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Ear to the Ground

S&P Downgrades U.S. Debt for First Time in Nation’s History

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Posted on Aug 5, 2011
Flickr / Funky Tee

In a potential blow to the nation’s economic recovery, Standard & Poor’s on Friday downgraded the U.S. from triple A to AA+. That ranks the U.S. on par with Belgium and New Zealand, but below Liechtenstein.

Rumors of the coming downgrade caused a sharp drop in the stock market, and although the Treasury responded that S&P had made a $2 trillion error in its calculations, the credit agency stuck to its rating judgment.

There is deep irony in S&P’s decision, since it was one of the credit agencies that approved the securitization of mortgage debt that proved so toxic.

From The Wall Street Journal:

The unprecedented move came after several hours of high-stakes drama. It began in the morning, when word leaked that a downgrade was imminent and stocks tumbled sharply. Around 1:30 p.m., S&P officials notified the Treasury Department they planned to downgrade U.S. debt, and presented the government with their findings. But Treasury officials noticed a $2 trillion error in S&P’s math that delayed an announcement for several hours. S&P officials decided to move ahead anyway, and after 8 p.m. they made their downgrade official.

S&P said “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.” It also blamed the weakened “effectiveness, stability, and predictability” of U.S. policy making and political institutions at a time when challenges are mounting.

... It is possible the blow in the short run might be more psychological than practical. Rival ratings firms Moody’s Investors Service and Fitch Ratings have retained their top-notch ratings for U.S. debt in recent days. And so far, U.S. Treasury bonds have remained a safe haven for investors worried about the health of the U.S. economy and the state of Europe’s debt crisis. The pre-announcement spat could further undermine the impact.

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By Marian Griffith, August 8, 2011 at 3:26 pm Link to this comment
(Unregistered commenter)

@standard model 34
—They have considerable influence on the psyche of investors. By their ratings they can make interest payable by the government for borrowed money go up, or down.—

It is even worse than that. Most european countries have mandatory pension funds which are essentially huge (and I mean huge!) reservoirs of money that are carefully invested to ensure that everybody paying into it will, once they reach the age of 65 (younger in some countries), receive an income for the rest of their lives.
These funds are by law required to limit the risk they take with their investments, and this includes amongst others that they are not allowed to buy treasury bonds with less than an AAA rating. Should the other two ratings agencies also reduce the rating of the USA these funds will be required by law to sell their American bonds (and we are talking about billions of dollars worth of them).
We can only hope that the European countries will react in time, should this rating downgrade happen, before this massive sell-off will crunch what remains of the world economy.

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By RayLan, August 8, 2011 at 4:34 am Link to this comment

Rating Agencies are a hired service - hence they dabble jn conflict of interest - to not bite the hand that feeds them.

Finally, the summary report identifies a document in which a senior analytical manager in the structured finance group wrote: “I am trying to ascertain whether we can determine at this point if we will suffer any loss of business because of our decision [on assigning separate ratings to principal and interest] and if so, how much?” The document further stated: “Essentially, [analytical staff] ended up agreeing with your recommendations but the CDO team didn’t agree with you because they believed it would negatively impact business.” In another example, after noting a change in a competitor’s ratings methodology, an employee stated: “We are meeting with your group this week to discuss adjusting criteria for rating CDOs of real estate assets this week because of the ongoing threat of losing deals.” The evidence set forth in the summary report demonstrates that ratings were indeed influenced by the business goals of the particular rating agency to maximize its fees and new business.
http://www.law.com/jsp/cc/PubArticleCC.jsp?id=1202424079090

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By Standard Model 34, August 7, 2011 at 5:10 pm Link to this comment
(Unregistered commenter)

For those of us who know little about rating agencies: They are NOT government related but private self-appointed, parented by corporations; in the case of S&P by McGraw-Hill. Nobody controls them, or holds them accountable. Their ratings are opinions, not based on facts. Rating is NOT a science.
They have considerable influence on the psyche of investors. By their ratings they can make interest payable by the government for borrowed money go up, or down. (The recent downgrade from AAA to AA+ means that the US has to pay more interest to,amongst others, China and Japan). They have the power to force governments to move in certain directions. It is absolute insanity. They are presently raising havoc in countries like Greece and Ireland.
Mind you: The benefit of WE, THE PEOPLE is no consideration in their ratings. It is time for our reps to make up their minds if they want to serve these agencies and their masters, the corporations, or if they will do the job they are supposed to do, namely, to keep these unholy harbingers of misery and destruction in check. Or else, the People will do it and - like Communism, Stalinism, Fascism, National Socialism in the last century - Capitalism will disappear. I personally prefer a reigned-in Capitalism to the uncertainty that would follow.

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By TDoff, August 7, 2011 at 10:01 am Link to this comment

Having helped create the economic debacle that is upon US, with their fraudulent AAA ratings of Wall Street’s scam-assemblages of worthless mortgages, the fact that S&P’s downgrade creates anything other than derisive laughter is as asinine as if calls by Governor Christie and Rosie O’Donnell to reduce obesity were expected to create skinny kids.

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By RayLan, August 7, 2011 at 8:06 am Link to this comment

@truthdigger3
“Please stop looking at the issues from partisan angels”

I am evening out the partisan score not slanting it.
I agree there is collusion and have admitted as such - but if the Repugs had been less in force - the obstruction that brought us to the brink could not have happened.
Focusing on the Fed Reserve leaves out a significant driver in the weakening of the economy - it took the collaboration of unethical Wall Street practices that the repeal of Glass-Steagal made possible.

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By truedigger3, August 7, 2011 at 7:19 am Link to this comment

Re: By RayLan, August 7 at 6:25 am

RayLan wrote:
“The Fed system was in place during the Clinton era when the economy was booming with a surplus.”
———————————————————————-
RayLan,

The economy was “booming” because of the artificially very low interest rates set by the Fed. In other word the economy was “booming” on VERY CHEAP credit which created the internet/high tech bubble that burst and caused the unforgettable market crash of 2000/2001. Remember!.
Both Robert Rubin and Lary Summer, both Democrats who were secretaries of the treasury and top economic adviser during Bill Clinton administration were instrumental and influential in repealing Glass-Steagal.
Please stop looking at the issues from partisan angels. Both Democrats and Republicans are in complete partnership and collusion in serving Wall St./super-rich and screwing the common people. All the shouting, blaming and haggling are nothing but make believe theatrics and bullshitting to create the illusion of a different choices and differnces where there are none.It should be glaringly obvious by now.

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By prisnersdilema, August 7, 2011 at 7:01 am Link to this comment

Brace yourself for another round of massive layoffs,  for the cost of food, and gas, and
all the daily need of life to take what little you have left, and the collapse of he economy
that will head us into a super depression.

While Americans watch in horror, as the country turns into shit. The corporations are
enjoying record profits. They make those profits by laying off workers and shipping jobs
overseas. They also make them in NAFTA like free trade agreements, like the ones
Obama, is negotiating right now with Panama, Columbia, and South Korea.

So when you watch CNN talk about job creation all day long, and the president talk
about creating jobs, and congress talk about creating jobs don’t you believe it. The only
jobs they are creating are overseas.

The plutocracy is proud of it’s new production plants in China, and India, everywhere but
here. So though they seem to be stumped about how to create jobs in this country,
that’s just a lie, they know perfectly well what they are doing.

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By RayLan, August 7, 2011 at 6:25 am Link to this comment

@DaveZx3
“The US government goes into debt only because it has abdicated it’s constitutional power to create money, and in so doing, has given that power over to an international banking cartel, which owns huge interests in the private Federal Reserve member banks. “


Nonsense. The Fed system was in place during the Clinton era when the economy was booming with a surplus. The 2008 debacle was triggered by the private sector banking industry’s unethical manipulation of debt and securities market.
The primary protaganists are Goldman Sachs
AIG, JP Morgan, Citibank. It is a collusion that cannot just be laid at the feet of the Federal Reserve (which is a private corporation).

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By RayLan, August 7, 2011 at 6:14 am Link to this comment

@Azcat85
“The present Congress, Dems and Repubs, are incapable of correcting a system
that they are so greatly rewarded by.  “
I’ve already admitted Obama’s collusion in the Repugs
deliberate scheme to deadlock any kind of rational solution to—-
I repeat
1.unemployemnt
2. slow growth.

The present bill not only does nothing to aleviate these problems but makes them worse. The Glass-Steagal act was the milestone in this downturn

The bill that ultimately repealed the Act was introduced in the Senate by Phil Gramm (Republican of Texas) and in the House of Representatives by Jim Leach (R-Iowa) in 1999. The bills were passed by a Republican majority, basically following party lines by a 54–44 vote in the Senate[15] and by a bi-partisan 343–86 vote in the House of Representatives.[16] After passing both the Senate and House the bill was moved to a conference committee to work out the differences between the Senate and House versions. The final bill resolving the differences was passed in the Senate 90–8 (one not voting) and in the House: 362–57 (15 not voting). The legislation was signed into law by President Bill Clinton on November 12, 1999.[17]Proponents argue that repealing the provisions had little impact on the financial system and even helped restore stability during the financial crisis. [18][19]

It’s the Repug obstructionism that brought the US to the brink - there is no mistaking that.

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By GW=MCHammered, August 7, 2011 at 5:31 am Link to this comment
(Unregistered commenter)

CEOs, Wall Streeters and politicians scheme bigger
pieces of the pie, despite their mediocre and conniving performance, because they are financially buffering themselves against this and their other upcoming caballed crises.

Governments and the wealthy plan for ruling a world without cheap, easy oil. A world with skyrocketed prices for everything that needs transported and for drugs and products derived from depleting oil.

They’re consuming your wages, home equity, your
retirement investment, and soon your paid-for
entitlements. We’re mid economic warfare and the
consumer is barely aware. National Strike anyone?

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By DaveZx3, August 6, 2011 at 10:56 pm Link to this comment

The moneyed elite control USA and world politics primarily through the Federal Reserve System and the status of the US Dollar as the world’s reserve currency. 

The US government goes into debt only because it has abdicated it’s constitutional power to create money, and in so doing, has given that power over to an international banking cartel, which owns huge interests in the private Federal Reserve member banks.  They profit enormously from their right to exclusively print US money and lend it back to the US Government as debt, to be paid back by taxing the citizens. 

I personally resent the fact that about 40% of my tax dollar goes to paying off interest to ultra-rich private bankers. 

President Woodrow Wilson, whose presidential ambitions were financed by the moneyed elite in exchange for his bringing about the Federal Reserve system, understood before his death how bad he had screwed his nation by signing this system into law. 

Since then there have been many who opposed the formation and abuses of the Federal Reserve Bank.  A most prominent one being President Kennedy, who initiated Executive Order 11110 to bring back currency creation into the realm of US Government.  It is worth reading about EO 11110, to understand Kennedy’s distrust of the moneyed elite who controlled US currency creation. 

Another, less known Fed dissident was Senator Louis T. McFadden, Republican Senator from Pennsylvania and Chairman of the Banking and Currency Committee for over a decade.  Senator McFadden was in a position to speak with authority of the vast ramifications of the Federal Reserve.

Please read what he had to say below: 

http://www.teachpeace.com/teachpeacemomentfedresmcfadden.htm

END THE FED.  END THE DEBT.

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By Azcat85, August 6, 2011 at 8:06 pm Link to this comment

One can not spend itself out of debt.  The government needs to establish just
tax laws and then get out of the business of business.  Government CAN NOT
create jobs.  All it can do is ensure just laws to enable a level playing field.

RAYLAN:

The malfeasance that you speak of was enabled by a greedy Congress that was
enabling the Clinton doctrine of increasing home ownership at all costs. 
Clinton repealed the very regulations that were put in place during the 30s and
40s to prevent what actually happened.  Yet even today, Congress accepts no
responsibility for the housing bubble burst and will not completely correct the
mistake that Clinton committed.

The present Congress, Dems and Repubs, are incapable of correcting a system
that they are so greatly rewarded by.  Special healthcare, pensions, auto raises,
etc, all seek to create the royalty and professional politicians that the founders
never desired nor could have foresaw.

Every last one has to go.

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By RayLan, August 6, 2011 at 6:39 pm Link to this comment

@Azcat85
” It is exactly this type of thinking that got us into this mess. If you
don’t have enough money, you make cuts!! “
It’s this kind of unthinking one trick pony that prevents our economy from recovering. The economy is suffering from
1, unemployment
2. slow growth
The deficit has nothing to do with either of these.
The housing bubble enabled by corporate malfeasance caused a crash in 2008 - the deficit had to increase because the banks had to be bailed out - the deficit is a red herring for the financially simple-minded.

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By Azcat85, August 6, 2011 at 4:28 pm Link to this comment

By kerryrose, August 6 at 12:15. “If the US does not collect enough money from
taxes, then we need to borrow.”

NO NO NO.  It is exactly this type of thinking that got us into this mess. If you
don’t have enough money, you make cuts!! Simple arithmetic.  Hopefully you don’t
run your own finances that way.  The US government since the Johnson
administration has been on a spending spree like there was no tomorrow.  NO
MORE.  What ever happened to the big bill the Nancy Pelosi passed with all that
fanfare, PAYGO.  That was scrapped as soon as it was passed.

Time for a Constitutional convention!

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By kerryrose, August 6, 2011 at 3:13 pm Link to this comment

Azcat85

You do not read carefully.  I called you a Tea Partier, you know, the useful idiots for corporate interests who use the word ‘we’ to describe the debt deal.  Regular people who actually believe they will gain by the deal or that the billionaires and corporate CEO’s give a shit about them?  They feed you crap and you eat it without a brain.

Standard & Poor’s gave AAA ratings to the toxic mortgage bundles sold worldwide by Wall Street.  Those bundles were fraudulent and caused the world economy to crash.  S&P gave them AAA, so people bought them without worry.  Standard & Poor’s are compromised, not honest, and are not working in the best interest of investors.  Whose pocket are they in?

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By truedigger3, August 6, 2011 at 2:57 pm Link to this comment

Re: By Azcat85, August 6 at 9:27 am

Aztec85 wrote:
“Do not delude yourself into thinking that you (Dems) have a superior intellect.  It was the Democratic Congress that passed everyone of the spending bills that got us here”
————————————————————

Aztec85,

No Sir. The reason for the deficits are the costs of the wars in addition to Bush’s massive tax cuts that mostly benefited the super-wealthy and bailing out Wall St. including its obscene bonuses.
Do not kid yourself. There is no difference between the Rupublicans and Democrats regarding the economy or foreign policies and the wars. All what we are having is make-believe bullshitting and theatrics from Obama and the Democrats to give the illusion of a difference. They are all in it together serving the super-wealthy and screwing the common people.

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By RayLan, August 6, 2011 at 2:45 pm Link to this comment

@Azcat85
“.  Do not delude yourself
into thinking that you (Dems) have a superior intellect.”
You delude yourself thinking I’m a Democrat. Obama colludes in the Right wing war on social justice and the middle class. Spending did not get our economy into this mess - Standard & Poor downgraded the US credit because the agreed upon strategy of cutting expenses and keeping revenues down put the American economy at risk.

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By kerryrose, August 6, 2011 at 12:15 pm Link to this comment

Azcat85

Your analysis reeks of Sesame Street Tea Party.  We have deficit because of the spending of last 12 years including Obama’s.  1.  All defense spending is put on the ‘credit card.’ 2. Bailouts from banking lack of regulation.

Less revenue because of the joblessness, low salaries of regular people and corporate welfare.  Exxon made 54 billion in profits last year, paid 0 taxes, and got a refund check.

Stop simplifying the world into ‘Oh, we just can’t spend as much.’ and falling right into the pockets of billionaires and corporate interests.  Guess why?  If we don’t spend, they can privatize services, making profit and making slaves. 

‘No taxes on the wealthy or corporations!’ Guess why?  Because they, of course, won’t have to pay the government, but instead can continue to lend to the government with interest.  If the US does not collect enough money from taxes, then we need to borrow.  The US borrows from the rich and corporate finance WITH INTEREST.  What a good deal for them.

Unfortunately, it means massive debt.  You should think more deeply.

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By Azcat85, August 6, 2011 at 9:27 am Link to this comment

RayLan, August 6 at 7:06 am Said, “I thank the morons who voted in enough
Repugs to make this fake spectacle of politcal wrestling possible.
Unfortunatly the brain-enabled must suffer with the brain-exempt in this
wonderful world of the pursuit of happines, liberty and the American way.”

You are welcome. The adults have the checkbook now.  Do not delude yourself
into thinking that you (Dems) have a superior intellect.  It was the Democratic
Congress that passed everyone of the spending bills that got us here.  The
President only signs what is placed on his desk.  Mutual culpability.

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By felicity, August 6, 2011 at 9:25 am Link to this comment

How about this - since 400 supra-wealthy Americans
realize one-half of all the income, while the rest of
us combined ‘share’ the other half, let those supra-
wealthy pay one-half of the total income taxes going to
Treasury.

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John M's avatar

By John M, August 6, 2011 at 9:07 am Link to this comment

http://www.investors.com/NewsAndAnalysis/Article.aspx?id=580473&p=1

Conventional wisdom holds that the congressional
supercommittee established by the debt-ceiling deal to
propose further deficit reduction will go nowhere. I’m
not so sure. There is a grand compromise to be had. It
does, however, require precise sequencing. To succeed
it must proceed in three stages:

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By Leefeller, August 6, 2011 at 9:03 am Link to this comment

One can speculate can’t they, so in all this flying dust there always seem more questions then answers?

Who does Standard and Poors represent?... Not I,... possibly you?

Wall Street has an inflated opinion of themselves for some unknown reason and they feel it important at this time to flex their manipulating skills to Congress and the president directly. Apparently the Kubuki theater had gone a bit to far?  Though poor theater for the entertainment value of it, it seems some of the standards for the most wealthy two percent who own 60 percent of everything are calling their bets.

After all there is still or was money in those darn hills, of Social Security, like a beutiful virgin needs tapping. After all Wall Street wants and lives on political integrity and money. 

Medicare still needs to be privatized for the poor profits of it so the reluctant insurance companies will do it anyway. Looking at the shining examples of privatized prisons and the ongoing privatizing of education one see the wonders of Ann Rand and the ideals of profit.

I can see it all now, the advertising of for private schools gets the money flowing, helping you decide which privet grammar school you should send your kids to. And when the time comes which privatized prison you may want to send them to.

So why not give grandma a chit for money so she can select her own favorite health insurance company, seem a problem? Just as parents can use a chit to send their kids to the private school of their choice. This chit idea could work for prisons, so people can use chits to live in the poor house of their choice.

I wonder if Standard and Poors belongs to the corporate standard the non lobby group known as ALEC or does Standard and Poors have sleeping arraignments with the Koch Brothers like the Red State Governors? After all Wall Street is people too!

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By TDoff, August 6, 2011 at 9:01 am Link to this comment

One of the ironies here is that because of our near-bankrupt condition, and screwed-up economy, the Feds have kept our interest rates so low that the Chinese are starting to consider borrowing from US!

Ain’t ‘Economics’ weird?

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By John M, August 6, 2011 at 8:59 am Link to this comment

The one and only cure:
http://online.wsj.com/article/SB10001424053111903366504576486082360723602.html

What everyone inside and outside the Beltway wants to
know, given the recent economic funk, is: Where will
the growth come from? Certainly not from another
round of failed Keynesian spending blowouts. The
White House’s lame call for an infrastructure bank
this week is merely a stimulus redux, and Republicans
have seen enough “shovel ready projects” to last two
lifetimes. Nor will Republicans, in an era of $1.5
trillion deficits, get very far pitching pro-growth
tax rate cuts, a la Reagan 1981, without major
offsetting loophole closings. This omelet is going to
require cracking some eggs.

Last year the White House tax-reform commission
headed by former Fed Chairman Paul Volcker denounced
the corporate income tax structure and warned that
the “growing gap between the U.S. corporate tax rate
[39%, a combination of state average and federal
rates] and the corporate tax rates of most other
countries [25%] generates incentives for U.S.
corporations to shift their income and operations to
foreign locations.” Treasury Secretary Tim Geithner
was even more succinct when he said earlier this
year: “Everybody who looks at the current system says
we can do better than this.” Amen.

Meanwhile, everyone seemed to miss the political
breakthrough by the much-maligned bipartisan Gang of
Six, which proposed to end tax loopholes and lower
the top income tax rate to between 23% and 29%. For
the first time since 1986 we have Democrats—even
liberals like Dick Durbin of Illinois—endorsing lower
tax rates and finally acknowledging that soaking the
rich with confiscatory taxes is an economic loser.
“We understand getting these rates down is an
important economic goal,” says Democrat Mark Warner
of Virginia, another one of the six.

Mr. Warner is right on the economics. In the early
1990s, Dale Jorgenson, then-chair of Harvard’s
economics department, calculated $1 trillion of
economy-wide efficiency gains from the 1986 tax
reforms—and that was when a trillion was still a lot
of money.

There’s an old saying that when dollar bills are
lying on the sidewalk, someone picks them up. The big
question is whether Barack Obama has the good sense
to do that on tax reform. It may save his presidency.

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By TDoff, August 6, 2011 at 8:57 am Link to this comment

If this keeps up, pretty soon Hu Jintao’s collection agents are going to start calling President Obama in the middle of the night with threatening phone calls about not paying his debts.

But only when they start calling Michelle, Sasha and Malia to tell them they’re going to cut off their allowances is when the Chinese will get some action.

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By CJ, August 6, 2011 at 8:43 am Link to this comment

This half-baked ratings outfit, S&P, completely blew the 2008 banking debacle,
rating AIG tops just before its collapse. If I recall, Lehmans too. Then S&P
claimed that it only expresses “opinions.”

How about this, S&P?: Thanks, but no thanks, now run along and stop bothering us.

I’ve got my problems with Mr. Obama and his dismal failures via “compromises”
that turn out give-aways, but this downgrading by schlocky S&P is nothing less
than a sandbagging of the President, another in the reactionaries’ efforts—at
the expense of the American people—to bring down this black President. (And I
do believe much is racially motivated on the right.)

I can’t say in public what I think ought be the reactionaries’ come-uppance for
their immoral, some of it criminal, actions, especially of late.

S&P labors for Wall Street and not the other way around.

As for media’s participation, the drama began last night with the
announcement. Commentators all over the tube, most of them (with a a few
exceptions, like Ali Velshi at CNN) with little idea of what just happened, or with what happens in the economy in general.

No matter, where else will bond-holders go? (As Erin Burnett DID point out. The dubious “virtue” of empire is that the currency is singularly insulated in ways other currencies are not.)

But so what when this charade is Just part and parcel of the ongoing, phony “debt crisis” debate, S&P now
having stamped one fraud with the imprimatur of another.

Not the the U.S. doesn’t need to reduce its debt load, but that’s easily done;
there’s plenty of money for that. Matter of making Wall Street pay for Wall
Street, instead of making the middle- and working classes and underclass pay
for Wall Street. They got the dough (sitting on trillions), more than enough to pay off all of it in a
few short years.

We need politicians with backbones willing to force these fat cats to pay up.
There are plenty of ways to do that, just a matter of political will, not to
mention a smidgen of integrity on the part of pols.

Yeah, good luck to us all with that…

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By California Ray, August 6, 2011 at 8:15 am Link to this comment

The federal government uses a special system dedicated to provide health care to military VETERANS.
It is not a fee-for-service system. Rather, the Veterans Health Administration owns the buildings and equipment; and the doctors, nurses, and technicians are federal employees. So, it’s a socialist system.
Under fee-for-service (like Medicare), private doctors and clinics bill the government for services rendered. Besides all the unnecessary paperwork and administrative overhead, fee-for-service is an invitation for fraudsters to bill for patients they didn’t treat.
A socialist system of medical care for the poor and elderly will save the federal government billions. And, yes, it’s coming, because fee-for-service is unsustainably expensive.

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By Spector, August 6, 2011 at 7:40 am Link to this comment
(Unregistered commenter)

Standard and Poor’s explanation for why it downgraded
U.S. debt is written in such a way that it can be
seized upon by all ideological stripes. And the
rating agency’s discourse about the political
dysfunction will provide column fodder for Washington
pundits who long for the days when both parties would
work together to reach compromises. But make no
mistake, when all the dust settles, it will be
difficult for President Obama to escape blame for
this.

Defenders of Obama will attempt to pin the blame on
his predecessor, President Bush, and on intransigent
Tea Party radicals in the current Congress. But that
would leave out the part in between. For his first
two years in office, Obama’s party controlled both
chambers of Congress – for part of that period, he
had a filibuster proof majority in the Senate. During
that time period, he and his fellow Democrats could
have passed his supposedly ideal, long-term, deficit-
reduction package—one that represented a “balanced
approach” between spending cuts and tax increases. It
also could have delayed the deficit reduction for
several years, so it wouldn’t have affected the
current weak economy or the “investments” he
considers crucial. Forget about actually
accomplishing serious deficit reduction—he didn’t
even attempt it.

When Obama came into office, he argued that we needed
deficit spending to boost the economy, so he passed a
$800 billion stimulus package. Then, in one of his
first supposed pivots to the deficit, he convened a
‘fiscal responsibility summit’ in February 2009. But
that actually turned out to be part of a different
pivot altogether. It was during that summit that then
White House Budget Director Peter Orszag declared,
“health care reform is entitlement reform.”

And so, for the next 13 months, Obama spent all of
his energies trying to get health care legislation
across the finish line. The end product was a plan
that, according to both the Congressional Budget
Office and actuary for the Centers for Medicare and
Medicaid Services, did not bend the health care cost
curve down.  Let’s even set aside the argument over
the accounting gimmicks that were employed to obtain
a CBO score that showed modest deficit reduction. The
reality is this: the law used money raised through
tax hikes and Medicare cuts that otherwise would have
been available for deficit reduction, to instead
expand Medicaid by 18 million beneficiaries and
create a massive new health care entitlement.

Of course, there’s more. After health care passed
last March, Obama punted on the debt for the rest of
the year as he awaited a report from his fiscal
commission. He then ignored its recommendations and
released a budget so ludicrous that within two
months, it failed 0 to 97 in the Senate and he
himself rejected it. He instead delivered a speech
about his deficit reduction vision, which didn’t have
enough details for the CBO to score. And then he
spent the last few months arguing that he was
prepared to offer Republicans a “grand bargain,” but
to this day he hasn’t released details of this
supposedly awesome deal that Republicans refused,
beyond calculated leaks to favored reporters.

But there’s another reason why Obama won’t escape
blame for this. Obama was elected president at a time
when Americans felt the nation was in decline, and
his central job was restore their faith that our best
days were ahead of us, as President Reagan did after
the Carter era. Whether you think he was dealt a poor
hand or not, the bottom line is that the sense of
decline has only deepened during the Obama
presidency, and the first-ever downgrade of U.S.
credit, whatever its ultimate financial implications,
is yet another symbol of that decline.

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By California Ray, August 6, 2011 at 7:36 am Link to this comment

Decline and fall: the global empire is now rated AA+.

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RayLan's avatar

By RayLan, August 6, 2011 at 7:06 am Link to this comment

I thank the morons who voted in enough Repugs to make this fake spectacle of politcal wrestling possible.
Unfortunatly the brain-enabled must suffer with the brain-exempt in this wonderful world of the pursuit of happines, liberty and the American way.

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By DaveZx3, August 6, 2011 at 5:49 am Link to this comment

Well, it’s like I told my daughter when she had to go into chapter 11.  It only really hurts you if you have immediate plans to borrow a lot more money.  Otherwise it is just an opportunity to get your act together.

ON the part of the USA, this is a chance to kick the Federal Reserve INC. along with all its illegal shareholders out of the country for good.

Get the USA back to issuing it’s own currency, and we won’t need debt anymore.  Debt is for idiots.  If we didn’t have debt and had a real currency, everybody would have a job and prosperity would reign.

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By truedigger3, August 6, 2011 at 4:37 am Link to this comment

Re: By kerryrose, August 5 at 7:35 pm

kerryrose wrote:
“Standard & Poores is the same agency that gave AAA ratings to the toxic mortgage bundles that killed the economy.
I’m not sure why people still respect the ratings.  It is a joke. “
—————————————————————————
kerryrose,
I agree with you 100%.
This is nothing but a ploy from Wall St. to create a crisis atmosphere to have more cuts in Federal Budget which will only harm the middle class and the poor more and more.

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By truedigger3, August 6, 2011 at 4:35 am Link to this comment

Re: By kerryrose, August 5 at 7:35 pm

kerryrose wrote:
“Standard & Poores is the same agency that gave AAA ratings to the toxic mortgage bundles that killed the economy.
I’m not sure why people still respect the ratings.  It is a joke. “
—————————————————————————
kerryrose,
I agree with you 100%.
This is nothing but a ploy from Wall St. to create a crisis atmosphere to have more cuts in Federal Budget which will only harm the middle class, the poor and senior citizens more and more.

Report this

By Rodney, August 6, 2011 at 3:39 am Link to this comment
(Unregistered commenter)

The owners of this country or at least of of them
decided to screw the country and attempt to embarrass
the President. These are the same people who gave AAA
bond ratings to the mortage investments which caused
the financial collapse and 14 trillion dollars of lost
wealth. These folks do not have a lot of credibility. I
wonder if the Republicans are really behind this? Since
they were the ones who caused this in the first place

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mrfreeze's avatar

By mrfreeze, August 5, 2011 at 9:32 pm Link to this comment

I think Robert Reich in his blog this evening hits the nail on the head:

Why the S&P has no business downgrading the U.S.

http://robertreich.org/post/8542550924

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By JniBGood, August 5, 2011 at 8:08 pm Link to this comment
(Unregistered commenter)

The GOP [Greed Overwhelming Principle] is working hand in glove with the rating agency to undermine our constitutional republic.

The wholw point of the illegal BushII [the war criminal]presidency beginning with his illegal appointment in 2000 by our corrupt Supreme Court was to bring us to this point in our history.

We are witnessing the completion of the Reagan Revolution with its eventual goal of the privatization into a corporate [fascist] government being realized.

This should surprise no one who pays attention to the political machinations that have been occuring since the election of Ronald Reagan in 1980.

It was to be expected. We will now experience a perennial and endless depression much worse than the Great Depression because it is designed to be never ending and there is no FDR around anymore and we will now come to understand what a plutocracy driven by GREED [Get Rich Eviscerating Everything Democratic] is really all about.

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kerryrose's avatar

By kerryrose, August 5, 2011 at 7:35 pm Link to this comment

Standard & Poores is the same agency that gave AAA ratings to the toxic mortgage bundles that killed the economy.

I’m not sure why people still respect the ratings.  It is a joke.

Report this

By Awi, August 5, 2011 at 7:15 pm Link to this comment

The new poster will feature Uncle Sam on bended knee sporting sunglasses and a tin cup all the while trying to support three wars and one thousand foreign military bases.  The wet dreams of the moneyed elite are drying up.  Their attempts to strap the poor and unemployed with more debt will invite a scenario that has been absent on this soil for 160 years.

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By Dr Bones, August 5, 2011 at 7:13 pm Link to this comment
(Unregistered commenter)

How are those tax cuts for billionaires and millionaires working out for you, Mr. O?

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By Azcat85, August 5, 2011 at 6:48 pm Link to this comment

Just as expected. No surprises.  The Government was told cut at least $4T in debt
over the next decade or be downgraded.  They didn’t, they did.  Who called whose
bluff now, Mr. Obama?

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