The reasons to increase the debt ceiling were to prevent the stock markets from craing. Oops, that happened yesterday and the previous days.
Ok, well, how about to prevent the credit rating of the U.S. from falling. Ooops, another mistake. From the Washington Post: Standard & Poor’s announced Friday night that it has downgraded the sterling U.S. credit rating for the first time.
The move came even though the Treasury Department said that it had found a math error in the firm’s calculations of deficit projections, according to a person familiar with the matter.
S&P decided to lower the AAA rating, held by the United States for 70 years, to AA+ after a bipartisan debt deal signed into law this week failed to assuage concerns about the nation’s growing spending.
Analysts have said a downgrade could increase the cost of borrowing for the U.S. government and lead to tens of billions of dollars in more interest costs per year. That could translate into higher borrowing for consumers and businesses, too.
A downgrade would also have a cascading series of effects on states and localities that rely on federal funding, including in the Washington metro area, potentially raising the cost of borrowing for schools and parks.
But the exact impact of the downgrade won’t be known at least until Sunday night, when Asian markets open, and perhaps not fully grasped for months. Analysts say the immediate term impact is likely to be modest because the markets have been expecting a downgrade by S&P for weeks.
Standard & Poor’s has warned Washington several times this year that, unless the federal government took steps to tame its debt, its credit rating could be lowered.
Some analysts are worried about the impact of a downgrade on markets where Treasurys are held as collateral and the AAA rating is required. But most analysts don’t expect this issue to pose a major problem.
http://www.washingtonpost.com/business/economy/sandp-considering-first-downgrade-of-us-credit-rating/2011/08/05/gIQAqKeIxI_print.html
Well, thanks to Dr. Joe Heck, Shelly Berkley and Harry Reid, our credit rating is lower. Instead of addressing the problem, these three idiots ran away from the problem instead of doing something about it.
So, 2 lies by the administration and congress have been exposed, and the $100 question is: how many more lies will be exposed in the upcoming days?
Tammytalk, But NO Questions Taken
47 minutes ago
You don't understand the issue. Read Marginal Revolution (conservative) and Grasping Reality (liberal). Then post.
ReplyDeleteI don't need to read those things. The Administration along with the Dem's and GOP said if we passed the debt ceiling bill, the markets would be stable and obviously that didn't happen.
ReplyDeleteThey also promised that the U.S. would not be downgraded and that happened. It really doesn't matter if S&P downgraded or not, i think the investors in the markets just don't trust the government taking another $2trillion out in loans in 1 year and have no way to pay it back other than printing more money, which will devalue the dollar.
You don't need to be an economist to figure that out
You're mis-reading what was said. The Dems & GOP (Tea Party excepted) said that it would be very bad to not raise the debt ceiling.
ReplyDeleteThe fact that we made a three ring circus of simply agreeing to pay for the things we'd already voted for in the budget made us look like fools. Imagine a married couple where they buy something on the credit card and then one of them changes their mind when the bill comes due and they fight about whether they're going to pay the credit card bill until the day before default. That's what we did. So yeah, it's better than defaulting but it doesn't engender confidence.
As for the trust of the markets, look at the 5 year t-bill rates and the 10 year t-bill rates. Investors are willing to take a zero percent return to get the stability of t-bills. Zero. That means a combination of: 1. fear of investment (stocks), and 2. confidence in the US fiscal stability.
Now look at Portugal, Italy, Greece and even Spain. Those countries have to pay massive rates because investors do not have confidence in their fiscal stability. That's the market.
So really, you should read those things. I strongly suggest you find a conservative econ blog you trust (i.e. they point out where conservative dogma is wrong), and then you find an analogously trustworthy liberal econ blog. There are many of each.