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      08-04-2011, 09:39 PM   #1
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Recession Approaching? What can the government do?

The signs are all pretty clear. Consumer confidence and business confidence are plummeting. The stock markets are having day after day of losses. Previous quarters have had GDP growth revised downwards. Short-term yields on treasuries are going down, and gold is on the rise. The only thing we are missing is an inverted yield curve.

I definitely feel for whoever is in the government leadership right now, from an economic standpoint. What can you do? Cut taxes? That will worsen our deficit situation and could put us into default. More quantitative easing? There is a risk of inflation and even hyperinflation if we thread down that path more aggressively. Lower interest rates? Fed already has its discount rate at close to 0%, which is the only rate it can directly control.

Only thing I can think of is lower the reserve ratio down to 0, but that won't have a huge impact, and could be dangerous if there is ever a run on the banks. We can also try to stimulate business growth by reducing government restrictions (re-open oil and gas exploration in the gulf, reduce environmental restrictions, et.c).

Curious to hear what you other economist-minded people think is the solution, as it is pretty clear now that we are headed for recession.
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      08-05-2011, 12:35 AM   #2
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This is the absolutely predictable results of firing over half a million state, local, and federal workers since January, passing a debt reduction bill that ensures way more job losses, and the economic uncertainty that comes with the THIRD fabricated near shutdown crisis of the government in less than a year (with at least 3 more coming this year).

We already went through this history after the Great Depression when Budget Hawks demanded austerity and forced a double-dip. Now thanks to the Tea Party, we are repeating history.

Before we can talk about what to do to put us back on the upward path we were on last year, we have to STOP doing what is driving us into the ditch this year.

1) We need to stop having the Tea Party hold the entire country hostage every 3 months, flooding the country with massive uncertainty.

2) We need to understand that cutting jobs in the gov't in the middle of a job crisis is making unemployment worse.

3) Drop the lazy bumper sticker mindless 1980's dogma, and think of REAL solutions.
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      08-05-2011, 12:43 AM   #3
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Obama's budget proposal failed 97-0 in the senate. The republican and democratic budget passed 74-26. I don't like it one bit and neither does the tea party. So if Obama had it his way we would have raised the deficit another several trillion dollars without making budget cuts. And to be honest, I don't really support budget cuts, I'd rather have Social Security, Medicare and Medicaid and other government and social programs completely reformed so that they stick around longer than twenty more years. I think Paul Ryan was off to a great start but the liberals killed it because they're chicken shit and don't want to think about what's going to happen down the line.
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      08-05-2011, 01:09 AM   #4
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Originally Posted by AngelinIsRich08 View Post
Obama's budget proposal failed 97-0 in the senate. The republican and democratic budget passed 74-26. I don't like it one bit and neither does the tea party. So if Obama had it his way we would have raised the deficit another several trillion dollars without making budget cuts. And to be honest, I don't really support budget cuts, I'd rather have Social Security, Medicare and Medicaid and other government and social programs completely reformed so that they stick around longer than twenty more years. I think Paul Ryan was off to a great start but the liberals killed it because they're chicken shit and don't want to think about what's going to happen down the line.
Oh god, not more mindless bs. Do you even TRY to fact check your crap? Are we starting yet another thread where a half dozen people repeatedly correct your factual failures?

1) We haven't passed a "republican and democratic budget" Not by 74-26, not at all. We haven't passed ANY 2012 budget yet. This last bill was just a dog and pony show orchestrated by the Tea Party Republicans purely for election year politics. The REAL work on passing the 2012 budget is sitting on hold for 5 weeks while the Congress is on vacation. Get ready for Tea Party Republican gov't shutdown threat number 4 in less than a year.

2) If you even bothered to READ Obama's budget, you would know that you are lying when you say Obama's budget didn't include debt cuts. His proposed budget included a Trillion dollars in deficit reductions. If you want to talk about what is in the Obama plan, read it first. It's damn easy to find.

3) The Ryan plan eliminates Medicare as a guaranteed safety net as we know it, so it is impossible to agree with the Ryan plan, and say you want to keep Medicare. The Ryan plan is to Medicare like taking a BMW badge and putting it on a Hyundai is to cars. You can slap whatever name you want on it, but it ain't Medicare. Do you want to know what will happen to the the dollars the gov't would hand out under the Ryan plan? Go look at what the airlines did with the FAA dollars. The Insurance companies will just charge people what the market will bear, and pocket the Ryan money as pure profits on top. Just like the airlines did with the FAA tax dollars. When seniors can't pay, they will no longer have ANY guaranteed safety net. The Democrats have perfectly good plans on how to extend those social programs WITHOUT shredding the guaranteed safety net, so stop trying to pretend Democrats "don't want to think about what happens down the line". That's just factually wrong, and asinine to say.


man. How about managing to put a single sentence in a single thread that holds a shred of factually true information? I guess the even better question, is when are the rational and intelligent people on the Right going to show up and shout down the mindless blathering of the Tea Party folks like you?

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      08-05-2011, 10:00 AM   #5
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The problem with these threads is everyone is so biased that if the side they are supporting shit all over themselves, people would say it smelled good.
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      08-05-2011, 11:04 AM   #6
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Originally Posted by E90SoFlo View Post
The problem with these threads is everyone is so biased that if the side they are supporting shit all over themselves, people would say it smelled good.

Then please lead the way instead of bitching and complaining.

Give us a non-biased post on what YOU think needs to be done that doesn't just fall back on the bumper sticker slogan bias of the Tea Party.
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      08-05-2011, 01:52 PM   #7
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Originally Posted by 11Series View Post
This is the absolutely predictable results of firing over half a million state, local, and federal workers since January, passing a debt reduction bill that ensures way more job losses, and the economic uncertainty that comes with the THIRD fabricated near shutdown crisis of the government in less than a year (with at least 3 more coming this year).

We already went through this history after the Great Depression when Budget Hawks demanded austerity and forced a double-dip. Now thanks to the Tea Party, we are repeating history.

Before we can talk about what to do to put us back on the upward path we were on last year, we have to STOP doing what is driving us into the ditch this year.

1) We need to stop having the Tea Party hold the entire country hostage every 3 months, flooding the country with massive uncertainty.

2) We need to understand that cutting jobs in the gov't in the middle of a job crisis is making unemployment worse.

3) Drop the lazy bumper sticker mindless 1980's dogma, and think of REAL solutions.
I am with you in regards to injecting stability into the economy. These uncertainties need to be removed in order to allow for firms to plan for the future.

I don't think increasing the size of government is the solution, however. While laying off that many employees in such a short span was not very far-sighted, the flip-side is that we simply cannot sustain Keynesian policies for much longer. We have essentially 'tapped out' our ability to borrow money, and any more massive stimulus bills would merely delay the issue from short-term to long-term.

I personally think we need more substantial economic reforms. We need to unload government spending that is not driving the economy, eg. reform social security and medicare. Cut our ridiculously over-inflated defense program, and terminate government programs that simply aren't helping (farm subsidies, etc.).

Instead, the government needs to invest in infrastructure, technology and education. Create SEZs (special economic zones) will more lower taxes and looser zoning laws in order to encourage manufacturing to come back to the country. Continue to invest in education, one of the key drivers of any economy and a traditional strongpoint of American society.

Short term, I really have no clue. Anything we attempt to do seems to be a lose-lose situation, whether it be increasing stimulus spending, buying back treasury bonds (quantitative easing), or whatever.
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      08-05-2011, 05:26 PM   #8
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We definitely agree that government stability is key for economic stability.


If we properly fund the gov't, we don't have to go into any deeper debt than the 17-18 Trillion (inflation adjusted) as we went into debt under Reagan. Unless you are trying to say that our current economic situation is simply the long-term impact of the Reagan debt, you would have to agree that in the long-term after Clinton raised taxes, that the economy recovered quite well from the 1980's Stagflation. All while taxes were higher than now.

I'm sure there are some gov't programs that could use some fixing. I've got my pet programs, you have yours. But cutting them doesn't create a single job. Not one. Cutting the programs I want cut won't create jobs, just like cutting the programs you want cut won't create jobs. In fact, cuts in general will ELIMINATE jobs. The latest agreement will cost a third of a million jobs directly, and up to 1.6 million jobs indirectly. We can't cut our way to more jobs. Any wasteful programs we agree to eliminate should be replaced with job-creating programs.

Lower taxes isn't going to change anything. GE already pays ZERO in taxes on billions of profits, but you don't see them moving production back to the US. We have the lowest EFFECTIVE tax rates in modern US history for the wealthy and corporations, and they are still off-shoring like crazy. Tax cuts do NOT get passed on to consumers. Prices of goods are based upon what the market will bear, not a sum of expenses. Take the recent FAA airline taxes for example. Calls to lower taxes for corporations and the wealthy will just increase the amount of gold and cash corporations and the wealthy have piled up.

This idea of tax cuts to spur a supply-side economic recovery might have made sense in the 1980's where it often cost well into the double digits to borrow money due to Stagflation, but not now. Back when it cost way too darn much to take out a loan to expand, and companies didn't have enough cash on hand because it had been inflated away, tax cuts to spur expansion had a certain logic. But now with companies like Microsoft borrowing money just because it's so cheap, and companies like Apple sitting on record cash, tax cuts WILL NOT fund expansion. They already aren't spending the money they have, giving them more will just provide them with more money NOT to spend.




Yes, it is a lose-lose situation. This is one of those adult things everyone has to come to terms with. There will be no painless solutions. And quite frankly, we're getting pretty sick and tired of folks on the right who think there should be a solution that doesn't require everyone to share the pain.




Quote:
Originally Posted by pman10 View Post
I am with you in regards to injecting stability into the economy. These uncertainties need to be removed in order to allow for firms to plan for the future.

I don't think increasing the size of government is the solution, however. While laying off that many employees in such a short span was not very far-sighted, the flip-side is that we simply cannot sustain Keynesian policies for much longer. We have essentially 'tapped out' our ability to borrow money, and any more massive stimulus bills would merely delay the issue from short-term to long-term.

I personally think we need more substantial economic reforms. We need to unload government spending that is not driving the economy, eg. reform social security and medicare. Cut our ridiculously over-inflated defense program, and terminate government programs that simply aren't helping (farm subsidies, etc.).

Instead, the government needs to invest in infrastructure, technology and education. Create SEZs (special economic zones) will more lower taxes and looser zoning laws in order to encourage manufacturing to come back to the country. Continue to invest in education, one of the key drivers of any economy and a traditional strongpoint of American society.

Short term, I really have no clue. Anything we attempt to do seems to be a lose-lose situation, whether it be increasing stimulus spending, buying back treasury bonds (quantitative easing), or whatever.

Last edited by 11Series; 08-05-2011 at 05:31 PM.
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      08-05-2011, 05:46 PM   #9
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We definitely agree that government stability is key for economic stability.


If we properly fund the gov't, we don't have to go into any deeper debt than the 17-18 Trillion (inflation adjusted) as we went into debt under Reagan. Unless you are trying to say that our current economic situation is simply the long-term impact of the Reagan debt, you would have to agree that in the long-term after Clinton raised taxes, that the economy recovered quite well from the 1980's Stagflation. All while taxes were higher than now.

I'm sure there are some gov't programs that could use some fixing. I've got my pet programs, you have yours. But cutting them doesn't create a single job. Not one. Cutting the programs I want cut won't create jobs, just like cutting the programs you want cut won't create jobs. In fact, cuts in general will ELIMINATE jobs. The latest agreement will cost a third of a million jobs directly, and up to 1.6 million jobs indirectly. We can't cut our way to more jobs. Any wasteful programs we agree to eliminate should be replaced with job-creating programs.

Lower taxes isn't going to change anything. GE already pays ZERO in taxes on billions of profits, but you don't see them moving production back to the US. We have the lowest EFFECTIVE tax rates in modern US history for the wealthy and corporations, and they are still off-shoring like crazy. Tax cuts do NOT get passed on to consumers. Prices of goods are based upon what the market will bear, not a sum of expenses. Take the recent FAA airline taxes for example. Calls to lower taxes for corporations and the wealthy will just increase the amount of gold and cash corporations and the wealthy have piled up.

This idea of tax cuts to spur a supply-side economic recovery might have made sense in the 1980's where it often cost well into the double digits to borrow money due to Stagflation, but not now. Back when it cost way too darn much to take out a loan to expand, and companies didn't have enough cash on hand because it had been inflated away, tax cuts to spur expansion had a certain logic. But now with companies like Microsoft borrowing money just because it's so cheap, and companies like Apple sitting on record cash, tax cuts WILL NOT fund expansion. They already aren't spending the money they have, giving them more will just provide them with more money NOT to spend.




Yes, it is a lose-lose situation. This is one of those adult things everyone has to come to terms with. There will be no painless solutions. And quite frankly, we're getting pretty sick and tired of folks on the right who think there should be a solution that doesn't require everyone to share the pain.
Can't disagree with you on any of this, you've make your point quite well. I'm certainly not advocating more tax cuts, by the way.

The fact of the matter is, neither you nor I know what level of debt is sustainable or 'unsustainable'. And neither do any of the members of Congress, as we've seen in the last few months.

I would support short-term stimulus efforts (none of that Pork-barrel crap, but solid efforts at rebuilding and rejuvenating our crumbling infrastructure and education systems) if they were paired with SUBSTANTIAL reforms to entitlement programs, and if the Treasury could illustrate that we will not be at jeopardy of losing our bond rating or going into default.

And as I stated before, we need to look into strategies as to how to encourage private sector investment in America. We have these American corporations with hordes of cash, but none of them want to invest IN America. We need to foster this in a positive manner; I think SEZs should be strongly looked into. Public-private partnerships, like in other developing countries, might be another way to tackle the issue.
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      08-05-2011, 06:24 PM   #10
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Originally Posted by pman10 View Post
Can't disagree with you on any of this, you've make your point quite well. I'm certainly not advocating more tax cuts, by the way.

The fact of the matter is, neither you nor I know what level of debt is sustainable or 'unsustainable'. And neither do any of the members of Congress, as we've seen in the last few months.

I would support short-term stimulus efforts (none of that Pork-barrel crap, but solid efforts at rebuilding and rejuvenating our crumbling infrastructure and education systems) if they were paired with SUBSTANTIAL reforms to entitlement programs, and if the Treasury could illustrate that we will not be at jeopardy of losing our bond rating or going into default.

And as I stated before, we need to look into strategies as to how to encourage private sector investment in America. We have these American corporations with hordes of cash, but none of them want to invest IN America. We need to foster this in a positive manner; I think SEZs should be strongly looked into. Public-private partnerships, like in other developing countries, might be another way to tackle the issue.
I'm glad to hear that we agree that more tax cuts aren't the solution. You are right, we don't know what level of debt is sustainable. Which is why we should increase revenue in order to slow debt expansion and buy ourselves more time for the REAL solution to our debt problem --- more jobs.

I could support entitlement reforms for the poor, if they were paired with tax revenue increases on behalf of the wealthy. If granny has to turn down the heat a few degrees in the winter in order to save our country, so should the top 10% of wage earners. And all the folks in between too. But this "cuts only" entitlement reform idea, as if we can fund the rebuilding of our country out of the shallow pockets of the poor, disabled, elderly, and unemployed, while leaving the deep pockets of the wealthy untouched is delusional. No country can rebuild itself using the money out of the pockets of their poor, disabled, elderly, and unemployed. The money just isn't there. If you are looking for money, you have to go where the money is. Looking where the money isn't won't help.

We definitely need to encourage private sector investment in America. I don't have a problem with Public-private partnerships, except when that means that the Profits are privatized, while the Risk is socialized. We've had too much of that already. If we are going to have Public-private partnerships, there need to be protections in place that strictly forbid the private side from profiteering and funneling wealth out of the partnership, leaving the debt to the gov't. That is what happened with Freddie/Fannie.

We have way too much Carrot incentives for businesses, and not enough Stick incentives. Tax haven zones are just another Carrot when we need sticks instead. We need to make it expensive for companies to close a factory in the US, instead of giving them a tax break to close a factory by letting them write off the cost of moving overseas on their taxes. We need to make it expensive for companies to move their corporate headquarters into a mailbox in the Caribbean. We need to make it expensive to renounce your citizenship in order to avoid paying taxes. We need to make it expensive to shuffle profits into offshore straw-subsidiary shell companies, and keep those profits offshore.

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      08-05-2011, 06:56 PM   #11
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The only tax increases that will help on the economy is those for all goods that are shipped from china to the US. Tax the goods that come in 20% and I'm 100% sure you'll have less exporting of US jobs to foreign countries and manufacturing will once again start up in the US.
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      08-05-2011, 07:40 PM   #12
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Well. The we just lost our AAA rating by the S
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      08-05-2011, 07:41 PM   #13
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*I have no idea what happened to my post...* We just got downgraded by the S
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      08-05-2011, 08:08 PM   #14
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Boehner shouldn't have walked away from the $4 Trillion dollar debt reduction talks with Obama.


Boned by the Boner.
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      08-05-2011, 08:14 PM   #15
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thanks congress. i blame both republicans and democrats
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      08-05-2011, 08:22 PM   #16
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So you can read the actual text of the downgrade...

TORONTO (Standard & Poor’s) Aug. 5, 2011–Standard & Poor’s Ratings Services said today that it lowered its long-term sovereign credit rating on the United States of America to ‘AA+’ from ‘AAA’. Standard & Poor’s also said that the outlook on the long-term rating is negative. At the same time, Standard & Poor’s affirmed its ‘A-1+’ short-term rating on the U.S. In addition, Standard & Poor’s removed both ratings from CreditWatch, where they were placed on July 14, 2011, with negative implications.

The transfer and convertibility (T&C) assessment of the U.S.–our assessment of the likelihood of official interference in the ability of U.S.-based public- and private-sector issuers to secure foreign exchange for debt service–remains ‘AAA’.

We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.

Our lowering of the rating was prompted by our view on the rising public debt burden and our perception of greater policymaking uncertainty, consistent with our criteria (see “Sovereign Government Rating Methodology and Assumptions,” June 30, 2011, especially Paragraphs 36-41). Nevertheless, we view the U.S. federal government’s other economic, external, and monetary credit attributes, which form the basis for the sovereign rating, as broadly unchanged.

We have taken the ratings off CreditWatch because the Aug. 2 passage of the Budget Control Act Amendment of 2011 has removed any perceived immediate threat of payment default posed by delays to raising the government’s debt ceiling. In addition, we believe that the act provides sufficient clarity to allow us to evaluate the likely course of U.S. fiscal policy for the next few years.

The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year’s wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently. Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures. It appears that for now, new revenues have dropped down on the menu of policy options. In addition, the plan envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability.

Our opinion is that elected officials remain wary of tackling the structural issues required to effectively address the rising U.S. public debt burden in a manner consistent with a ‘AAA’ rating and with ‘AAA’ rated sovereign peers (see Sovereign Government Rating Methodology and Assumptions,” June 30, 2011, especially Paragraphs 36-41). In our view, the difficulty in framing a consensus on fiscal policy weakens the government’s ability to manage public finances and diverts attention from the debate over how to achieve more balanced and dynamic economic growth in an era of fiscal stringency and private-sector deleveraging (ibid). A new political consensus might (or might not) emerge after the 2012 elections, but we believe that by then, the government debt burden will likely be higher, the needed medium-term fiscal adjustment potentially greater, and the inflection point on the U.S. population’s demographics and other age-related spending drivers closer at hand (see “Global Aging 2011: In The U.S., Going Gray Will Likely Cost Even More Green, Now,” June 21, 2011).

Standard & Poor’s takes no position on the mix of spending and revenue measures that Congress and the Administration might conclude is appropriate for putting the U.S.’s finances on a sustainable footing.

The act calls for as much as $2.4 trillion of reductions in expenditure growth over the 10 years through 2021. These cuts will be implemented in two steps: the $917 billion agreed to initially, followed by an additional $1.5 trillion that the newly formed Congressional Joint Select Committee on Deficit Reduction is supposed to recommend by November 2011. The act contains no measures to raise taxes or otherwise enhance revenues, though the committee could recommend them.

The act further provides that if Congress does not enact the committee’s recommendations, cuts of $1.2 trillion will be implemented over the same time period. The reductions would mainly affect outlays for civilian discretionary spending, defense, and Medicare. We understand that this fall-back mechanism is designed to encourage Congress to embrace a more balanced mix of expenditure savings, as the committee might recommend.

We note that in a letter to Congress on Aug. 1, 2011, the Congressional Budget Office (CBO) estimated total budgetary savings under the act to be at least $2.1 trillion over the next 10 years relative to its baseline assumptions. In updating our own fiscal projections, with certain modifications outlined below, we have relied on the CBO’s latest “Alternate Fiscal Scenario” of June 2011, updated to include the CBO assumptions contained in its Aug. 1 letter to Congress. In general, the CBO’s “Alternate Fiscal Scenario” assumes a continuation of recent Congressional action overriding existing law.

We view the act’s measures as a step toward fiscal consolidation. However, this is within the framework of a legislative mechanism that leaves open the details of what is finally agreed to until the end of 2011, and Congress and the Administration could modify any agreement in the future. Even assuming that at least $2.1 trillion of the spending reductions the act envisages are implemented, we maintain our view that the U.S. net general government debt burden (all levels of government combined, excluding liquid financial assets) will likely continue to grow. Under our revised base case fiscal scenario–which we consider to be consistent with a ‘AA+’ long-term rating and a negative outlook–we now project that net general government debt would rise from an estimated 74% of GDP by the end of 2011 to 79% in 2015 and 85% by 2021. Even the projected 2015 ratio of sovereign indebtedness is high in relation to those of peer credits and, as noted, would continue to rise under the act’s revised policy settings.

Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act. Key macroeconomic assumptions in the base case scenario include trend real GDP growth of 3% and consumer price inflation near 2% annually over the decade.

Our revised upside scenario–which, other things being equal, we view as consistent with the outlook on the ‘AA+’ long-term rating being revised to stable–retains these same macroeconomic assumptions. In addition, it incorporates $950 billion of new revenues on the assumption that the 2001 and 2003 tax cuts for high earners lapse from 2013 onwards, as the Administration is advocating. In this scenario, we project that the net general government debt would rise from an estimated 74% of GDP by the end of 2011 to 77% in 2015 and to 78% by 2021.

Our revised downside scenario–which, other things being equal, we view as being consistent with a possible further downgrade to a ‘AA’ long-term rating–features less-favorable macroeconomic assumptions, as outlined below and also assumes that the second round of spending cuts (at least $1.2 trillion) that the act calls for does not occur. This scenario also assumes somewhat higher nominal interest rates for U.S. Treasuries. We still believe that the role of the U.S. dollar as the key reserve currency confers a government funding advantage, one that could change only slowly over time, and that Fed policy might lean toward continued loose monetary policy at a time of fiscal tightening. Nonetheless, it is possible that interest rates could rise if investors re-price relative risks. As a result, our alternate scenario factors in a 50 basis point (bp)-75 bp rise in 10-year bond yields relative to the base and upside cases from 2013 onwards. In this scenario, we project the net public debt burden would rise from 74% of GDP in 2011 to 90% in 2015 and to 101% by 2021.

Our revised scenarios also take into account the significant negative revisions to historical GDP data that the Bureau of Economic Analysis announced on July 29. From our perspective, the effect of these revisions underscores two related points when evaluating the likely debt trajectory of the U.S. government. First, the revisions show that the recent recession was deeper than previously assumed, so the GDP this year is lower than previously thought in both nominal and real terms. Consequently, the debt burden is slightly higher. Second, the revised data highlight the sub-par path of the current economic recovery when compared with rebounds following previous post-war recessions. We believe the sluggish pace of the current economic recovery could be consistent with the experiences of countries that have had financial crises in which the slow process of debt deleveraging in the private sector leads to a persistent drag on demand. As a result, our downside case scenario assumes relatively modest real trend GDP growth of 2.5% and inflation of near 1.5% annually going forward.

When comparing the U.S. to sovereigns with ‘AAA’ long-term ratings that we view as relevant peers–Canada, France, Germany, and the U.K.–we also observe, based on our base case scenarios for each, that the trajectory of the U.S.’s net public debt is diverging from the others. Including the U.S., we estimate that these five sovereigns will have net general government debt to GDP ratios this year ranging from 34% (Canada) to 80% (the U.K.), with the U.S. debt burden at 74%. By 2015, we project that their net public debt to GDP ratios will range between 30% (lowest, Canada) and 83% (highest, France), with the U.S. debt burden at 79%. However, in contrast with the U.S., we project that the net public debt burdens of these other sovereigns will begin to decline, either before or by 2015.

Standard & Poor’s transfer T&C assessment of the U.S. remains ‘AAA’. Our T&C assessment reflects our view of the likelihood of the sovereign restricting other public and private issuers’ access to foreign exchange needed to meet debt service. Although in our view the credit standing of the U.S. government has deteriorated modestly, we see little indication that official interference of this kind is entering onto the policy agenda of either Congress or the Administration. Consequently, we continue to view this risk as being highly remote.

The outlook on the long-term rating is negative. As our downside alternate fiscal scenario illustrates, a higher public debt trajectory than we currently assume could lead us to lower the long-term rating again. On the other hand, as our upside scenario highlights, if the recommendations of the Congressional Joint Select Committee on Deficit Reduction–independently or coupled with other initiatives, such as the lapsing of the 2001 and 2003 tax cuts for high earners–lead to fiscal consolidation measures beyond the minimum mandated, and we believe they are likely to slow the deterioration of the government’s debt dynamics, the long-term rating could stabilize at ‘AA+’.

On Monday, we will issue separate releases concerning affected ratings in the funds, government-related entities, financial institutions, insurance, public finance, and structured finance sectors.
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      08-05-2011, 09:01 PM   #17
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Something smells fishy in Denmark. Standard and Poor's admits that they made a 2 TRILLION dollar math error, and yet downgrades the US credit rating anyways.

From the Wall Street Journal website:

http://blogs.wsj.com/marketbeat/2011...grade-warning/

"After two hours of analysis, Treasury officials discovered that S&P officials had miscalculated future deficit projections by close to $2 trillion. It immediately notified the company of the mistakes.

S&P officials later called administration officials to say they agreed with the administration’s critique"
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      08-05-2011, 10:07 PM   #18
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Geithner: No Risk U.S. Will Lose AAA Credit Rating
Apr 19, 2011- 7:32 -
Treasury Secretary Tim Geithner discusses the state of America's credit rating and the administration's efforts to cut the deficit.


http://video.foxbusiness.com/v/46517...credit-rating/
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      08-05-2011, 10:28 PM   #19
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Geitner should be fired immediately.
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      08-05-2011, 10:56 PM   #20
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Originally Posted by M3Bahn View Post


Geithner: No Risk U.S. Will Lose AAA Credit Rating
Apr 19, 2011- 7:32 -
Treasury Secretary Tim Geithner discusses the state of America's credit rating and the administration's efforts to cut the deficit.


http://video.foxbusiness.com/v/46517...credit-rating/
Did you actually listen to the whole thing?

He's basing this statement upon a couple of things:

1) The Republican House would pass a roughly 2 Trillion dollar debt ceiling increase by JUNE. He had gotten assurances by both Democrats and Republicans that this would happen. The Republican House failed.

2) He was basing this on the fact that a bi-partisan fiscal commission announced that Republicans and Democrats had agreed upon 4 Trillion in debt reduction with a 3:1 ratio of spending cuts to revenue (tax) increases.

http://www.fiscalcommission.gov/

The Republicans completely reneged on honoring ANY revenue (tax) increases. And Boehner walked away from the 4 Trillion dollar deal.

3) He was basing this on the logical conclusion that since even under the Ryan plan, a 2 Trillion debt limit increase would be required, and Republicans would be crazy not to pass a debt limit increase that even their own budget would require. He was wrong, the Republicans were crazy, and they pretended that even though their OWN budget required a 2 Trillion debt limit increase, that they somehow could refuse to raise the debt limit.


Republicans failed to hold up their side. No 4 Trillion dollar reduction. No balanced agreement with both spending cuts and revenue increases. No bill by June. And they illogically have failed to increase the debt limit enough to pay for their OWN budget they passed.

And you hold this against Geithner??

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      08-06-2011, 12:23 AM   #21
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Quote:
Originally Posted by 11Series View Post
Did you actually listen to the whole thing?

He's basing this statement upon a couple of things:

1) The Republican House would pass a roughly 2 Trillion dollar debt ceiling increase by JUNE. He had gotten assurances by both Democrats and Republicans that this would happen. The Republican House failed.

2) He was basing this on the fact that a bi-partisan fiscal commission announced that Republicans and Democrats had agreed upon 4 Trillion in debt reduction with a 3:1 ratio of spending cuts to revenue (tax) increases.

http://www.fiscalcommission.gov/

The Republicans completely reneged on honoring ANY revenue (tax) increases. And Boehner walked away from the 4 Trillion dollar deal.

3) He was basing this on the logical conclusion that since even under the Ryan plan, a 2 Trillion debt limit increase would be required, and Republicans would be crazy not to pass a debt limit increase that even their own budget would require. He was wrong, the Republicans were crazy, and they pretended that even though their OWN budget required a 2 Trillion debt limit increase, that they somehow could refuse to raise the debt limit.


Republicans failed to hold up their side. No 4 Trillion dollar reduction. No balanced agreement with both spending cuts and revenue increases. No bill by June. And they illogically have failed to increase the debt limit enough to pay for their OWN budget they passed.

And you hold this against Geithner??

Nice try...

You are nothing more than a delusional cheerleader for obama.
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      08-06-2011, 12:48 AM   #22
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Nice try...

You are nothing more than a delusional cheerleader for obama.

So no, you didn't listen to the whole thing.

Go back to the FAP thread.
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