There is absolutely “no risk” that America will lose its aaa rating, said America’s treasury secretary on April 19. Congress should raise the debt ceiling for “as long as possible.”
Infamous last words.
On Friday, August 5, at 9 p.m., for the first time in United States history, America’s sovereign credit rating was downgraded from aaa to aa+ by Standard & Poor’s.
Consequently, the credibility of the U.S. treasury secretary, along with virtually everyone in Washington, was downgraded too.
The agency issued its report long after the market closed for the weekend because of the potentially catastrophic consequences. On cue, Asian markets plunged. In Europe, the European Central Bank came to the rescue, promising to buy billions in Spanish and Italian debt. But on Monday in America, a battered Dow Jones opened down 2 percent and never stopped falling. It was the worst day since the Lehman bust in 2008.
In cutting America’s rating, s&p confirmed what the Trumpet has warned about for decades: America is addicted to debt.
Politicians in Denial
The credit rating agency said the deficit reduction plan signed by the president did not go far enough to stabilize the country’s debt situation. s&p also put America on negative watch—meaning that it may downgrade the country even further unless something significant changes.
Yet in comparison, American politicians sound inebriated. Only in America could a plan that raises the national debt from $14.5 trillion to $23 trillion by 2021 be declared a “win for the economy and budget discipline.” Only in Washington is adding another $8 trillion to the debt characterized as “spending cuts.”
Republicans and Democrats alike don’t really believe America has a problem. Both sides are in denial.
Republican Sen. John McCain called members of the Tea Party “terrorists” for not wanting to raise the debt ceiling. Later he called them small-minded “hobbits,” with the implication that they needed to go back to Middle Earth.
Democrat John Kerry said, “I believe this is without question the Tea Party downgrade … because a minority of people in the House of Representatives countered even the will of many Republicans .…” Democrat Howard Dean confirmed: “I think this is [the] Tea Party’s problem .… I think they’re totally unreasonable and doctrinaire and not founded in reality. I think they’ve been smoking some of that tea, not just drinking it.”
But all the rhetoric and name-calling just goes to show how ridiculously ignorant most politicians are and how ignorant they think voters are. s&p didn’t downgrade America because of threats to not raise the debt ceiling, but because politicians plan on raising it too much.
Here is the problem; it really is simple to understand: America collects over $2.1 trillion in taxes—but it spends $3.7 trillion!
And here is the proof politicians have no real plans to end America’s addiction. The details of the new budget compromise show they are not even making a credible effort to wean the nation off debt. For 2012, the new plan calls to cut a total of—wait for it—$21 billion. They are planning to go further into debt by $1.6 trillion next year!
In 2013, politicians will trim $42 billion—but America will go another $1.5 trillion into debt that year. The rest of the so-called trillion-dollar cuts will happen years further in the future—if politicians don’t change their minds.
The scary part is that these massive budget deficits happen if things go according to plan—meaning, if the economy somehow gets back to 4 percent growth! Will someone tell the budget geniuses that the economy is growing at around 1 percent, and probably closer to not at all? Even before the recession, the long-term growth average of the U.S. was around 3 percent.
Don’t worry about sobering up to economic reality—the budget balances better that way.
Admitting It Is the First Step
Following the downgrade, the president said: “We’ve always been and always will be a aaa country.”
There will be no real desire to fix our problems until Washington admits—in both words and action—that it has a problem. Unfortunately, it will take a real market-imposed crisis to make that happen. And by then it will be too late.
America’s forced withdrawal is getting closer. On August 2, it was announced that U.S. federal debt had reached 100 percent of gdp for the first time since the World War ii era.
When s&p downgraded America, the U.S. joined the aa club. But what the country really needs is an intervention from the Arrears Anonymous club—though, to tell the truth, America is actually even beyond that. Its economic organs are failing, it can’t think straight, and its historic response to problems is to look for ever-stronger stimulants to temporarily make the pain go away.
In fact, despite the downgrade, most Americans still don’t really think there is a problem. We are so intoxicated with debt, we don’t even know we are drunk on it. ▪