This past week when Congress finally agreed to raise the debt ceiling, we thought our problems were over. But in a surprise move yesterday, Standard & Poor’s downgraded the United States credit rating from AAA to AA plus. Many of us are wondering how foreboding this will be for the future of the US economy.
The downgrade in the US credit rating is the financial equivalent of the short, fat, bald, masked guy in those free score.com commercials. In announcing the downgrade, Standard & Poor’s cited the difficulties of bridging the gulf between the political parties over reducing the deficit, it indicated they wanted even more spending cuts from Congress — join the misguided consensus that completely misses the fact that economic growth is the most powerful weapon against the deficit. The White House challenged Standard & Poor’s analysis, claiming it was off by Chileans of dollars. Maybe the ratings agency was using the same math ahead would help create the fiscal crisis we are still struggling to get out of by awarding AAA ratings to trillions of dollars in subprime mortgages repackaged as securities.
This past week when Congress passed raising the debt limit, it was a triumphant time for the American people. The surprise appearance by Congresswoman Gabrielle Giffords was a moment that both Congress and the American people needed. In her brief appearance before Congress to cast her vote in favor of raising the debt limit, she gave both houses of Congress, Democrats and Republicans alike a lesson in civility. Her strength and resolve to make the trip to Washington to cast her vote spoke volumes to all Americans. Congresswoman Giffords is a charming and humble public servant. The rest of Congress could learn a lesson from Gabrielle Giffords. Amid much rancor and acrimony, Gabrielle Giffords’ presence seemed to help calm the divide between those factions feuding over the debt limit increase.
Pres. Barack Obama and Republicans have had a contentious relationship to say the least. In the past few weeks the American public has been inundated with the ongoing drama regarding the debt ceiling. President Obama has done everything except use bleach to gain consensus from the Republicans. It appears that they are dead set on no, no matter what President Obama does.
To understand the Republicans resistance and recalcitrance on raising the debt limit, one must go back to the first President Bush. Many Americans may recall the first president Bush and his no new taxes pledge. Mr. Bush gained infamy for his campaign slogan, “read my lips.” As history shows, it wasn’t too long after Mr. Bush was in office, he was forced to raise taxes. This was a big part of the reason why he lost favor with Americans in general, and the Republican Party in particular.
Debt Ceiling – The Debt Ceiling is on every ones mind these days. This is the fiscal limit set by congress going back to 1917 to control government spending. Much is at stake if the debt ceiling crisis isn’t handled properly. The United States stands to lose it’s credit rating in the world economy. We jeopardize having our Stock and Bond markets crash. Treasury Secretary, Timothy Geithner has his job cut out for him.
The overriding factor that will determine what happens with the debt ceiling is politics. In this game of fiscal chicken, the Republicans are steadfast and resolute that they will not be the ones to blink. No one wants to be the first one on the GOP side to support raising the debt ceiling. To do so, would brand that person a fiscal spendthrift.