On America's Credit Downgrade

All the talk this weekend has been about S&P, but first I'd like to give you Moody's, whose analytics divisoin put out this damning report about student loans.

My "favorite" is probably the charts and graphs at the bottom of page 58 and page 59. For all the fist-shaking our policy leaders do at the for-profit schools, this is clearly a systemic problem that includes non-profit public and private schools. My only complaint about this report is that it's written in the tone of an article that should have been written a decade (if not more) ago:

[M]any students may be getting their loans for the wrong reasons, or that borrowers—
and lenders—have unrealistic expectations of borrowers’ future earnings. Unless students limit their debt burdens, choose fields of study that are in demand, and successfully complete their degrees on time, they will find themselves in worse financial positions and unable to earn the projected income that justified taking out their loans in the first place.

Of course, one problem is that you often pick an in-demand degree that is not in-demand 4-7 years later when you emerge onto the job market. Our politicians and ratings agencies can't project 4-7 months into the future, and yet 18-year olds are supposed to have some crystal ball that helps them know what job will be hot and hiring in 5 years lest they be saddled with non-dischargable debt. That's why bankruptcy reform is so essential, and why it almost certainly won't be lead by people tied to the mast of the current model.

And that brings me to the financial shipwreck known as the United States of America.

I'd like to note that many of the libertarian/right-wingers are being disingenuous in proclaiming America's spending the big problem. You can shoot this argument dead merely by looking at the list of other nations with sterling credit. Canada, France, Sweden, Norway, Denmark, the UK: it's like a who's who of so-called socialist republics.

It isn't the spending. It's the spending in conjunction with the refusal to raise the funding necessary to support the spending in addition to slowed economic growth. As S&P said, it's the politics.

And the politics didn't start yesterday. One on the central reasons the U.S. runs a budget deficit is that the American public has been suckered into thinking that income taxes are evil, and has passively sat by as the rich have gotten richer - and the middle class driven into non-existence and poverty - as income taxes for the wealthy have fallen like a rock.

In the 1960s, the top .01% of the population paid 60+% of their income to taxes. Today that same group pays well under 40%, and in the last decade, that same group has seen its wealth dramatically expand while the middle- and lower-classes suffer comparatively. Yet, if anyone in Congress so much as suggests a tax hike for the wealthiest of Americans - let's face it, the best tool our government has for immediately raising revenue - you get a whole bunch of yay-hoos screaming about taxing "our most productive citizens" and how you have to work until June to pay Uncle Sam. Of course, these idiots never realize that disproportional drops/loopholes for the superwealthy damage them far more than paying a higher income tax. And they can never explain how states like Germany and Sweden can maintain strong economies - complete with recognizable domestic manufacturing - paying a higher tax rate than the U.S.

All its served to do is handcuff Congress. That's fine if spending is kept to a minimum, but jackwagons on both sides of the aisle have no problem demanding that the government spend when it's convenient to their cause. Bank bailouts? Military spending? Go for it!

S&P hit the nail on the head that this is a political failure. A mere decade ago, America ran a budget surplus and loss of its credit rating would be laughable. In the in-between days, we've had two horrendously bad administrations who've watched spending balloon without any rational plan to increase revenue, who've guided an economy that has drained jobs to overseas countries and seen real unemployment skyrocket, has seen its economy become more dependent on bubbles, and watched as middle class life becomes more and more elusive for a majority of Americans.

Real leaders would have addressed these issues long ago - or at least tried - instead of hand-wringing over [random stupid faux controversy while the wealthy elite got rich at the expense of everyone else]. Instead, we vote in the same putzes year who find new ways to give their cronies and their funders a bigger share of the pie.

I should note that the treasury department is disputing S&P's opinion, claiming S&P made a $2 trillion dollar mistake and that there is "no rational reason" to downgrade America's credit rating. Right, which is why China's leading ratings agency downgraded the U.S. last November.

It's all the more scarier when you realize that the people who will be charged with getting us out of this mess (the fact that we ever left recession status should have economists reassessing the definition) will almost certainly be hand-picked and anointed by the people who steered us right into the iceberg, and I wouldn't expect the credit ratings agencies to look any favorably on American public debt unless Washington suddenly grows some balls and stands up to the wealthy elite.