Credit Rating Downgrade

We knew this was coming.

Congress and the White House was warned back in April.

This evening Standard and Poor’s downgraded the United States Credit rating from ‘AAA’ to ‘AA+’

The credit rating agency said that it is cutting America’s top AAA rating by one notch to AA-plus. The credit agency said that it is making the move because the deficit reduction plan passed by Congress on Tuesday did not go far enough to stabilize the country’s debt situation.

The ‘Super committee’ had best find a way to work together and find some serious cuts.  I am not optimistic.  Neither are a few other people.

In its statement, S&P said that it had changed its view “of the difficulties of bridging the gulf between the political parties” over a credible deficit reduction plan.
S&P said it was now “pessimistic about the capacity of Congress and the administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics anytime soon.”

Hang on kids, it is going to be a rough ride for the next year or so.

53 Replies to “Credit Rating Downgrade”

  1. springer

    So the president et al scared the Reps into caving because of the threat of downgrade, stock market fall, etc. This wonderful deal was made and our country was saved?! Is this saved??? All that was saved was that Obama doesn’t have to face this issue again before his election. What is so hard about cutting spending. JUST DO IT!!! DEMAND IT!!!! I want my kids and grandkids to have the same opportunities I had growing up in the USA, and at this rate they have no chance of that.

  2. stuper

    It is frustrating that all of SD’s reps praised this bill. It was a did on day 1. I had a feeling we were going to default no matter what.

    I want to say Obama might have lost reelection today but this bill also reflects badly on congress also.

    Johnson, thune and noem need to refocus and explain again why this was a good plan.

    This is a black eye for our country. In the end it will hopefully become a good thing.

    I hate to say it but michele bachmann looks good for standing her ground.

  3. Stan Gibilisco

    Several thoughts, sort of scattered …

    1. This event gives the Republicans great fodder for an assault on President Obama between now and the 2012 election.

    2. Let’s wait and see how the markets react to this news. My guess: Stocks will fall on Monday, but not by a whole lot.

    3. I have no skin in the stock market so it could fall 1000 points for all I care.

    4. I have zero debt so if interest rates rise, maybe I’ll get a better return on my certificates of deposit next time I renew them.

    5. Standard and Poor’s is a division of McGraw-Hill, who publishes all my work. Should I thank them or not?

    6. An interesting article appears in Fox News dot com. Here’s the link:

    Of the nine countries listed here, six are “Euro-socialist democracies” whose economies are structured in a way that Bill O’Reilly recently said “does not work.” These are countries with AAA ratings and not at risk of losing that rating.

    7. Obviously, we would do better to emulate the six countries noted above, than to emulate certain other “Euro-socialist democracies” such as Greece, Italy, Spain, Portugal, or Ireland.

    8. We face a real “crossroads in history” as our population ages and the demand for Social Security and Medicare increases. I see no humane alternative than going in the direction of the AAA-safe countries noted above.

    9. Someone please prove my statement No. 8 above dead wrong! Is there no way for us to become the real America again?

    1. Job Creator

      Stan, that link led to a stunning find – I hope it’s not true. Literally every single one of those countries has one thing in common – government health care. Some are pure single source healthcare, others require people to get health insurance and for insurers to pay for it.

      1. Australia
      > GDP per capita: $39,699.358
      Medibank was funded from general taxation. In 1976, the Fraser Government introduced a 2.5% levy and split Medibank in two: a universal scheme called Medibank Public and a government-owned private health insurance company, Medibank Private.
      During the 1980s, Medibank Public was renamed Medicare by the Hawke Labor government, which also changed the funding model, to an income tax surcharge, known as the Medicare Levy, which was set at 1.5%, with exemptions for low income earners.

      2. Canada
      > GDP per capita: $39,057.444
      In 1984, the Canada Health Act was passed, which prohibited extra billing by doctors on patients while at the same time billing the public insurance system. In 1999, the prime minister and most premiers reaffirmed in the Social Union Framework Agreement that they are committed to health care that has “comprehensiveness, universality, portability, public administration and accessibility.”[6]

      3. Denmark
      > GDP per capita: $36,449.554
      Denmark has a universal public health system paid largely from taxation with local municipalities delivering health care services in the same way as other Scandinavian countries. Primary care is provided by a general practitioner service run by private doctors contracting with the local municipalities with payment on a mixed per capita and fee for service basis. Most hospitals are run by the municipalities (only 1% of hospital beds are in the private sector).

      4. Germany
      > GDP per capita: $36,033.284
      Germany has the world’s oldest universal health care system, with origins dating back to Otto von Bismarck’s Health Insurance Act of 1883.[69] As mandatory health insurance, it originally applied only to low-income workers and certain government employees, but has gradually expanded to cover the great majority of the population.[

      5. Holland
      > GDP per capita: $40,764.548
      Insurance companies must offer a core universal insurance package for the universal primary, curative care which includes the cost of all prescription medicines. They must do this at a fixed price for all. The same premium is paid whether young or old, healthy or sick. It is illegal in The Netherlands for insurers to refuse an application for health insurance, to impose special conditions (e.g. exclusions, deductibles, co-pays etc., or refuse to fund treatments which a doctor has determined to be medically necessary). The system is 50% financed from payroll taxes paid by employers to a fund controlled by the Health regulator. The government contributes an additional 5% to the regulator’s fund. The remaining 45% is collected as premiums paid by the insured directly to the insurance company.

      6. Norway
      > GDP per capita: $52,012.506
      Norway has a universal public health system paid largely from taxation in the same way as other Scandinavian countries. Norway?s entire population has equal access to health care services. The Norwegian health care system is government-funded and heavily decentralized. The health care system in Norway is financed primarily through taxes levied by county councils and municipalities.

      7. Singapore
      > GDP per capita: $56,521.731
      Singapore has a universal health care system where government ensures affordability, largely through compulsory savings and price controls, while the private sector provides most care. Overall spending on health care amounts to only 3% of annual GDP. Of that, 66% comes from private sources.

      8. Sweden
      > GDP per capita: $38,031.484
      Sweden has a universal public health system paid largely from taxation in the same way as other Scandinavian countries.

      9. Switzerland
      > GDP per capita: $41,663.047
      Healthcare in Switzerland is universal and is regulated by the Federal Health Insurance Act of 1994. Basic health insurance is mandatory for all persons residing in Switzerland (within three months of taking up residence or being born in the country). Insurers are required to offer insurance to everyone, regardless of age or medical condition. They are not allowed to make a profit off this basic insurance, but can on supplemental plans.

  4. DDC

    “Hang on kids, it is going to be a rough ride for the next year or so..”

    Oh how I wish I had your optimism. This is just a blip on the radar compared to what is coming if we don’t get spending under control and seriously reform Medicare & SS.

    1. Les

      With Ohio’s predictions of recovery starting in late 2016? With a system that is promoting class and racial tensions? With an estimated 600 Tril in derivatives looking for a place to land.

      In a year or so we won’t be thinking this was a rough ride when the US comes off the government teat and riots in the streets like the squealing pigs we can be.

  5. PNR

    Consider scenario:
    House holds line on debt ceiling, forcing an immediate 40% reduction in government spending (the amount we borrow). S&P happy – getting spending under control.
    Obama makes good on threat to cut Soc. Security, military pay, etc. to meet that 40% cut in spending.

    What happens?

  6. caheidelberger

    S&P suggested they wanted a bigger deal, on the order of $4 trillion, to prove the U.S. was serious about getting the budget under control. President Obama offered a $4 trillion deal. The Tea Party forced Boehner to walk away from that deal. Oops. The rough ride coming will be for conservatives in 2012 trying to defend the purely political hostage-taking that brought on this downgrade.

    1. PNR

      What, pray tell, was the $4 trillion deal the president offered? Forgive me, but I never saw it or any details of it. I heard a speech where he CLAIMED he made that offer, but nobody has ever seen it and, as the head of the CBO says, we can’t score speeches.

        1. PNR

          Right. You wouldn’t by any chance want to buy a bridge, would you?

          If it were a credible and detailed plan, given that he was being chastised for not presenting one, he had every reason to go public with it. He didn’t – because there was no plan.

        2. Anonymous

          Have you blacked-out? You seem as ignorant on these matters as that big ugly lawmaker who is always putting his hind paw in his mouth.

  7. springer

    Obama never had a deal or a plan. He simply hid out until he hoped the Reps would hang themselves. O wouldn’t dare cut $4 million; he would lose all his support. The way it is, he has trillions to spend before the next election to buy votes, influence votes, etc. And the cuts – most of them don’t kick in until 2017 or something like that. Does anyone really think they will be cuts? If the US as we know it is even around by that time.

  8. J Rae

    A friend at morning coffee made the comment that we are getting really good at petty politics, but at the expense of actually governing. Seems that the S&P in their release agrees that probably isn’t a good thing:

    “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.”

    1. Les

      “””Seems that the S&P in their release agrees that probably isn?t a good thing:””

      Same folks that lead us down the chute with the toxic assets J Rae. They are no less the charade than our congress.

  9. J Rae

    Here’s the article from the WSJ and the release.

    Just thinking that maybe we should put an end to the petty politics and get back to governing. Wishful thinking, I know.

    For some of the ideologues that find this to be good sport here’s some other highlights.

    “It appears that for now, new revenues have dropped down on the menu of policy options.”

    “The act contains no measures to raise taxes or otherwise enhance revenues, though the committee could recommend them.”

    “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.”

    Last I checked, everyone is on the campaign trail appealing to the fringes of their respective parties, so I don’t expect to see any adults in the room for quite some time.

    I really miss statesmen and women and people who held country and doing the right thing above party. In the mean time, it seems we are at the mercy of the ideologues since no on has the guts to stand up to them and their money.


    1. Job Creator

      J Rae, those statesmen and stateswomen are still there. But those on our side are made timid because they are scared of being primaried. Awful state of affairs. I think some of the fringe politicians will be purged in 2012 and that will be a good thing. We tried the experiment and saw how it cause so much crap. The fringers have a right to express their opinions. They do not have a right to hold our caucus prisoners.

      1. William

        I’m not sure what you consider fringe? Are those the folks that say the “party is over”?

        The country is “broke”, both literally and figuratively.

        If you think we can “adjust” without radical changes to the structural deficit, them I’m sorry for you. You’re going to be disappointed.

        We’ve reached the point where “ugly” decisions will have to be made, and the only real question, is if we have the guts to make them. If we do, we can recover within a couple of painful years. If we don’t, we in a downward spiral that we don’t know how to stop.

        1. Spencer

          The New York Times had a very useful ap. on their site last year. It allowed individuals to “fix” the U.S. debt situation. Even if you checked every single tax increase imaginable: expiration of Bush Tax cuts, implementation of a VAT, filled in every corporate loop hole, and taxed the wealthy to death, you still ended up making cuts to entitlements to balance the budget. Without hard decisions being made on our tens of trillions of dollars in unfunded entitlements, the whole thing is going to implode.

  10. J Rae

    Thanks Job Creator. Not sure who’s side I’m on…but as a “radical” moderate, I’m not sure the team has a name, or a spokesperson. Just tired of the crap that gets shoved down everyone’s throat in the name of whatever party they are aligned with. It’s not about policy anymore it’s about politics and getting re-elected. It’s about a blind commitment to special interests (both sides) no matter how it affects anyone else.

    Sure wish there was a ticket with Bill Gates and Warren Buffet that we could vote for. Of course neither one of them would meet the “purity test” so we will take the Eddie Haskel half-wits that pledge whatever it takes to get someones vote and call it good…no need to look at what that vote means as they’ve got their own “Badhousekeeping” seal of approval.

  11. J Rae

    Not to mention, some see it as a game to be played and not real life that affects real people. Love the blogs, but it’s turned us into self selecting low information citizens. Guessing some of the comments that follow will bear me out.

    1. Job Creator

      You’re spot on there. The absolutists always think they are perfect and it does not matter which end of the spectrum they are on. Those of us left to be reasonable truly do outnumber the fringe people, but the games and money and influence sometimes give them more weight. Now WE are the people who need to take our country back! I’m glad I have a neighbor like you in this blog.

  12. J Rae

    Nice of you to throw in WE THE PEOPLE…unfortunately that doesn’t mean much anymore either as the fringe has co-opted that as their brand. Hell, there have been fringe nut jobs using that for a long time. Guess it makes them feel like they are part of something bigger than they actually are. Not to mention that it sounds better than “Hey listen to us, we represent 2% of the population and you need to think like us!”

    That’s too bad that something so meaningful from the Founding Fathers could be grabbed by any nutjob and made a part of a movement.

    Shouldn’t there be like a double super majority vote before any group could use that line and misrepresent America in their propaganda to lure in the low information crowd?

  13. William

    We’ve simply reached a point where 2 world views collide.

    1. Spend money we don’t have to provide a Utopian dream that can’t be paid for.

    2. Stop spending money we don’t have, expect personal responsibility for ones actions.

    One side will win the political battle, but economics DICTATE, we will eventually run out of “other peoples money” to spend on option #1.

    1. J Rae

      William, that’s a false choice and you know it…not to mention fairly shallow and dishonors the political courage that Reagan had to not only increase the debt limit 18 times! But he also the guts enough to know when we needed raise revenue, guts enough to raise taxes 11 times! He also proposed cuts to go along with that, but the politics got in the way. Just like they are now.

      So William, who was the better American? Ronald Reagan or Grover Norquist?

      1. PNR

        It’s not 1984. It’s 2011. And the amount of money we owe, both in absolute terms and relative to GDP, is staggering.

        Yes, Reagan did ascede to tax increases – they didn’t work. What worked, briefly, was a Republican Congress that balanced the budget while Clinton was president. Trouble is, once we got a Compassionate Conservative, off they went a-spending again.

        It’s not a revenue problem. It’s a spending problem. Trying to cure a spendaholic by giving him more money is like trying to cure an alcoholic by giving him more booze.

  14. springer

    J Rae, you have taken the directions from Kerry, Biden, etc to target the conservatives who believe in limited gov’t, less gov’t regs, states rights, lower taxes (i.e.Tea Party). your previous posts on here have been decidely liberal, not middle of the road. Just what do you propose to do when we (as Margaret Thatcher so succinctly put it) “run out of other people’s money?”

    Stan, maybe S&P was the only group with enough guts to say it like it is. Families who run their budgets like the Obama administration end up in bankruptcy and lose their credit rating; why is it different with a nation? Of course, we can continue to print more money, and probably will, but that doesn’t solve the problem either. In fact, Obama said after the debt deal was done and supposedly there were to be no tax increases and no more spending, that he was going to do just the opposite. Wonderful!

    1. J Rae

      Oh Springer, I’m sure to you that I seem far left… You know that Margaret Thatcher wouldn’t pass the Tea Party purity test don’t you? But hey, Margaret Thatcher was governing at the same time as Ronald Reagan…which one was the better conservative?

      You know the difference between a federal budget and a family budget don’t you?

      Tell me who you think is the better American, Reagan or Norquist.

      1. duggersd

        Is it just me or did you fail to answer the question about what we do when we run out of other peoples’ money?

        1. J Rae

          Not to be flip…but it’s not other peoples money its ours. You know that great mass of people know as citizens of the United States. When’s that happen by the way?

        2. J Rae

          Not to be flip…We’ll print more, just like we did when Reagan and the rest were president, but it’s not other peoples money, its ours.

          When’s that happen by the way?

          You haven’t answered my question though…who’s the better American, Reagan or Norquist?

    2. Stan Gibilisco

      Good answer. The S&P “verdict” is an opinion of experts. (In my less-expert opinion, they didn’t go far enough.) I think that we allow these people too much psychological clout. But that’s not S&P’s fault; it’s our fault. We have to get out of the greed-and-fear cycle.

  15. William

    Bill Gates and Warren Buffet , for all their talk, still continue to fund their own “special interests”. If they truly “walked the walk they would dedicate their Billions of wealth to the government to spend as it wishes.

    Even the most most liberal billionaires dedicate their money to the causes THEY support. Even they don’t trust Washington to spend their money wisely.

    Hypocrites, with attitude, spending money on THEIR pet projects using tax payer dollars, appears to be the status quo.

    “Eat the Rich”? It’s the only plan Obama has, and the rich is turning on him…

  16. BF

    Grover Norquist is an enemy of the Government. Congress is sworn to protect us from such enemies (both foreign and domestic).

    1. PNR

      No, they’re not. They’re sworn to protect the Constitution, not the government. Sadly, there is a difference these days.

  17. BF

    Yes, as nearly as I can tell, the GOP wants to do away with the 14th Amendment altogether, disregard the 4th, pervert the 1st and 2nd and throw out the Commerce clause. They also want to throw a wrench into the workings of both houses, rendering it dysfunctional.

    Since when did defending something mean changing and ignoring it?

    1. PNR

      Get rid of the 14th amendment? How so? How does not borrowing more money translate into defaulting on the money we owe? Absurd.

      Throw out the commerce clause? Pervert 1st & 2nd? Disregard 4th?

      I don’t know what you’re smoking, but it sure ain’t just tobacco.

      The most abused, ignored, and perverted amendment today is in fact the 10th.

  18. anon i think

    Is not the HofR to bring forward all $$$$$$$$$$$$$$$$$$ issues not the Pres or the Senate or the judicial??

    If this is true where is it? Someone please tell me up front what all is to be reduced, cut or totally taken out………………. Please express in terms of average American not in a 10 yr program.

    1. PNR

      The House is where any tax bills must originate, not “all money issues”. That is, however, only where they originate. They still have to go through the Senate to the President’s desk for signature.

      So far, the House has passed a budget and serious plans for curtailing our debt. The Senate has said “no” and the President has said “no” to those plans. The House has said, “Well, what’s your plan?” The response has been a mixture of ephemeral and vague speeches that are long on generalities (mostly in the tax-raising vein) and short on details. It’s hard to negotiate a middle ground when you only know for sure where one side stands.

  19. springer

    Here’s some up front cuts that will help the average American – cut Obamacare, cut the new regs that EPA and other gov’t agencies are busy dreaming up (along with the inflated bureaucracy necessary to carry out all these new regs etc); these two alone would spur the economy. Cut foreign aid, cut the DC salaries (O’s staff apparently just got good sized raises). Streamline all gov’t agencies; get rid of duplicated agencies and responsibilities; cut the automatic base increase every year. And I haven’t even touched entitlements, which the Dems love to use as scare tactics if one penny is cut from their non-existent budget.

    Then reform the entitlements so they will be there for our kids and grandkids. And reform does NOT equal with throwing granny over the cliff; what a ridiculous ad that was, when it is actually the policies of the Dems that are really reponsible for potentially throwing her off the cliff by refusing to address the issue at all.

  20. Electrifying South Dakota

    I usually keep my business cards pretty close to my chest, but this morning was simply incredible. Upon arriving at work my secretary asked me to return a call to my lending institution regarding the financing our business had been pursuing for a new project that 1) brought in more profit, and 2) hired new positions (with benefits). After calling said banker, I was informed that the lending institution would be pulling the plug due to the S&P downgrade. The banker mentioned that we still had great cash-flow, we were a seasoned business that had never defaulted upon its obligations, that we were an excellent entity within their bank’s portfolio, that they wanted to continue to work with us, but that “with all of the stuff happening in Washington we are going to hold on to our equity.” Now I don’t usually beat on my SD congressional delegation, but a bank just did a 180 on my business over the course of a weekend. My revenues didn’t change, my margins are still the same, I still have the same number of employees. Gang, all I can say is Thank You, Thank You So Very Much! I can’t begin to tell you how much I appreciate your willingness to help!

  21. feasant

    The only way to get the economy moving is get the Government off the back of business. Look right here in SD, coal fired power plant in Walworth County, approx 2500 jobs, Big Stone 2 approx 2500 jobs, oil refinery approx 3000 jobs. That is approx 8000 jobs Obama has stopped. I see turmoil until the Obama Administration is voted out.

    1. Job Creator

      I do see the government’s hands on the coal plant failure, but many of the new reg changes that made them run away were in the mix when Bush was president. I guess the fact that Obama didn’t throw those out makes it his fault. The refinery is a different issue – the local protesters with help from their liberal friends have put roadblock after roadblock in front of the company.


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