Saturday, August 6, 2011

Why The S&P Downgraded The United States

The Pure, Unadulterated Truth You Won’t Read Anywhere Else

I’ve never been one to deliberately lie or mislead anyone reading this blog, and I’m not about to start now.  I’ve always been the first to admit that I’ve never been happy with George W. Bush’s wild spending.  As a fiscal and social Conservative, I personally found Bush’s fiscal record a train-wreck. 

Starting with “Free Drugs for Seniors” as the largest expansion in social welfare programs since the Johnson Administration, George W. Bush took a budget surplus (even if only on paper…) and drove us into negative territory again.  Folks, that’s just a fact.

That fact is not however an excuse for the Obama Administration taking a bad situation and making it ten times worse with demonstrably failed Keynesian economic policies which continue to refuse to realize the economic reality that we live in.

Before Obama, Geithner and the rest of the stooges running Washington DC try and ram QE-3 down our throats which will only further debase our currency and cause the other two ratings agencies to downgrade us along with S&P, let me run down a few basic and incontrovertable facts about exactly why S&P downgraded the U.S. credit rating to “AA” with a negative forecast.


Let’s start with the fiscally wreckless policies of the Obama and the Democrat Senate.

Starting in January of 2007, the Democrats controlled both houses of Congress.  As we’ve said before and we should all know by now, Congress controls the spending.  They own the checkbook and write the bills to authorize spending.  When Congress decides to spend money and appropriate (or in some cases, not appropriate) money by itself, there isn’t much a President can do other than voice opposition or approval.

The Democrat controlled Congress, specifically the United State Senate has not passed a budget since the Government’s 2008 fiscal year began.  In fact, the last budget approved by Congress and signed by the President dates back to 2008, the last year Republican’s controlled the House, Senate and White House, for the 2009 budget year.

As the Democrats won the mid-term election’s in 2008, they assumed control of the House & Senate in 2009 and have not passed a federal budget since.

When the Democrats assumed the House & Senate in January 2009 they threw out the budget passed by the Republican Controlled Congress in 2008 (again, for the 2009 budget year) and proceeded to expand spending with no end in sight. 

The last “Bush Budget” of 2008 had a deficit of $250 billion dollars, according to the non-partisan Office of Management & Budget.  As we can see in 2009, the Democrats nearly tripled that amount, and this was after money was allocated for such mis-guided programs as TARP, the Banking Bailouts and bailouts for GM & Chrysler.

The lack of a comprehensive federal budget since 2009, and an Administration and Democrat controlled Congress is Reason #1 why S&P downgraded America’s debt.

Here’s Reason #2: A complete lack of taking our national debt seriously, as evidenced by John Boehner, Mitch McConnell, John McCain, and the rest of the Republican establishment.  Simply stated, the Republican establishment caved during the negotiations, snatching victory from the jaws of defeat.

No one will argue that the Democrats are in any way serious about tackling our mounting debt.  These are the same Democrats that had to “pass the bill (Obamacare) in order to show us what was in it.” 

Democrats, and to a very large degree the Republican establishment don’t know what the word “cut” means.  They may reduce the “increase” in spending on a program and call that a “cut” but the rest of us out here in Real America knows that “cut” means STOP SPENDING!

Like the rest of us, S&P recognizes that this Congress simply is not serious about cutting anything.  If they were, we’d be writing about One Trillion dollars in cuts by the next election.  Rather, Boehner, McConnell and the rest of the Republican Establishment chose to kick the can down the road, and not seriously address the debt. 

As one Congress cannot bind another, any proposed “cuts” in years 3-10 are frankly bullshit.  What matters is what this Congress passes and cuts, not future Congresses which will have no obligation to follow what this Congress says.

The fact that Boehner, McConnell and the rest of the Republican Establishment gave Obama another $2 Trillion plus to spend before the next election is reason #3: they didn’t cut off Obama’s credit card.  The wreckless spending binge continues, and as a result the Republican Establishment may have just handed the next election to Obama as a result.  He has another $2 Trillion plus to buy more votes.

Finally, the fact that Congress once again failed to address the root cause of our structural debt and deficit is reason #4 S&P downgraded the U.S.’ credit rating.  This problem has deep, deep roots dating back to the Johnson Administration when all Social Security Trust Funds were moved into the General Funding bucket, turning Social Security into nothing more than a cash-flow program (call it a “ponzi scheme” and you’d be correct!)

image Source: Non-Partisan Office of Management & Budget (OMB)

Cash flow hides alot of structural financial problems, until you run out of other people’s money, and that’s exactly what’s happening, if not already happened, to Social Security, Medicare and Medicaid.

I’m a baby boomer born in 1962 at the very tail end of the “boom.”  In the 1960’s, there was on average 6.5 people working for every 1 person on Social Security.  When Social Security was moved from a Trust Fund to the General Funding bucket, all that money became available for the Federal Government to spend on “social welfare” programs (read that: Medicare, Medicaid and more.) 

It appears to me that no one ever thought of the long term implications of raiding the trust fund and a declining birth rate here in America. 

Add to that the problem of tens of millions of anchor babies now eligible for “benefits” they’ve never paid for and their families and we can easily see a ponzi scheme that’s not only run out of American taxpayer money, we’re now borrowing forty cents of every dollar this Government spends from the Chinese to pay for it.

And that’s just Social Security, I haven’t gotten to Medicare and Medicaid being their own ponzi schemes yet!

These three programs are the core of our structural debt and deficit problems, none of which were addressed by this Congress, and specifically the Republican Establishment which was within a day or two of Obama caving to the every demand of the Tea Party.

Had Congress addressed the structural debt and deficit issues which the Tea Party has rightly brought to light, there would’ve been no reason for S&P to downgrade United States.

So there you have it, the four reasons S&P downgraded America’s credit rating.

Mind you, I’m no fan of S&P.  These are the same folks that rated mortgage backed securities as “triple-A” when they were anything but, and a primary cause of the economic mess we’re in today.

But let’s face reality, and that is S&P’s downgrade is in the end a “tax” on every American taxpayer who has a mortgage, car loan, credit card or other debt affected by interest rates.

For this, we have a President who knows only how to spend, and a Congress that lacks the backbone to say “NO!” to thank.

Hang onto your wallets folks, you haven’t seen anything yet.  Just wait until Obama, Read and the rest of “Adults” in Washington return and want to raise your taxes.

How’s that hope and change working out for you all these days?

Obama Is Worst Ever

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