Posted by: Debby Durkee | August 8, 2011

Downgraded president.

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Downgraded president.

How does it feel to be the president of a downgraded United States? Obama doesn’t seem too pleased at this stage of the game, blaming Congress, Republicans, the Tea Party, and who knows who else he’ll nail to the wall. As of this writing, the Dow has plunged over 600 points after Standard and Poor’s downgraded the United States’ debt from AAA to AA+. Were they also signaling that they were downgrading the stewardship of the United States economy by our CEO Obama? I believe they were. This is from the Wall Street Journal.

…S&P essentially declared that on present trend the U.S. debt burden is unsustainable, and that the American political system seems unable to reverse that trend.  Snip –

In that context, the Obama Administration’s attempt to discredit S&P only makes the U.S. look worse—like the Europeans who also want to blame the raters for noticing the obvious… Snip  —

We think the larger problem with S&P, Moody’s and Fitch is that they make no distinction over how a nation balances its books—whether through tax increases or spending reductions. Like the International Monetary Fund, the raters care only about balance.

This takes too little account of the need for faster economic growth, which is the only real path out of a debt crisis. Britain’s government has earned rater approval for its fiscal consolidation, but its increases in VAT and income tax rates are hurting its tepid recovery. Letting the credit raters dictate tax increases is the road to an austerity trap.

The real reason for White House fury at S&P is that it realizes how symbolically damaging this downgrade is to President Obama’s economic record. Democrats can rail all they want about the tea party, but Republicans have controlled the House for a mere seven months. The entire GOP emphasis in those seven months—backed by the tea party—has been on reversing the historic spending damage of Mr. Obama’s first two years.

The Bush Presidency and previous GOP Congresses contributed to the current problem by not insisting on domestic cuts to finance the cost of war, and by adding the prescription drug benefit without reforming Medicare. But as recently as 2008 spending was still only 20.7%, and debt held by the public was only 40.3%, of GDP.

In the name of saving the economy from panic, the White House and the Pelosi Congress then blew out the American government balance sheet. They compounded the problem of excessive private debt by adding unsustainable public debt.

They boosted federal spending to 25% of GDP in 2009, 23.8% in 2010 (as TARP repayments provided a temporary reduction in overall spending), and back nearly to 25% this fiscal year. Meanwhile, debt to GDP climbed to 53.5% in 2009, 62.2% in 2010, and is estimated to hit 72% this year—and to keep rising. These are all figures from Mr. Obama’s own budget office.

Rather than change direction this year, Mr. Obama’s main political focus has been to preserve those spending levels by raising taxes. His initial budget in February for fiscal 2012 proposed higher spending. He then resisted the modest spending cuts that the GOP proposed for the rest of fiscal 2011.

He responded to Paul Ryan’s proposal to reform Medicare and Medicaid by calling it un-American and unworthy of debate. In the most recent budget talks, he would only consider small entitlement reforms (cuts in payments to providers) if Republicans agreed to raise taxes. He has refused even to discuss ObamaCare or serious reforms in Medicare and Social Security. Meanwhile, federal payments to individuals continue to grow as a share of all spending, as the nearby chart shows.

This is how you become the Downgrade President.  Snip –

…the only road back to fiscal sanity and AAA status—is to reverse the economic policies of the late Bush and Obama years. The financial crisis followed by the Keynesian and statist revival of the last four years have brought the U.S. to this downgrade and will lead to inevitable decline. The only solution is to return to the classical, pro-growth economic ideas that have revived America at other moments of crisis.

http://online.wsj.com/article/SB10001424053111903454504576493173381179508.html?mod=WSJ_Opinion_LEADTop

It’s not just the president who has been downgraded, but the hollow, blame-bellowing Democratic Party itself. Left with a crisis they won’t be able to demagogue and haven’t a clue how to actually fix, while also keeping their equally insane base happy, we’ll all suffer the consequences. The Tea Party has been the go-to scapegoat for these liars, but how can they blame the Tea Party for downgrades by S&P of Fannie Mae and Freddie Mac because of their reliance on the U.S. government?  Or what about ten of 12 Federal Home Loan Banks? Fannie and Freddie guarantee about half of all of the country’s mortgages. According to CNBC: “Their downgrade might force anyone looking to buy a home to pay higher mortgage rates.”

S&P also cut ratings for several of the main arteries of the US financial system — the Depository Trust Co., National Securities Clearing Corp., Fixed Income Clearing Corp. and the Options Clearing Corp. — were cut one notch to AA-plus.

You can read that here: http://www.cnbc.com/id/44058747

Robert P. Kirchhoefer of American Spectator says: “Clearly the left needs to update the tired narrative before its Credibility Rating plummets to outright calumny.” Read him here: http://spectator.org/blog/2011/08/08/further-downgrades-dont-fit-th

Oh, they also downgraded Warren Buffett’s Berkshire Hathaway from “stable” to “negative”. Hmmm…the Oracle of Omaha isn’t looking so wise these days. You can read about that here: http://www.cnbc.com/id/44058141

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