Holy shoot... US Credit Downgraded.

elenetxu · August 2011

Well, after a lot of threats it's finally happened. US credit has been downgraded from AAA to AA+.

http://www.bbc.co.uk/news/world-us-canada-14428930

I'm thankful this happened on a Friday evening when markets are closed, but I'm extremely fearful about what's going to happen on Monday. I'm especially worried about the repercussions in Spain.

MrsBini10 · August 2011

I heard they threatened to downgrade and then changed their minds. Hmmm.

MrsBini10 · August 2011

And apparently then they changed their minds again. From what I can tell. This is all weird.

elenetxu · August 2011

As I was fixing dinner, the 6:30 news broadcast said they threatened to do so.

Both BBC and MSNBC are reporting as of 8:47 EST that we now have an AA+

Flower05 · August 2011

This is going to make for a long weekend in our house....DH works in finance. Can't say I am at all surprised by this. I was thinking this would have happened last week.

elenetxu · August 2011

Flower05:
This is going to make for a long weekend in our house....DH works in finance. Can't say I am at all surprised by this. I was thinking this would have happened last week.

I'm sorry.

I'm just glad it happened on a Friday evening so there's at least a weekend of reflexion/planning/thinking.

Flower05 · August 2011

elenetxu:
Flower05:
This is going to make for a long weekend in our house....DH works in finance. Can't say I am at all surprised by this. I was thinking this would have happened last week.
I'm sorry.
I'm just glad it happened on a Friday evening so there's at least a weekend of reflexion/planning/thinking.

I couldn't agree more with you. I think if it had happened on a weekday night, everyone would have had a knee jerk reaction to things the following day. At least now people can think things through a little. Lets hope!

Publius · August 2011

Unfortunately, I can't say that this is at all surprising.

MrsBini10 · August 2011

Publius:
Unfortunately, I can't say that this is at all surprising.

Not really. But I thought if they were going to do it they would have done it earlier this week.

Publius · August 2011

MrsBini10:
Publius:
Unfortunately, I can't say that this is at all surprising.
Not really. But I thought if they were going to do it they would have done it earlier this week.

Eh, S&P works at its own pace. It doesn't do knee-jerk reactions. TBH, I'm surprised that Moody's reaffirmed their AAA of the US so shortly after the bill was signed. They can't have had that much time to read its contents.

Jetur20 · August 2011

Publius:
MrsBini10:
Publius:
Unfortunately, I can't say that this is at all surprising.
Not really. But I thought if they were going to do it they would have done it earlier this week.
Eh, S&P works at its own pace. It doesn't do knee-jerk reactions. TBH, I'm surprised that Moody's reaffirmed their AAA of the US so shortly after the bill was signed. They can't have had that much time to read its contents.

I don't see why it matters. I really think that all of the rating agencies are useless and they need to allow more competition in the industry. If the US were a company and paying for a rating of its bonds, they wouldn't have been downgraded. The system is crap and I really think S&P just wants to gain the appearance of standing out from the crowd and being tough... but it's all just a show.

Publius · August 2011

Jetur20:
Publius:
MrsBini10:
Publius:
Unfortunately, I can't say that this is at all surprising.
Not really. But I thought if they were going to do it they would have done it earlier this week.
Eh, S&P works at its own pace. It doesn't do knee-jerk reactions. TBH, I'm surprised that Moody's reaffirmed their AAA of the US so shortly after the bill was signed. They can't have had that much time to read its contents.
I don't see why it matters. I really think that all of the rating agencies are useless and they need to allow more competition in the industry. If the US were a company and paying for a rating of its bonds, they wouldn't have been downgraded. The system is crap and I really think S&P just wants to gain the appearance of standing out from the crowd and being tough... but it's all just a show.

As far as timing is concerned, I agree, it matters not at all. I hear what you're saying about the credit agencies, but TBH, I see this as a long time coming. I don't really see how S & P could have not downgraded without making themselves look like they were cow-towing given their rash of recent and semi-recent downgrades of economies that have lower debt than the US does.

Publius · August 2011

This is just lovely:

"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+'."

From S & P's research update. Crap.

http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DUS_Downgraded_AA%2B.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243942957443&blobheadervalue3=UTF-8

MrsBini10 · August 2011

Publius:
This is just lovely:
"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+'."
From S & P's research update. Crap.
http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DUS_Downgraded_AA%2B.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243942957443&blobheadervalue3=UTF-8

Well I like the part where they think the tax cuts for the wealthy should expire...

EnidFalcor · August 2011

K but...explain to a dummy. What does this mean to the average person?

Publius · August 2011

MrsBini10:
Publius:
This is just lovely:
"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+'."
From S & P's research update. Crap.
http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DUS_Downgraded_AA%2B.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243942957443&blobheadervalue3=UTF-8
Well I like the part where they think the tax cuts for the wealthy should expire...

I was talking about the last sentence. Even with that, the US "could" stabilize in the long term at AA+. Or it could be downgraded again. The more I think about it the less annoyed I am with this though. The Dem part of the debt ceiling compromise pushed the date by which Congress would need act on it again well past the election so as to make this not be an election issue. S & P downgrading the US puts the issue right back onto the table for the 2012 elections. It's not something that is going to bode wellfor Democrats or Obama in the swing states.

Publius · August 2011

EnidFalcor:
K but...explain to a dummy. What does this mean to the average person?

Practically speaking, not a lot. It just means that it will be more expensive for the US to take on new debt. The market might react on Monday, but the market has been really volatile lately anyway. The implications for everyday life won't come until Congress actually begins making cuts, raising taxes, and balancing the budget--even that I would argue is more of an implication of the US having a national debt the size of Montana than S&P downgrading our credit rating.

I think the biggest issue is that it's incredibly embarrassing that the US no longer has the premier rating of a ratings system it basically created.

MrsBini10 · August 2011

Publius:
MrsBini10:
Publius:
This is just lovely:
"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+'."
From S & P's research update. Crap.
http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DUS_Downgraded_AA%2B.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243942957443&blobheadervalue3=UTF-8
Well I like the part where they think the tax cuts for the wealthy should expire...
I was talking about the last sentence. Even with that, the US "could" stabilize in the long term at AA+. Or it could be downgraded again. The more I think about it the less annoyed I am with this though. The Dem part of the debt ceiling compromise pushed the date by which Congress would need act on it again well past the election so as to make this not be an election issue. S & P downgrading the US puts the issue right back onto the table for the 2012 elections. It's not something that is going to bode wellfor Democrats or Obama in the swing states.

Well, I disagree. I think this whole mess highlighted the error voters made in sending so many republicans and especially tea partiers to Congress, where they held our economy hostage to protect the interests of the very rich. But to each her own. We shall see how it plays out.

Publius · August 2011

MrsBini10:
Publius:
MrsBini10:
Publius:
This is just lovely:
"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+'."
From S & P's research update. Crap.
http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DUS_Downgraded_AA%2B.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243942957443&blobheadervalue3=UTF-8
Well I like the part where they think the tax cuts for the wealthy should expire...
I was talking about the last sentence. Even with that, the US "could" stabilize in the long term at AA+. Or it could be downgraded again. The more I think about it the less annoyed I am with this though. The Dem part of the debt ceiling compromise pushed the date by which Congress would need act on it again well past the election so as to make this not be an election issue. S & P downgrading the US puts the issue right back onto the table for the 2012 elections. It's not something that is going to bode wellfor Democrats or Obama in the swing states.
Well, I disagree. I think this whole mess highlighted the error voters made in sending so many republicans and especially tea partiers to Congress, where they held our economy hostage to protect the interests of the very rich. But to each her own. We shall see how it plays out.

That is an incredibly simplistic view of the situation, especially considering that there were more than a few dems dragging their feet too, albeit for a different reason. It's also not backed up by recent polling numbers. Look, Dems could have used their bargaining power to get tax "hikes" in the bill. Instead they used it to try and notake this an election issue, which should tell you something about how they themselves thinks this plays for their election chances.

The bottom line is that the above is likely going to force Dems to run on a platform of raising taxes--TBH, anyone who thinks that the entire sitation can be fixed by allowing a few tax breaks for people making above $250k to lapse will fix the entire problem is kidding themselves. Running on a platform of raising taxes does not win elections; just ask Walter Mondale.

Publius · August 2011

This doesn't mean I think Obama is not going to be reelected. I suspect that he will be. I'm not sure that Romney can take him based upon the numbers and after 200 I don't trust the GOP primary electorate not to be flipping idiots when it comes to selecting a candidate. I do, however, expect the Dems o lose the Senate. Of all of the Senate seats up next year, only 9 are currently held by the GOP. 9 seats are considered to be safe or leaning GOP (so at this point we are not expected to lose any seats). A further 9 seats are toss-ups. The GOP only needs two of them.

MrsBini10 · August 2011

I'm a little insulted that you find my opinion "simplistic." I didn't go into much detail (I wrote that on my phone at like midnight) but I assure you I've thought a great deal about this subject. I disagree with you on virtually every point you've made but like I said, to each her own. I don't really feel like getting into a long debate about this especially since it's clear we will never change each other's minds.

elenetxu · August 2011

I don't think any blatantly partisan comments have been made by Publius. I think she's entirely correct when stating that:

The Dem part of the debt ceiling compromise pushed the date by which Congress would need act on it again well past the election so as to make this not be an election issue. S & P downgrading the US puts the issue right back onto the table for the 2012 elections. It's not something that is going to bode wellfor Democrats or Obama in the swing states.

Let's face it. John and Jane Q. Public might go into the elections thinking "Hmm, America got embarrassed with this S&P thing. Who was president? Obama. Well, then, I don't like Obama since it's clearly his fault because he was in office. I think I'll vote for those other people." While many people think a lot more critically than that, I think past elections have shown us that there are still people who think this way. If you don't believe me, I'll present you to some of my old coworkers, one who told me she was a lifelong staunch Democrat but she wasn't going to vote for Obama because he had a "foreign" name. I decided not to point out she had a French last name.

I think both sides are, fundamentally, equally at fault. Call me an idealist, but partisan politics should not have been played at such an important time and this shouldn't have come as "close to the wire" as it did.

Publius · August 2011

MrsBini10:
I'm a little insulted that you find my opinion "simplistic." I didn't go into much detail (I wrote that on my phone at like midnight) but I assure you I've thought a great deal about this subject. I disagree with you on virtually every point you've made but like I said, to each her own. I don't really feel like getting into a long debate about this especially since it's clear we will never change each other's minds.

To begin with, I am a little confused as to why you think I was being super partisan. I didn't say anything aside from commonly accepted polotical norms--that no wants to run on a platform of raising taxes because historically speaking those people lose elections. Everything else I said is backed up by recent pollong data. I you want to see it I'd be happy to link it. I didn't make this up.

Secondly, in case I wasn't clear, I blame several people on both sides of the aisle for being idiots when it was clear weeks ahead of time that they'd be able to reach a compromise (Boehner and Reid's bills were so close that the difference could have been worked out in committee).

JulieFe · August 2011

MrsBini10:
I'm a little insulted that you find my opinion "simplistic." I didn't go into much detail (I wrote that on my phone at like midnight) but I assure you I've thought a great deal about this subject. I disagree with you on virtually every point you've made but like I said, to each her own. I don't really feel like getting into a long debate about this especially since it's clear we will never change each other's minds.

Well, then you're obviously myopic at best because every bit of Senate coverage I've seen in the last 9 months, even from Democratic strategists, says that the Senate's going Republican. Even a cursory glance at the numbers shows that. It's simple math based on the respective number of states held by Rs and Ds.

Look at the states involved. Quite a few are red states whose Senate races only went blue as a fluke in 2006 due to the dislike for Bush. Such a result was aberrant and not likely to happen again.

Holy shoot... US Credit Downgraded.

Re: Holy shoot... US Credit Downgraded.

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