God bless Standard & Poor’s!
In a patriotic act of tough love, the Wall Street bond-rating agency on Friday evening downgraded America’s sovereign debt one notch for the first time since it was granted in 1941 — from its sterling AAA credit rating to AA+. As S&P explained, “The downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges.”
Naturally, this came as a shock to America’s hapless Treasury secretary, Timothy Geithner. “No risk of that,” Geithner specifically predicted
about an S&P downgrade last April 19 on the Fox Business Network. “No risk.”
In the short term, this unprecedented news will hammer national prestige, hike interest rates, and heap short-term agony on an already achy nation. However, this startling development may supply the face-down-in-the-gutter moment that Washington’s bipartisan spendaholics desperately need to hit rock bottom, grow up, and enter rehab. Alas, everything else has failed during the Bush-Obama era of the ever-expanding state.
Consider Washington’s latest fiscal flop. There is plenty to dislike about the recently enacted bipartisan deal to cut spending and reduce the national debt. For starters, it neither cuts spending nor reduces the national debt. After weeks of federal handwringing, taxpayers should hope that our masters in Washington become serious about slashing spending. If not, this republic will implode, not sometime on “the children,” but soon — atop today’s struggling adults.
“The budget deal doesn’t cut federal spending at all,” Cato Institute analyst Chris Edwards explains. “The ‘cuts’ in the deal are only cuts from the Congressional Budget Office’s ‘baseline,’ which is a Washington construct of ever-rising spending. . . . The federal government will still run a deficit of $1 trillion next year. This deal will ‘cut’ the 2012 budget of $3.6 trillion by just $22 billion, or less than 1 percent.”
Edwards observes that Washington’s “cuts” rarely reduce anything. President Obama, for instance, proposed boosting the Corporation for Public Broadcasting’s funding from $432 million this year to $451 million in FY 2012. Therefore, handing CPB $441 million would constitute a $10 million “cut” in Washington, versus a $9 million increase in the real world.
Source: Cato Institute
Thus, as Edwards vividly illustrates at Cato’s downsizinggovernment.org website, these budget “cuts” actually raise federal discretionary spending non-stop for the next ten years — from $1.04 trillion in FY 2012 to $1.23 trillion in FY 2021. “No program or agency terminations are identified in the deal,” Edwards laments. “None of the vast armada of federal subsidies is targeted for elimination.”
As for red ink, Washington just extended the federal credit card’s limit from $14.3 trillion to $16.7 trillion. In 2021, the national debt is expected to reach $22 trillion — a figure 54 percent above $14.3 trillion. What debt reduction?
Washington refuses to learn what millions of overextended Americans recognize daily: One cannot escape debt by tunneling ever deeper into it. As the economy cools afresh, the feds blissfully assume that the rest of the Earth will keep lending to Uncle Sam, even as he tragically resembles a junkie trembling for “just one more fix” — to be purchased on account and settled . . . sometime. “Promise.”