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But if they made no cuts they would have been downgraded anyways. They should have raised taxes and done cuts to the point where they would not have to pay anot

But if they made no cuts they would have been downgraded anyways. They should have raised taxes and done cuts to the point where they would not have to pay another 2 trillion in interest.

btilly 15y ago
Not true! If we'd voted for the usual "bare increase" back in Feb, the bond markets would have not noticed and our rating would have been fine. The cause of the downgrade is that our politicians demonstrated that even when they are negotiating under the best of all possible circumstances to solve our long-term problems, they act like idiots. A "grand bargain" was the only way that put us on a course to actually bring debt under control. Our inability to negotiate that combined with our long-term fiscal problems is a major long-term problem. If you want to know more about our fiscal situation, I highly recommend http://www.kpcb.com/usainc/USA_Inc.pdf http://www.kpcb.com/usainc/USA_Inc.pdf. It is very long, detailed, and depressing. Here are a few key facts. Our government's cash flow last year was -$11,000 per household. Our government's net worth, if we used standard business accounting, is -$44 trillion. Or -$370,000 per household. By 2025, CBO projections show that our total tax revenue will be entirely absorbed by interest payments and entitlements. As a country we need dramatic changes. Soon. And there is absolutely no indication that the political will exists anywhere to create them.
- 3pt14159 15y ago
  So we are in agreement. Anyways can mean different things, but it is better to face the (and I have -$100T NPV accounting) -$44T crisis earlier than later, what with the baby boomers still working. My only point is that at least this brought the looming debt problems to the forefront of Americans mind, albeit at a undesirable outcome. If this crisis had actually resulted in real cuts now and real tax increases now it would have softened the blow in the long term.
  - btilly 15y ago
    If this crisis had actually resulted in real cuts now and real tax increases now it would have softened the blow in the long term. I'm not positive that that is true, but that is what S&P thinks. The possibility to the contrary is that our economy is slowing again and we have more financial problems dragging us down. Real cuts and tax increases would slow it further. Reduced GDP growth increases our long-term fiscal problems. How exactly those factors would balance out against each other is a heavily debated problem in economics. (The two major political parties have sharply different opinions about the answer.) But while that can be debated, my belief is that either "kick the can without the political fight" or "grand bargain" would have been better for us than what we actually wound up with. And I think we're in agreement there.
- gbhn 15y ago
  "By 2025, CBO projections show that our total tax revenue will be entirely absorbed by interest payments and entitlements." That sounds worse than it is. Entitlement programs are major component of the budget. (The other is defense.) The real argument here is about what's going to take the fall for the last 10 years of wars, tax cuts, and bailouts. Will we choose to stop doing wars, tax cuts, and bailouts? Or cut entitlements instead? It looks like the bipartisan consensus is to go ahead and stay with the war/tax cut/bailout plan and shed social programs to pay for them. If we as voters don't like that, it looks like our only option is to replace the officials in the legislative and executive branches in 2012 and try to roll back.

But if they made no cuts they would have been downgraded anyways. They should have raised taxes and done cuts to the point where they would not have to pay another 2 trillion in interest.

btilly 15y ago

Not true! If we'd voted for the usual "bare increase" back in Feb, the bond markets would have not noticed and our rating would have been fine. The cause of the downgrade is that our politicians demonstrated that even when they are negotiating under the best of all possible circumstances to solve our long-term problems, they act like idiots. A "grand bargain" was the only way that put us on a course to actually bring debt under control. Our inability to negotiate that combined with our long-term fiscal problems is a major long-term problem. If you want to know more about our fiscal situation, I highly recommend http://www.kpcb.com/usainc/USA_Inc.pdf http://www.kpcb.com/usainc/USA_Inc.pdf. It is very long, detailed, and depressing. Here are a few key facts. Our government's cash flow last year was -$11,000 per household. Our government's net worth, if we used standard business accounting, is -$44 trillion. Or -$370,000 per household. By 2025, CBO projections show that our total tax revenue will be entirely absorbed by interest payments and entitlements. As a country we need dramatic changes. Soon. And there is absolutely no indication that the political will exists anywhere to create them.

3pt14159 15y ago
So we are in agreement. Anyways can mean different things, but it is better to face the (and I have -$100T NPV accounting) -$44T crisis earlier than later, what with the baby boomers still working. My only point is that at least this brought the looming debt problems to the forefront of Americans mind, albeit at a undesirable outcome. If this crisis had actually resulted in real cuts now and real tax increases now it would have softened the blow in the long term.
- btilly 15y ago
  If this crisis had actually resulted in real cuts now and real tax increases now it would have softened the blow in the long term. I'm not positive that that is true, but that is what S&P thinks. The possibility to the contrary is that our economy is slowing again and we have more financial problems dragging us down. Real cuts and tax increases would slow it further. Reduced GDP growth increases our long-term fiscal problems. How exactly those factors would balance out against each other is a heavily debated problem in economics. (The two major political parties have sharply different opinions about the answer.) But while that can be debated, my belief is that either "kick the can without the political fight" or "grand bargain" would have been better for us than what we actually wound up with. And I think we're in agreement there.
gbhn 15y ago
"By 2025, CBO projections show that our total tax revenue will be entirely absorbed by interest payments and entitlements." That sounds worse than it is. Entitlement programs are major component of the budget. (The other is defense.) The real argument here is about what's going to take the fall for the last 10 years of wars, tax cuts, and bailouts. Will we choose to stop doing wars, tax cuts, and bailouts? Or cut entitlements instead? It looks like the bipartisan consensus is to go ahead and stay with the war/tax cut/bailout plan and shed social programs to pay for them. If we as voters don't like that, it looks like our only option is to replace the officials in the legislative and executive branches in 2012 and try to roll back.