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Old 07-31-2011, 07:30 AM   #101
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If Congress really does nothing on the deficit and just extends the debt ceiling, the likelihood of a downgrade is high.
If you read the last several S&P reports you'll notice a considerable change in tone over the last several months. Back in January we had a stable outlook and many years to deal with the demographic pressures impacting our credit outlook, according to S&P. Today they say we'll be downgraded if we don't achieve meaningful deficit reduction now.

What changed in seven months?

Credit quality is a measure of two things. 1) Ability to pay 2) Willingness to pay. Seven months ago our ability to pay needed to be shorn up with long-term structural changes. The assumption was that we'd make the necessary adjustments but nothing immediate was required. Our willingness to pay was never in question.

Fastforward to today. Our willingness to pay is highly questionable with many elected members of Congress and some leading presidential candidates saying a default isn't a bad thing and may actually be desireable. Our ability to pay is also questionable given the unwillingness of our politicians to agree publicly even on the things that they agree on privately.

Congress, and Congress alone is responsible for any near-term downgrade, if it should happen. A downgrade won't be about our economic capacity to honor our debts. It will be about the isane turn our politics has taken of late.
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Old 07-31-2011, 07:49 AM   #102
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Credit quality is a measure of two things. 1) Ability to pay 2) Willingness to pay. Seven months ago our ability to pay needed to be shorn up with long-term structural changes. The assumption was that we'd make the necessary adjustments but nothing immediate was required. Our willingness to pay was never in question.
Convincing markets (and the rating agencies) of our willingness to pay can be accomplished right now with a public announcement--and concrete steps to actually execute--showing where bondholders fall in precedence for payment if the debt ceiling isn't raised. The Executive Branch has been reluctant to publicly discuss the "what if's" of a failure to raise the debt ceiling, and there have been a few threats to Social Security recipients, but now it's time to let everyone know where the pain is going to be experienced. SS recipients? Monthly pay of troops on active duty? Bondholders? Government contractors? Civilian govt employees? Block grants to states?

Yep, a bitter pill, and the President is surely reluctant to alienate anyone by letting them know they are not at the head of the line. Everyone is waiting, hoping the ceiling will be raised, borrowing can continue as before, and no one will have to be told they aren't at the head of the line when the real cutting starts. But at this point, making such plans known would do a lot to reinforce faith that America is going to fulfill obligations to those who loaned us money. The WH Press Secretary said the contingency plan will be announced this weekend (i.e. today) but with a WH/ GOP compromise outline reportedly being completed, they may decide not to reveal details of the plan and instead hope that things work out. But, as they say in the trade, "Hope is not a course of action."
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Old 07-31-2011, 09:28 AM   #103
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From what I hear this "whatever" is going to be a temporary fix and will come up again next year.

If the U.S. gets lumped in with the P.I.G.S, will the new term be PIGUS? I guess it really should be PIIGUS.
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Old 07-31-2011, 10:39 AM   #104
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From what I hear this "whatever" is going to be a temporary fix and will come up again next year.
I think it would be a good thing if it came up every three months. As ugly as it has been, at least the public has a new sense of the situation. There are actually bills that won't get paid if we don't do something. I think it is far more 'real' to the general public than ever before.

So let's review every three months - are we on target? Did any proposed cuts actually provide the savings that were promised? Did any proposed revenue increases actually provide the revenues that were promised? Did other issues come up (positive or negative) that materially affect the plan?

Businesses provide quarterly reviews to the public, why not our Federal Government? If we wait a year or two to address this again, we could be way off-course.

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Old 07-31-2011, 10:55 AM   #105
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As ugly as it has been, at least the public has a new sense of the situation. There are actually bills that won't get paid if we don't do something. I think it is far more 'real' to the general public than ever before.

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+1

That's the silver lining, if you want to call it that. I believe that a much higher proportion of the USA population now has a clue about the recent rate of increase in our national debt. Even the folks with their heads deepest in the sand seem aware (and shocked) that 40 cents of every buck spent is borrowed.

Whether we need to cut spending, raise taxes or both, more folks are tuned in that our current trajectory is problamatic.
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Old 07-31-2011, 11:01 AM   #106
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If the U.S. gets lumped in with the P.I.G.S, will the new term be PIGUS? I guess it really should be PIIGUS.
I vote for "U-PIGS"

The most recent rumored proposal of which I'm aware will eliminate the need for another vote before the 2012 elections.

Simplest answer to keep everyone honest? Approve a timeline of cuts and an "allowance" of stepped debt ceiling increases every quarter that get us through the election. If everyone keeps to the timeline and makes the required spending cuts without any shenanigans, then there's no need to increase the debt ceiling before the election. If there are any "oops, we need more money for XXX" or "we just can't make the cuts we promised back in July" then there won't be any choice but to ask for an increase in the debt ceiling. maybe right before the election. Too bad. Just like the rats in a Skinner box: Press on the lever, get a foot pellet. Fail to press the lever and Washington gets a little shock. Make clear that the bondholders will get paid first (or very early, ahead of the EPA and tax subsidies for various businesses, etc) and the bond market won't even hiccup if the debt ceiling looks like it might not get raised.
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I believe that a much higher proportion of the USA population now has a clue about the recent rate of increase in our national debt. Even the folks with their heads deepest in the sand seem aware (and shocked) that 40 cents of every buck spent is borrowed.
Yes, there's ceertainly a greater awareness among the public, but I don't know if it's a majority yet. Many people need a "significant emotional event" to cause things to move from the theoretical plane to something they are willing to act upon. I don't know if we're there yet. If, howeverm the checks don't come, or air traffic controllers can only route 50% of aircraft, etc, then it will be "real."
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Old 07-31-2011, 05:52 PM   #107
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I balance our budget at least monthly. The outflow must be equal to or less than the inflow. If we don't have it, we don't spend it. And we don't incur debt to make ends meet.

All I see right now is the budget / debt ceiling / spending / etc. being pushed off to the next election. I wonder how many congressional retirements will take place before the end of 2012?
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Old 07-31-2011, 07:17 PM   #108
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I think it would be a good thing if it came up every three months.




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Old 07-31-2011, 08:39 PM   #109
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They'll just auto pass it every time, if it came up off that often. Heck, see what they did the last decade.
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Old 07-31-2011, 09:23 PM   #110
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Originally Posted by ERD50
I think it would be a good thing if it came up every three months.
Isn't the alternative worse? Just let it go further and further out of control?

Like East Texas just posted - if I decide to not balance my checkbook each month, will the problem just go away? We have to face this.

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They'll just auto pass it every time, if it came up off that often. Heck, see what they did the last decade.
Right, just like this one 'auto-passed'. I want to see the numbers on a regular basis, not only after it hits some limit. Are we making progress, or not?


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Old 08-01-2011, 07:23 AM   #111
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Looks like this crash got postponed and we never got a real buying opportunity. Oh well, continuing resolution comes around in a couple of months.
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Old 08-01-2011, 07:25 AM   #112
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Looks like this crash got postponed and we never got a real buying opportunity. Oh well, continuing resolution comes around in a couple of months.
You must be more convinced than I am the House will pass the compromise deal...
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Old 08-01-2011, 07:53 AM   #113
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For those interested in an "inside baseball" look at the compromise bill's prospects, the vote count, etc. this article is interesting (an evenhanded Fox News piece). It's going to be some rough sledding.

Has anyone seen the promised announcement from the executive branch detailing exactly what is going to happen after 2 Aug? They gave us a date, they can't control what Congress does, so now they owe us (and the markets) their plan. That's the most productive thing they could do to stop an adverse market reaction to the DC sausage making which is about to occur.
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Old 08-01-2011, 08:55 AM   #114
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It's a slam dunk that some time over the next four weeks, the market is going to crash because of the contention in Washington.
The OP was so sure of his position, but has not posted since July 01, the day he started this thread. Four weeks has passed, where's that 'crash'?

Maybe he's out practicing his hoop shots?

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Old 08-01-2011, 09:54 AM   #115
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Another example of how analysts pretend to understand what makes the market go up and down ("Wall surges on debt deal hopes" but market is actually down by the time the headline appears).

wall.jpg
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Old 08-01-2011, 11:14 AM   #116
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Noone knows nuttin' about nuttin' anymore............
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Old 08-01-2011, 11:47 AM   #117
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Noone knows nuttin' about nuttin' anymore............
But the FBI thinks they found DB Cooper.
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Old 08-01-2011, 11:52 AM   #118
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Noone knows nuttin' about nuttin' anymore............
Not even yer hairdresser?
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Old 08-01-2011, 12:11 PM   #119
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Isn't the alternative worse? Just let it go further and further out of control?

Like East Texas just posted - if I decide to not balance my checkbook each month, will the problem just go away? We have to face this.



Right, just like this one 'auto-passed'. I want to see the numbers on a regular basis, not only after it hits some limit. Are we making progress, or not?


-ERD50
Just to clarify, I wouldn't object to an analysis every few months to assess our progress and consider adjustments to keep us on track and make sure we, as a country, are living within our means.

IMHO, what we've gone through was fueled more by political power plays than a sincere desire to solve the problem. That's what I don't want to go through again.

I'd like to see more emphasis placed on approving expenses and getting people back to work than arguing about paying the bills when they come due.

I think Suze Ormon makes some good points here.
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Old 08-01-2011, 12:35 PM   #120
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Just to clarify, I wouldn't object to an analysis every few months to assess our progress and consider adjustments to keep us on track and make sure we, as a country, are living within our means.

IMHO, what we've gone through was fueled more by political power plays than a sincere desire to solve the problem. That's what I don't want to go through again.

I'd like to see more emphasis placed on approving expenses and getting people back to work than arguing about paying the bills when they come due.

I think Suze Ormon makes some good points here.
I understand, but it seems like the 'ugliness' was necessary to get the politicians to at least attempt to approach the problem. W/O the ugly public airing of this, the politicians would have just raised the debt limit and not made any changes going forward.

from suze:
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Here's what is so truly absurd: We wouldn't have a deficit crisis, if we had more people working. The revenue that would come from halving our unemployment rate would reduce our long-term debt to manageable levels.

Seems to me that's the sort of policy debate Congress should be having right about now: What's the best way to get more Americans working? When was the last time you heard a peep out of Washington about that?
She's not listening - it's being talked about, here's what my rep has to say (first relevant google hit that came up, I'm sure there are more):

http://walsh.house.gov/index.cfm?sec...ctiontree=5,65

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If we want our economy to grow and produce jobs again, we must rely on a vibrant private sector to pull us out of the recession. In order to allow the private sector to thrive the government must spend less, and stop intervening in the private market.
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