Standard & Poor’s rating agency has downgraded the US credit rating to AA+ from its top rank of AAA, reflecting concerns over the US federal government’s inability or unwillingness to curb its deficit spending.
This was an expected course of action and S & P, along with Moody’s, Fitch, the IMF, and even Italy, had warned that this would likely happen.
Well, the Obama presidency was supposed to be historic and this is historic. Friday, August 5, 2011 marked S & P’s first ever downgrade rating for the US Government’s credit since S & P first granted it in 94 years ago in 1917.
We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.
— Nikola G Swann, CFA, FRM
Primary Credit Analyst, Standard & Poor
As bad as that sounds, it actually gets worse. Standard & Poor – It’s also a safe bet that Moody’s and Fitch will concur – has, rightly I believe, not only downgraded America’s government’s credit score but predicts at negative outlook indicating the likelihood of an even further worsening credit rating in the near-term future.
The outlook on the long-term rating is negative. We could lower the long-term rating to ‘AA’ within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.
This means that it’s unlikely that any of us alive today will see America’s credit rating restored to AAA and that we’ll almost assuredly live to see it downgraded further to AA and likely see it downgraded even further unless we can force the federal government to live within our means.
And it will take force – ballots, bullets, bombs, or some combination thereof – for Americans to correct the federal government’s addiction to raping our nation’s economy. Obama and his coterie of Liberals, while the most profligate of the wastrels, are just the latest downward step in the degeneration of America’s federal government. Hoover, FDR, Carter, and yes Bush Jr., along with their respective Congresses built and expanded the entitlement society and the nation’s deficit.
With so much inertia built up within it and so much bloated weight behind it, there’s no gentle way enact true change upon this system or its proponents before our nation is completely beggared and bankrupt. We, the People are left with only “short lever” means at our disposal – maximum force applied at the point of change. Sadly I suppose, this is inefficient and will be extremely painful, both for Americans and for the Liberals and their minority tenants.
Then again, it’s been Americans’ long-running misapplied compassion, complacency, and stupidity that has allowed them to bring our nation to this point and, “Stupid should be painful.”
Keep your eyes open. Travel light but load heavy, and always put another round in the enemy after they’re down. When faced with extremity, extremism in the cause of America is no vice; it is a virtue and holy duty.
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