Wintery Knight

…integrating Christian faith and knowledge in the public square

Moody’s anticipates U.S. credit downgrade following fiscal cliff deal

Here’s the latest from the Moody’s web site.

Excerpt:

Moody’s Investors Service said that the fiscal package passed by both houses of Congress yesterday is a further step in clarifying the medium-term deficit and debt trajectory of the federal government. It does not, however, provide a basis for a meaningful improvement in the government’s debt ratios over the medium term. The rating agency expects that further fiscal measures are likely to be taken in coming months that would result in lower future budget deficits, which are necessary if the negative outlook on the government’s bond rating is to be returned to stable. On the other hand, lack of further deficit reduction measures could affect the rating negatively. Notably, yesterday’s package does not address the federal government’s statutory debt limit, which was reached on December 31. The need to raise the debt limit may affect the outcome of future budget negotiations.

[...]The Congressional Budget Office (CBO) estimates that the net increase in budget deficits from the fiscal package when compared to its baseline scenario (which assumes taxes on all income levels would increase) is about $4 trillion over the coming decade, excluding higher interest costs on the resultant higher debt. Based on that estimate, a preliminary calculation by Moody’s shows that the ratio of government debt to GDP would peak at about 80% in 2014 and then remain in the upper 70 percent range for the remaining years of the coming decade. Stabilization at this level would leave the government less able to deal with future pressures from entitlement spending or from unforeseen shocks. Thus, further measures that bring about a downward debt trajectory over the medium term are likely to be needed to support the Aaa rating.

This will not be our first credit rating downgrade, we had one before from Standard and Poor’s in August 2011 and a second one from Egan Jones in April 2012. So this will be the third one in a row during Obama’s borrowing and spending spree.

Would you like to see some graphs showing the impact that the fiscal cliff deal has on our long-term debt? There is a pretty good article on National Review by Yuval Levin that has the charts. The truth is that entitlements are driving our debt, and the fiscal cliff deal does nothing about it.

All Obama seems to be able to do as President is borrow from future generations in order to spend now. When I consider his drug-using years with his “Choom Gang” friends, I’m not sure that he is really qualified to do anything other than borrow and waste money. So far, he’s spent a lot more time using drugs than running businesses in the private sector, it seems to me. Maybe he has an addiction issue with borrowing and spending?

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Egan Jones cuts U.S. credit rating again, this time from AA to AA-

Story from CNBC.

Excerpt:

Ratings firm Egan-Jones cut its credit rating on the U.S. government to “AA-” from “AA,” citing its opinion that quantitative easing from the Federal Reserve would hurt the U.S. economy and the country’s credit quality.

The Fed on Thursday said it would pump $40 billion into the U.S. economy each month until it saw a sustained upturn in the weak jobs market.

In its downgrade, the firm said that issuing more currency and depressing interest rates through purchasing mortgage-backed securities does little to raise the U.S.’s real gross domestic product, but reduces the value of the dollar.

In turn, this increases the cost of commodities, which will pressure the profitability of businesses and increase the costs of consumers thereby reducing consumer purchasing power, the firm said.

In April, Egan-Jones cuts the U.S. credit rating to “AA” from “AA+” with a negative watch, citing a lack of progress in cutting the mounting federal debt.

Moody’s Investors Service currently rates the United States Aaa, Fitch rates the country AAA, and Standard & Poor’s rates the country AA-plus. All three of those ratings have a negative outlook.

Could this have anything to do with the decision to print $40 billion a month to “stimulate” the economy? Once you’ve given up on letting businesses create jobs by lowering their taxes and removing burdensome regulations, then printing money is all you have left. But no one mistakes that for economic growth, least of all credit rating agencies.

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United States receives another credit downgrade under Obama’s leadership

From Breitbart. (H/T ECM)

Excerpt:

Credit rating agency Egan Jones downgraded the United States Thursday on concern over the sustainability of public debt. Egan Jones is one of the most important ratings firms in the world; they lowered our credit level from AA+ to AA. The firm reduced America from AAA to AA+ in July 2011, just before Standard & Poor’s did the same.

Egan Jones warned. “Without some structural changes soon, restoring credit quality will become increasingly difficult . . . without some structural changes soon, restoring credit quality will become increasingly difficult.” They added that there was a 1.2% probability of U.S  default in the next 12 months.  The company cited the fact that the US’s total debt, which now equals its total GDP, is rising and soon will eclipse the national GDP; the company sees the debt rising to 112% of the GDP by 2014.

The debt grew 23.6% the first two years of Obama’s presidency. When the debt is more than 100% of the GDP, treasury notes fall, which is a problem because they are used for transactions between financial institutions. This, in turn, could raise rates on mortgages and other loans, which would discourage growth in the economy, as well as state and local governments feeling the pinch, which could eliminate more services.

Paul Ryan has offered a debt reduction plan which would reduce the current six federal income tax rates to just 2 — 10% and 25%. His plan would also reduce the federal corporate income tax rate from 35% to 25%, the same rate as the international average. Because of the additional revenue accrued from economic growth as a result of the tax reductions, federal revenues could double over the next 10 years; the added revenue  would be more than the entire GDP of almost every other country in the world.

Meanwhile, President Obama continues to vilify Ryan’s ideas, saying they are, “a Trojan horse, disguised as deficit-reduction plans . . . thinly veiled social Darwinism.” And White House projections show the federal debt’s ratio to gross domestic product growing to a record 124 percent in 2050 under Obama’s plan.

He just wants to keep spending and spending and spending money we don’t have. Money that he didn’t earn. Money that people not even born have not yet earned.

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