that costs something like 800k to 1 million dollars. WTF? Why? you are already getting a business license.. why the hell is that needed? it just reduces the number of people who try to make a business. Even if it's just you, you need to pay that. Anyone could see that it's an unnecessary burden.

I would continue, but i have to go eat dinner. i'll have to finish later.

[gvg]

Alright, to conclude:

Basically, I think we should focus more on Jobs than the debt. wait until we get rid of this high unemployment problem, which would therefore give us more taxpayers and help the debt cause. How to get people to hire is another question. like i said above, we need to get rid of overregulations on small businesses (I'm sure people could come up with a few, like this: http://online.wsj.com/article/SB10001424052748703445904576118030935929752.html 'The theory and practice' of shampooing? Give me a break). For instance, maybe a 2% tax cut from the 28% I said before for every, I dunno, couple of hundred thouseand you hire? Something like that? I dunno. But we have to encourage. A second stimulus would help, but government alone can't do it.

But austerity measures wouldn't help at all. i think Dawh explains it right. The cycle must be broken in some way, and really, i can only see a public solution.

[Quag]

I would point out that S & P didn't downgrade US credit because of the debt/deficit, they downgraded because of the brinkmanship that almost led to the government defaulting. In their reasoning, they fairly specifically called out the Republicans for playing political games with the country's financial priorities. None of the rating companies (or investors) currently seem to have any qualms about the US's creditworthiness. When the market tanked, people were running to the safety of US Treasury notes.

um no it was because of the debt/deficit.

http://www.standardandpoors.com/ratings/articles/en/us/?assetID=1245316529563

here is the reasons given by S&P themselves.

• We have lowered our long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term rating.
  
• We have also removed both the short- and long-term ratings from CreditWatch negative.
  
• The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.
  
• More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.
  
• Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon.
  
• 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.
  

please note the last paragraph it is very explicit you are spending way too much. Both Moody's and Fitch have reaffirmed that the outlook for the US keeping their credit ratings are negative (ie they may be downgraded). So its not a 1 time crazy company thing that happened. YOU HAVE a debt/deficit problem. As to the running to T-bills all the analysis that i have seen said it is because t-bills and gold are where people have traditionally taken refuge and it should not be seen as a sign that people have confidence in them only that they don't know where else to go with their money.

The debt is a long-term problem, no question, but with certain simple, marginal changes in direction, most of the problems go away. If all of the Bush tax cuts expire, most of the deficit problems reduce down to manageable levels. Even if only the cuts on the top 2% of wage earners is allowed to expire, most of the fiscal problems the country is facing will be manageable.

umm no simple changes wont fix the problem and the tax rates will not even come close to closing the gap. Please look again at the link gvg gave for the NY Times

Debt is not the "Be all and the End all" of our fiscal soundness. If you have a mortgage on your house, then you are in debt, probably deeply in debt (several years' salary-worth). Even so, your credit-rating isn't in the dirt with that monumental debt hanging over your head because you can continue to pay it off over the long-term. And while analogies between government and household economics are of limited use, the government's situation isn't really much different. So long as the promise to pay off the debt remains and regular payments are made, it's possible to rack up a large debt while maintaining a strong credit-rating.

Yes I agree with you here, only you guys are growing debt at such an incredible rate the ability to pay the debt is being reduced. That is why you got the downgrade and that there is a strong possibility of future downgrades.

The Republicans have fairly clearly demonstrated that they aren't interested in governing this country. They are only interested in power. The Senate Minority Leader, Mitch McConnell, said that it was his goal to ensure that Obama is a one-term President. That's not something that a real public servant should ever say. Obama is the President. McConnell may not like it and he might not agree with that, but if he were really interested in governing this country, he would work with the President to help right our economy and put people back to work, even if that likely meant that Obama would be elected to another term.

um sorry to disagree here well kinda disagree. When Bush was in power the dems acted the same there is no difference there.

But instead, the Republicans are taking their ball and going home. If the economy recovers before November 2012, most analysts believe Obama has a strong chance of being reelected. However, if the economy is in the dumps and unemployment is high, then the public might be more inclined to vote for the other guy (whoever that turns out to be). Looking at everything that the Republicans in Congress have done so far this term, can you say that you think that they are really trying to turn the economy around? They insisted that this Congress would be about "Jobs, jobs, jobs," but as I stated before, they haven't passed a single jobs-related bill that stands a chance of passing both chambers and being signed into law.

this is political analysis and well i call bs here. There is NO chance the economy will recover by 2012, thus making the analysis complete conjecture and a waste of time. in fact the next president rep/dem will inherit a screwed up economy and will be lucky to get reelected in 4 years unless they make major changes. Obama is going in the wrong direction increasing debt at astronomical rates will just continue the economic malaise. perhaps he will try to get it under control but i doubt it, frankly i doubt a republican will be able to either. Only when you admit you have a serious problem will there be enough political will to tackle it.

They want the economy to be in the dump because it gives them the best chance to get their guy into the White House in the next election. I don't see how else you can slice it. And these austerity measures that everyone is taking for granted is one way to ensure that that will be the case come November 2012. I think that the debt and deficit worries are a distraction from the real problem. Unemployment is high, not because companies don't have capital, they have capital in spades. The Fortune 500 companies have been more profitable in the last year and a half than they ever were before the crash. Their not hiring because people aren't buying. And people aren't buying because they don't have the money. And they don't have the money because they don't have jobs. And they don't have jobs because companies aren't hiring...it's a vicious cycle that the market can't correct on its own without a lot of people hurting for a long time.

Again i go back to what i wrote before i believe all (most) politicians want what is best for their country just because you disagree with their ideas on how to get there doesn't mean that they want to do harm for their own personal gain. Ok perhaps i am naive but the alternative as i see it is to believe that all(most) politicians are there for personal gain at the expense of their country

The government can short-circuit this cycle and reduce the pain by spending money and hiring people itself. If you put people back to work and give them money to spend, they'll spend it and the economy will start moving again of its own accord. Fiscal austerity is about the last thing a potentially strong economy like America's needs. We need more investment, not less.

yes that is the theory, unfortunately it does not and has not ever worked. the problem is when the govt stops spending the money and starts to deal with the problems causing the debt they created the economy does even worse. It is Keynesian economics at its worst. In fact Keynes would be appalled as he said in times of plenty they govt pays back the money it borrowed. the idea of continuing the deficit spending in times of plenty and then trying the pump/priming when you are in debt up to your eyeballs would have him rolling in his grave.

here another opposing idea. You reduce taxes thus leaving more money in the hands of consumers who would either spend or invest that money thus stimulating the economy. No this doesn't work really either it is the same thing from a different point of view. one is democrat one is republican.

[Quag]

I will begin what will probably be a rant by saying that i've decided that the debt does matter, but we have bigger issues now. Specifically, unemployment.

We should definitely begin to take steps to reduce the debt. Cut military spending, raise the SS and Medicare age to 68 for those below 50 (or whatever)... yes, those we should do.

but there's a reason that I chose more taxes than cuts: As Dawh said, austerity measure would cripple us. We can't move to fast and we can't slice too much. What we need to do is to get more people working. I care more about that. I'm going to quote Dawh here:

unemplyment will not go away as long as the outlook for the govt debt is soo soo bad. What I can tell you is that in the 90's we here were in the same basic situation as you guys are now. The govt did cut jobs, froze wages downloaded services to the provinces basically they did everything they could to get their house in order (financially speaking). now we are weathering the economic crisis better than any other developed country. We did some stimulus type stuff. the govt didnt actually want to. They were in a minority and were forced to, which led top the rather hilarious situation of the opposition parties screaming that the govt was spending to much and creating a deficit after they forced them to do so. Now we have a majority govt and they are working to get rid of the deficit again and have completely rejected the possibility of any further stimulus, only 1 of the 3 opposition parties thinks it should be done so they almost have unanimity on this one here.

in my view, the debt is something we have to work on when we are NOT on the borderline of another recession with unemployment as high as it is. i know this may not be what i implied above, but the tea party was right to lady about the debt. What they didn't do right was the timing, and the method (and of course, they have a political thing going behind it, as Dawh pointed out, but that's a seperate issue). We need to put people to work, THEN focus on the deficit/debt. we currently have 47% of Americans who dont pay income tax. Why? They're either unemployed or too poor. We need to change this, not with the flat tax or other similar proposals, but with pushing people OUT of this set.

That's why I can't agree to cutting government jobs. They may be funded by tax payer dollars, but they're jobs, and they give people money to pour back into the economy (thus indirectly funding the economy... with government. Who knew? =)) Of course, we can't fix it with only public jobs... obviously that wouldn't work. o, we have to take a few hits and possibly do some things that may or may not negate and of the changes i mentioned above to reduce the debt (of course, tax raises would help get rid of this problem... but that won't happen anytime soon, i assure you). the things i'm talking about include possibly a second stimulus and the like. but they also include common sense things.

basically the problem is the 2 are interconnected you cant fix they unemployment problem with such an overwhelming debt problem. a stimulus will not help, just like every other stimulus it will create either unproductive govt office jobs that are jsut a drain on the economy or infrastructure projects that result in employment of those building as soon as the project is done which usually coincides with the need for more $ by the govt to pay the debts caused by the projects thus making the situation even worse. I am sorry stimulus has just never ever ever ever worked as a way of getting the economy going.

For instance, lowering the Corporate tax rate (and closing loopholes). Common sense, in my view. i'm not going to go reduce it to like 10%, but I could see how lowering it (instead of just closing loopholes and keeping the rate as is) would help lure corporations back. And add tax money.

Also, there are overregulations that have to be dealt with. For instance, in some cases it's very hard to get a small business. For instance, to get a taxi company going, you need a medallion ( i think that's what it's called) that costs something like 800k to 1 million dollars. WTF? Why? you are already getting a business license.. why the hell is that needed? it just reduces the number of people who try to make a business. Even if it's just you, you need to pay that. Anyone could see that it's an unnecessary burden

Agree 100%

[gvg]

unemplyment will not go away as long as the outlook for the govt debt is soo soo bad. What I can tell you is that in the 90's we here were in the same basic situation as you guys are now. The govt did cut jobs, froze wages downloaded services to the provinces basically they did everything they could to get their house in order (financially speaking). now we are weathering the economic crisis better than any other developed country. We did some stimulus type stuff. the govt didnt actually want to. They were in a minority and were forced to, which led top the rather hilarious situation of the opposition parties screaming that the govt was spending to much and creating a deficit after they forced them to do so. Now we have a majority govt and they are working to get rid of the deficit again and have completely rejected the possibility of any further stimulus, only 1 of the 3 opposition parties thinks it should be done so they almost have unanimity on this one here.

http://worthwhile.typepad.com/worthwhile_canadian_initi/2009/06/comparing-employment-growth-in-canada-and-the-us-over-the-longer-term.html When did the cutting come?

basically the problem is the 2 are interconnected you cant fix they unemployment problem with such an overwhelming debt problem. a stimulus will not help, just like every other stimulus it will create either unproductive govt office jobs that are jsut a drain on the economy or infrastructure projects that result in employment of those building as soon as the project is done which usually coincides with the need for more $ by the govt to pay the debts caused by the projects thus making the situation even worse. I am sorry stimulus has just never ever ever ever worked as a way of getting the economy going.

http://www.realclearpolitics.com/2011/09/01/evidence_shows_the_stimulus_worked_262702.html First off, the stimulus worked. (I'll get more links if you want). It made public and private jobs (and actually, Obama has fired about 2 million public workers) and prevented anything worse from happening, even though it was about (or exceeded) 50% tax cuts. So, it worked, and did what it said it would. And anytime jobs are created,I'm pretty sure that helps.

Second, government jobs are not a drain on the economy; after all, it's better than no job at all, and it lends them spend money which increases demand. Cycle broken somewhat (of course, things need to be done to incrase private jobs, like the things I said above)

And I look at it as: We need to increase employment, than when times are better, go ahead and raise taxes and cut more stuff. Start laying the foundation for cutting and saving and taxing now, complete it later when unemployment is down and the economy is better. Not do austerity measures now. Did you see the hell in Greece? We aren't at a point where we need to do that yet.

and just looking quickly at your response to Dawh, i just have two quick comments:

1. In my good old US of A, politicians are to political knowledge as Michael phelps is to political knowledge. you have the Neo-cons who want an American Empire (I know some people say we are technically one now, but they want to expand it), you have the theocrats who want a Christian theocracy in place, you have the rest of the republicans who are just a-holes, you have blue dog democrats which are republicans in disguise (they always vote with them), you have the democrats who have no spines and simply do what the biggest unions want (like the repubs do what the corporations want), and then there is an independent, a democratic socialist, who i like but will never be able to make his voice heard and i'm afraid will actually abolish the free market ( him being a socialist and all), which wouldn't help.

American politics in a nut-shell. i know of no one who isn't in it for the reelections (maybe a few, but as of right now they're a minority). now, i may be overreacting a little, but you are definitely wrong about American politicians.

2. I like Keynesian what-not. i looked into a little. it is true that we have done the important part (ie reduce the debt/deficit in times of good). we should start now. Lay the foundation for reduction now, work harder on it when things turn around.

Agree 100%\

[Guest]

um no it was because of the debt/deficit.

http://www.standarda...D=1245316529563

here is the reasons given by S&P themselves.

<p class="blockquote">

• We have lowered our long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term rating.
  
• We have also removed both the short- and long-term ratings from CreditWatch negative.
  
• The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.
  
• More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.
  
• Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon.
  
• 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.

please note the last paragraph it is very explicit you are spending way too much. Both Moody's and Fitch have reaffirmed that the outlook for the US keeping their credit ratings are negative (ie they may be downgraded). So its not a 1 time crazy company thing that happened. YOU HAVE a debt/deficit problem. As to the running to T-bills all the analysis that i have seen said it is because t-bills and gold are where people have traditionally taken refuge and it should not be seen as a sign that people have confidence in them only that they don't know where else to go with their money.

It's reasonable to say that the debt played a role in their decision to downgrade, but you notice that it was only the final paragraph that mentioned the debt. The three paragraphs before it all say that they thought the political intransigence in Congress made achieving fiscal stability unlikely. Obama offered them a "Grand Bargain" that was 3-1 cuts to revenue and the Tea Party House Republicans refused. The plan was supposed to cut $3 trillion and raise $1 trillion over 10 years, but even though that was more cuts than most (if not all) of the Republican plans, it was rejected because it had some taxes. If they were really interested in governing, they would have been able to find a big deal to make. But they scraped something together to get them over the finish line at the last minute because a sizable portion of the party is deadset against allowing the President to get any credit for any good thing that happens.

umm no simple changes wont fix the problem and the tax rates will not even come close to closing the gap. Please look again at the link gvg gave for the NY Times

I have to admit, I haven't looked at gvg's link, but I said it could be made "manageable," I didn't say that it would necessarily be "fixed" with simple changes. I think that there are a few relatively simple changes that could be implemented if the people in Congress were really interested in solving our problems. I'm a tad sleep-deprived, so I can't come up with any examples off the top of my head.

this is political analysis and well i call bs here. There is NO chance the economy will recover by 2012, thus making the analysis complete conjecture and a waste of time. in fact the next president rep/dem will inherit a screwed up economy and will be lucky to get reelected in 4 years unless they make major changes. Obama is going in the wrong direction increasing debt at astronomical rates will just continue the economic malaise. perhaps he will try to get it under control but i doubt it, frankly i doubt a republican will be able to either. Only when you admit you have a serious problem will there be enough political will to tackle it.

The economy was growing in the first half of the year and businesses were beginning to gain confidence again. The stock market was at its highest that it had been since the crash. But then the Republicans forced us into a hard turn toward austerity (and Europe sort of fell to pieces) and the economy has been tanking again. If we had found a way to maintain the growth that we had been seeing, the economy (while still not fully recovered) would have been decent come November 2012.

Again i go back to what i wrote before i believe all (most) politicians want what is best for their country just because you disagree with their ideas on how to get there doesn't mean that they want to do harm for their own personal gain. Ok perhaps i am naive but the alternative as i see it is to believe that all(most) politicians are there for personal gain at the expense of their country

I would say that there are three classes of politician. Those who want what's best for the country, those who want what's best for themselves and those too stupid to know what they're doing. The people in the third category may think that they are there to make things better, but because they don't have a clue, they are easily manipulated by special interests and those in the second category. I'm always reminded of Douglas Adams' "Restaurant at the End of the Universe." One of the characters, Zaphod Beeblebrox, becomes President of the galaxy, but because only people totally unqualified to rule ever want to be President, the real power has to lie elsewhere for the galaxy to function. Unfortunately, I think there are far more Beeblebroxes in government than not.

For instance, as I see it, presidential candidate Rick Perry fits squarely in the second category with maybe a little cross-over into the third. The first category doesn't come into play at all. Perry came from working class roots and has only ever been a public servant and he's also a millionaire. Sounds like a story of a good, hard working American, right? Well he got his money buying and selling land with two business partners who happened to need a government permit to develop it. After he made the money, the permit was granted...but of course, there wasn't any corruption involved. Most of the rest of the Republican candidates are in a similar boat. They are all blatantly changing policy positions to curry favor with the Tea Party (with the exception of Ron Paul, but he's insane for a whole host of other reasons). I don't really see the same level of duplicity (or insanity) from the Democrats.

yes that is the theory, unfortunately it does not and has not ever worked. the problem is when the govt stops spending the money and starts to deal with the problems causing the debt they created the economy does even worse. It is Keynesian economics at its worst. In fact Keynes would be appalled as he said in times of plenty they govt pays back the money it borrowed. the idea of continuing the deficit spending in times of plenty and then trying the pump/priming when you are in debt up to your eyeballs would have him rolling in his grave.

here another opposing idea. You reduce taxes thus leaving more money in the hands of consumers who would either spend or invest that money thus stimulating the economy. No this doesn't work really either it is the same thing from a different point of view. one is democrat one is republican.

So you're saying that neither of the major economic theories work (Keynesian and supply-side)? I could agree to an extent, but I think that you missed an important episode in the story. Clinton's policies (while flavored by the supply-side policies of Reagan and Bush I), were largely of a Keynesian nature and he was running a surplus by the end of his term. Had we kept going on that path, the debt was projected to be paid off by the end of this year (or 2012, I can't remember which). The problem was that when Bush II stepped into office, he immediately squandered the surplus with wars and tax cuts (something no president had ever done before, cut taxes while going to war) instead of paying down the debt like he should have. Instead, he ballooned the deficit and consequently the debt.

Keynesian economics says, you spend in recessions to help pull the country out and then you start paying it back when the economy is strong. The economy was strong at the end of Clinton's term and that was the time that we should have been paying down the debt. The problem is that it's hard for politicians to pull the plug on spending (especially when special interests set up factories in their districts to convince them to keep funding projects). I think that the most noticeable example is the F-22, which the Democrats managed to get defunded in 2009:

The decision was met with strong opposition in Congress. With the F-22 being manufactured in or getting supplies from 44 different states, the plane gets broad support from congressmen and senators on both sides of the aisle.

Lockheed Martin and Boeing were both making sure that the work would be spread around so that they would have lots of friends in Congress. Even so, enough politicians managed to get the wherewithal to stand up to the companies and say "No," since the President and the Pentagon both said it was a waste of money.

I agree with gvg when he says that he thinks that most politicians are there to get reelected. Some may have started with the intent to help, but most get so entrenched in Washington that they change their actions to stay in Washington, They stop making the necessary sacrifices to help the country, when it would hurt their own reelection chances. I think that there are a lot of people who could be good politicians, who would do the right thing for the country and probably get booted out in the next election, but it costs so much to run for office these days it's prohibitively expensive for most people to run. Also, many of them would rather do things far more interesting and rewarding than bloviate on the House floor for six hours a day.

[Quag]

short reply as i don't have time

no the stimulus didn't work

http://lyingeyes.blogspot.com/2011/02/did-stimulus-worked.html

http://economyincrisis.org/content/did-stimulus-create-jobs

we can keep going back and forth all day on this but to make it easier historically speaking ie looking back many years with hindsight instead of the recent recession and you will find that stimulus has never had a long term positive effect only long term negative effect. so whether 2 million jobs were saved or not (notice they dont use created, makes ya wonder) doesn't matter if in the longer term the bad economy lasts longer and even more peopel are hurt by it.

the Canadian link proves my point. think of the economy as a large ship nothing you do has an immediate effect(well almost nothing, natural disaster wars etc are pretty immediate) in the 90's we started to do something by 1995 Canadian jobs are growing very very nicely untill the recession hits, thank you very much for proving my poiint

as to us politics ok maybe your guys are worse than the ones we have here, but ill still live in my fairytale land and pretend the politicians are working for what they believe is the good of the country and not just themselves (yeah im hopeless)

you like Keynesian economics? it has been shot down by pretty much every economists and financial expert since it was first tried AND FAILED! just like the current stimulus has failed.

[Quag]

It's reasonable to say that the debt played a role in their decision to downgrade, but you notice that it was only the final paragraph that mentioned the debt. The three paragraphs before it all say that they thought the political intransigence in Congress made achieving fiscal stability unlikely. Obama offered them a "Grand Bargain" that was 3-1 cuts to revenue and the Tea Party House Republicans refused. The plan was supposed to cut $3 trillion and raise $1 trillion over 10 years, but even though that was more cuts than most (if not all) of the Republican plans, it was rejected because it had some taxes. If they were really interested in governing, they would have been able to find a big deal to make. But they scraped something together to get them over the finish line at the last minute because a sizable portion of the party is deadset against allowing the President to get any credit for any good thing that happens.

points 1-2 basically stating what they did after they say why

3rd point:

The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.

4th point politica i giv eya that

5th point is mix politics and ability to meet a compromise.

as to the tea party stuff. I disagree that no tax increase is good/possible but going back to my point earlier if you truly believe you are right to compromise on this would lead to ruin in your opinion, then compromise would be wrong, They need to learn that just like Obama needed to learn to compromise, something he only started to do when his political capital ran out, i remember the speech where he told republicans to get on board because he had won the election, he doesn't say crap like that anymore.

I have to admit, I haven't looked at gvg's link, but I said it could be made "manageable," I didn't say that it would necessarily be "fixed" with simple changes. I think that there are a few relatively simple changes that could be implemented if the people in Congress were really interested in solving our problems. I'm a tad sleep-deprived, so I can't come up with any examples off the top of my head.

If all of the Bush tax cuts expire, most of the deficit problems reduce down to manageable levels.

put in bold as i felt it was important. seemed to imply that tax breaks ending will solve things. but honestly they wont even make them manageable just reduce the speed that your are heading in the wrong direction slightly. but yes there are many things that could be done in fact that is part of it there are many things that HAVE to be done no 1 thing by itself will have a large impact.

The economy was growing in the first half of the year and businesses were beginning to gain confidence again. The stock market was at its highest that it had been since the crash. But then the Republicans forced us into a hard turn toward austerity (and Europe sort of fell to pieces) and the economy has been tanking again. If we had found a way to maintain the growth that we had been seeing, the economy (while still not fully recovered) would have been decent come November 2012.

the growth was almost nonexistant and the Europe thing was a much much larger factor than not reaching a compromise, BTW i dont blame only republicans the dems could easily have said ok well do it your way and if it didnt work pasted them come election time and then done things their way.

I would say that there are three classes of politician. Those who want what's best for the country, those who want what's best for themselves and those too stupid to know what they're doing. The people in the third category may think that they are there to make things better, but because they don't have a clue, they are easily manipulated by special interests and those in the second category. I'm always reminded of Douglas Adams' "Restaurant at the End of the Universe." One of the characters, Zaphod Beeblebrox, becomes President of the galaxy, but because only people totally unqualified to rule ever want to be President, the real power has to lie elsewhere for the galaxy to function. Unfortunately, I think there are far more Beeblebroxes in government than not.

love douglas adams, yeah i would say most politicians fit category3 and only get it right by accident but still fairtale dreaming me likes to think most are also cat1

For instance, as I see it, presidential candidate Rick Perry fits squarely in the second category with maybe a little cross-over into the third. The first category doesn't come into play at all. Perry came from working class roots and has only ever been a public servant and he's also a millionaire. Sounds like a story of a good, hard working American, right? Well he got his money buying and selling land with two business partners who happened to need a government permit to develop it. After he made the money, the permit was granted...but of course, there wasn't any corruption involved. Most of the rest of the Republican candidates are in a similar boat. They are all blatantly changing policy positions to curry favor with the Tea Party (with the exception of Ron Paul, but he's insane for a whole host of other reasons). I don't really see the same level of duplicity (or insanity) from the Democrats.

sounds like Obama, guy starts with nothing works only in community service or govt and ends up rich, lol liek that is possible without being corrupt! I don't pay much attention to primaries untill later on as who cares about soem guy who may never even get close to running for the office, if perry wins the nomination or looks like he might (later on) ill check him out.

So you're saying that neither of the major economic theories work (Keynesian and supply-side)? I could agree to an extent, but I think that you missed an important episode in the story. Clinton's policies (while flavored by the supply-side policies of Reagan and Bush I), were largely of a Keynesian nature and he was running a surplus by the end of his term. Had we kept going on that path, the debt was projected to be paid off by the end of this year (or 2012, I can't remember which). The problem was that when Bush II stepped into office, he immediately squandered the surplus with wars and tax cuts (something no president had ever done before, cut taxes while going to war) instead of paying down the debt like he should have. Instead, he ballooned the deficit and consequently the debt.

Keynesian economics says, you spend in recessions to help pull the country out and then you start paying it back when the economy is strong. The economy was strong at the end of Clinton's term and that was the time that we should have been paying down the debt. The problem is that it's hard for politicians to pull the plug on spending (especially when special interests set up factories in their districts to convince them to keep funding projects). I think that the most noticeable example is the F-22, which the Democrats managed to get defunded in 2009:

actually i never considered Clinton as doing much one way or the other economically but again when you look at it his last term was dominated by republican congress that was much more for less govt and only at the end did he have a surplus so was it clinton or the republican congress that did it? dont knwo dont really care either as liek i said i dont see him as keynsian but more a small intervention.

let me put it this way govts do not create good economies they create the environment that good economies can grow in. they can destroy an economy but never make it grow just provide the right conditions ie not too much/little regulation, both hurt the economy. a balanced approach is necessary. reduce spending and increase income to the govt when the finance are under control you can try to play around a bit but now is definitely not the time to be spending like drunken sailors.

I agree with gvg when he says that he thinks that most politicians are there to get reelected. Some may have started with the intent to help, but most get so entrenched in Washington that they change their actions to stay in Washington, They stop making the necessary sacrifices to help the country, when it would hurt their own reelection chances. I think that there are a lot of people who could be good politicians, who would do the right thing for the country and probably get booted out in the next election, but it costs so much to run for office these days it's prohibitively expensive for most people to run. Also, many of them would rather do things far more interesting and rewarding than bloviate on the House floor for six hours a day.

nope i close my ears and wont listen politicans want to be good they are jsut stupid!!

[gvg]

short reply as i don't have time

no the stimulus didn't work

http://lyingeyes.blo...lus-worked.html

http://economyincris...lus-create-jobs

we can keep going back and forth all day on this but to make it easier historically speaking ie looking back many years with hindsight instead of the recent recession and you will find that stimulus has never had a long term positive effect only long term negative effect. so whether 2 million jobs were saved or not (notice they dont use created, makes ya wonder) doesn't matter if in the longer term the bad economy lasts longer and even more peopel are hurt by it.

http://www.tnr.com/blog/jonathan-cohn/94367/one-more-time-the-stimulus-worked This one says what many economists think: It wasn't big enough. And it was more than 50% tax cuts. That's not government spenidng technically, so, it wasn't actually 800+ million in spending, only half that. And the economy grew more than that according to your article.

Another: http://articles.cnn.com/2011-08-31/opinion/bernstein.obama.recovery_1_job-growth-unemployment-rate-gdp-growth?_s=PM:OPINION And again: http://www.economy.com/mark-zandi/documents/End-of-Great-Recession.pdf http://lacrossetribune.com/news/opinion/article_7e1ff8e8-9e83-11df-a30c-001cc4c002e0.html (This one points out that the recession ended a year ago when the stimulus's full effects were in bloom)

TARP was the most controversial, and again, if we make sure that 'If your too big to fail, you're too big to exist' is what we work from, that won't be needed again.

the Canadian link proves my point. think of the economy as a large ship nothing you do has an immediate effect(well almost nothing, natural disaster wars etc are pretty immediate) in the 90's we started to do something by 1995 Canadian jobs are growing very very nicely untill the recession hits, thank you very much for proving my poiint

Well that's what I wanted to know, when did the cutting things happen? if it happened in the mid-90's well.... i guess you're right. point conceded for Canada.

as to us politics ok maybe your guys are worse than the ones we have here, but ill still live in my fairytale land and pretend the politicians are working for what they believe is the good of the country and not just themselves (yeah im hopeless)

Have you seen fox news or MSNBC? Have you seen the guys on there? Those are the SMART ONES.

you like Keynesian economics? it has been shot down by pretty much every economists and financial expert since it was first tried AND FAILED! just like the current stimulus has failed.

Again, it hasn't failed, and I'd like to see evidence for Keynesian economics's failure. And after all, look at the great Depression. Government spenidng and programs, and back we went. Things declined in 1937 after Roosevelt became worried about... wait for it... DEFICITS and pulled back. he realized his mistake, and along with WW2 (Trust me, I don't underestimate its effects), he helped us out of the depression (and he's one of my favorite presidents).

[Quag]

if you are stating half the first stimulus was tax cuts and that it worked than what worked the tax cuts or the stimulus? again long term i see no gain if you claim half was tax cuts than how can you be sure the tax cuts were not the actual impetus for the (ahem) increase in jobs (they keep using jobs saved and never use jobs created because you can never actually give a definite number to jobs saved bit so they can claim any BS number they want and i use the BS in maximum sense here they are just jerking you around and you are buying it.

Roosevelt and the new deal was a failure the us didnt coem out of the recession untill WW2 and that was due to england and to a limited extent France spending their cash to buy us arms/armamments a situation that continued untill lend lease was created to continue to help england as it was obvious they couldnt contineu to pay for all they needed (they did continue to pay for a lot) so how did the new deal help? it didnt it was total abject failure only money that came from outside that didnt need to be paid back ended the problems in the us also please not e a recession happened at the end of the war as soon as the govt stopped spending money and started having to deal with the incurre ddebt (partially offselt by continued payments from england.

as to canadian cuts they started in early 90's i think about 92-93 id have to look uop to be sure but it was one of those 2 years add a bit of time for the effects to happen (ie the actual savings from the cuts you get to 94-95 when things picked up,.

[gvg]

if you are stating half the first stimulus was tax cuts and that it worked than what worked the tax cuts or the stimulus? again long term i see no gain if you claim half was tax cuts than how can you be sure the tax cuts were not the actual impetus for the (ahem) increase in jobs (they keep using jobs saved and never use jobs created because you can never actually give a definite number to jobs saved bit so they can claim any BS number they want and i use the BS in maximum sense here they are just jerking you around and you are buying it.

First off, I'm pretty sure it did say jobs created for one (2.7 million i think), and besides, the biggest point of it was to prevent anything from getting worse. Which it did well. Now, what part of it worked i don't know. The economist i sourced doesn't say. But knowing what tax cuts like the Bush tax cuts did, well, i think it was the stimulus.

And besides, a big part of why it didn't do as well (besides haveing to be reduced in order to be able to leave congress) was, well, I'm not entirely sure the money reached the right people. After all, who does the most spending of the three economic classes (meaning rich, middle, poor)? The middle class, no? Thus, for something like this to work, the money had to reach the middle class. Did it? Well, i doubt TARP did. The obama stimulus? i think more so.

Read the report done by the economist that I linked. He explains why it worked.

Roosevelt and the new deal was a failure

http://www.commondreams.org/view/2009/02/18-14

http://open.salon.com/blog/caveat_canem_croceum/2009/02/17/the_new_deal_worked_deal_with_it_neanderthals

http://unreasonable.org/node/2230

it worked. how can you say it didn't? The one time things slowed down, in 1937, when he was worried about deificits, unemployment jumped up and GNP (or was it GDP? I dunno, one of those) fell down. it worked.

the us didnt coem out of the recession untill WW2 and that was due to england and to a limited extent France spending their cash to buy us arms/armamments a situation that continued untill lend lease was created to continue to help england as it was obvious they couldnt contineu to pay for all they needed (they did continue to pay for a lot) so how did the new deal help? it didnt it was total abject failure only money that came from outside that didnt need to be paid back ended the problems in the us also please not e a recession happened at the end of the war as soon as the govt stopped spending money and started having to deal with the incurre ddebt (partially offselt by continued payments from england.

First off, I understand that the war helped. but seriously, to assume that a war cured an economy.... no, all the war did besides help a little (a little) was get rid of America's competition since Europe and Japan were blown to bits (notice that now when they are finally back, things like the US auto industry are not doing as well. That's no coincidence). And uh, the economy was great after WW2 http://economics.about.com/od/useconomichistory/a/post_war.htm

as to canadian cuts they started in early 90's i think about 92-93 id have to look uop to be sure but it was one of those 2 years add a bit of time for the effects to happen (ie the actual savings from the cuts you get to 94-95 when things picked up,.

Well if the effects began to be felt in 94-95, than according to the chart, you are right. For Canada. =)

[gvg]

http://money.cnn.com/news/economy/storysupplement/obama_jobs_timeline/?hpt=hp_c1 More proof. notice the stimulus.