Fitch downgrades U.S. after debt limit stalemate(politico.com)
politico.com
Fitch downgrades U.S. after debt limit stalemate
https://www.politico.com/news/2023/08/01/fitch-downgrades-u-s-debt-00109288
112 comments
It’s not solvable. Because even if you make great progress; someone like a criminal president comes along and spends it all on favors. True story.
> Because even if you make great progress; someone like a criminal president comes along and spends it all on favors.
That’s always a possibility, but as we’ve seen with the recent attempt to spend $500B to pay off student loans, the SCOTUS does a decent job of stopping the truly egregious.
That’s always a possibility, but as we’ve seen with the recent attempt to spend $500B to pay off student loans, the SCOTUS does a decent job of stopping the truly egregious.
The President does not have power of the purse. The House proposes a budget. The President can't spend beyond what Congress approves, and can't really decline to spend anything that Congress has approved (i.e. "impoundment").
That’s where theory and practice diverge
Right right because the Republican party ever even once denied Trump what he wanted before 6/01
Right right because the Republican party ever even once denied Trump what he wanted before 6/01
> I think this has more to do with the US spending itself into debt in an unsustainable way.
Government debt and household debt don't work the same way.
This a common fallacy that serves political ends, but they are not directly comparable.
Government debt and household debt don't work the same way.
This a common fallacy that serves political ends, but they are not directly comparable.
> Government debt and household debt don't work the same way
In what way? Enlighten us. Are you a MMT proponent? That's a bullshit theory that's fallen on its face pretty spectacularly since 2021. The debt has to be paid, either with inflation or taxes or both. Household debt also has to be paid with income (households don't have the moeny printing option, but that's not a get-out-of-jail free card either.) The US has been spending $1 to get $0.20 of GDP growth. That's not only unsustainable by any measure, it's also just lighting money on fire. The most egregious venture-backed sell-a-dollar-for-50-cents startups don't have a track record that bad.
> This a common fallacy that serves political ends
I don't care for what you're implying. Careful not to assume too much about me, you'll be wrong.
In what way? Enlighten us. Are you a MMT proponent? That's a bullshit theory that's fallen on its face pretty spectacularly since 2021. The debt has to be paid, either with inflation or taxes or both. Household debt also has to be paid with income (households don't have the moeny printing option, but that's not a get-out-of-jail free card either.) The US has been spending $1 to get $0.20 of GDP growth. That's not only unsustainable by any measure, it's also just lighting money on fire. The most egregious venture-backed sell-a-dollar-for-50-cents startups don't have a track record that bad.
> This a common fallacy that serves political ends
I don't care for what you're implying. Careful not to assume too much about me, you'll be wrong.
I'm not sure we're far enough out to really say for sure if MMT has been disproven by the events since 2021. The global pandemic, supply chain issues, and the war in Ukraine all muddy the water. The previous administration also squandered a lot of debt on tax breaks for the ultra wealthy. Even with all that, it's looking like we may actually manage to pull off a relatively soft landing.
With all of that, I think it will be some time before we can accurately analyze what these events mean for economic policy.
With all of that, I think it will be some time before we can accurately analyze what these events mean for economic policy.
> The previous administration also squandered a lot of debt on tax breaks for the ultra wealthy.
That's a nice sound bite but it's not true as the majority of the tax breaks went to the middle class:
https://thehill.com/opinion/finance/584190-irs-data-prove-tr...
https://www.washingtonpost.com/politics/2018/11/14/does-trum...
https://www.cnn.com/2019/02/26/politics/fact-check-sanders-t...
Even if the majority of the tax cuts went to the wealthy, there's nothing inherently wrong with the people who are paying the most taxes getting the most out of a tax cut. The other end of the income spectrum makes that immediately apparent. Would you expect every tax cut to directly pay money who don't pay any taxes at all?
Can we never lower taxes on people making more than some arbitrary income? Or do you mean that after some arbitrary income amount, it's never okay to ever get a tax cut?
That's a nice sound bite but it's not true as the majority of the tax breaks went to the middle class:
https://thehill.com/opinion/finance/584190-irs-data-prove-tr...
https://www.washingtonpost.com/politics/2018/11/14/does-trum...
https://www.cnn.com/2019/02/26/politics/fact-check-sanders-t...
Even if the majority of the tax cuts went to the wealthy, there's nothing inherently wrong with the people who are paying the most taxes getting the most out of a tax cut. The other end of the income spectrum makes that immediately apparent. Would you expect every tax cut to directly pay money who don't pay any taxes at all?
Can we never lower taxes on people making more than some arbitrary income? Or do you mean that after some arbitrary income amount, it's never okay to ever get a tax cut?
> In what way? Enlighten us.
You can google as well as I can, and if you're well-versed enough to have a firm opinion about MMT (and no expansion of the acronym needed) then you do not need my handholding.
But anyway, I submit that the extra-ordinary claim would be the parties with the control of money supply and taxation structure, and the parties without it, are on an equal footing here when it comes to debt. Graeber has things to say on the topic. IDK, go ahead and make the case that they line up despite that.
As for "implying" - it really does serve political ends, I hear party leaders across the wide wide spectrum from Mr Sunak to Mr Starmer all use this same lazy analogy regarding austerity measures, it's not one or the other. Yeah, assumptions are bad, huh.
You can google as well as I can, and if you're well-versed enough to have a firm opinion about MMT (and no expansion of the acronym needed) then you do not need my handholding.
But anyway, I submit that the extra-ordinary claim would be the parties with the control of money supply and taxation structure, and the parties without it, are on an equal footing here when it comes to debt. Graeber has things to say on the topic. IDK, go ahead and make the case that they line up despite that.
As for "implying" - it really does serve political ends, I hear party leaders across the wide wide spectrum from Mr Sunak to Mr Starmer all use this same lazy analogy regarding austerity measures, it's not one or the other. Yeah, assumptions are bad, huh.
> I submit that the extra-ordinary claim would be the parties with the control of money supply and taxation structure, and the parties without it, are on an equal footing here when it comes to debt.
Well, obviously.
There’s limits to the parallels you can draw here, but unsustainable spending into debt is bad for both households and states. Period.
Well, obviously.
There’s limits to the parallels you can draw here, but unsustainable spending into debt is bad for both households and states. Period.
"unsustainable" is undefined and the rest is unproven. You cannot reason by analogy here.
It's economics, not hard science. "Proof" is a different standard.
What the US government is doing is unsustainable. The onus is on you if you want to argue otherwise, I already submitted a link that shows the problem with it.
If the US keeps going at this pace inflation will either get really bad, or taxes will get really high while spending gets slashed. Or some combination of all of it. Either way, it can't continue like this for long before things break in a bad way.
32T in debt is bad, but if nothing changes that could be >70T in a decade.
The economic growth is too slow to sustain that.
What the US government is doing is unsustainable. The onus is on you if you want to argue otherwise, I already submitted a link that shows the problem with it.
If the US keeps going at this pace inflation will either get really bad, or taxes will get really high while spending gets slashed. Or some combination of all of it. Either way, it can't continue like this for long before things break in a bad way.
32T in debt is bad, but if nothing changes that could be >70T in a decade.
The economic growth is too slow to sustain that.
> debt is bad
You're just repeating your assumption. You have not shown that government debt and private debt are even the same thing at all. What if they're opposites? (hint: who is government debt owed too?). One more time, Graeber is good on this topic. https://positivemoney.org/2015/10/breaking-taboos-david-grae...
"saying "debt is bad, whoever's debt it is" is a bit like saying "that umpire's batting average is terrible, get them off the field". It's a fundamentally different game for them, argument that rests on the assumption that it works the same will go wrong rapidly.
You're just repeating your assumption. You have not shown that government debt and private debt are even the same thing at all. What if they're opposites? (hint: who is government debt owed too?). One more time, Graeber is good on this topic. https://positivemoney.org/2015/10/breaking-taboos-david-grae...
"saying "debt is bad, whoever's debt it is" is a bit like saying "that umpire's batting average is terrible, get them off the field". It's a fundamentally different game for them, argument that rests on the assumption that it works the same will go wrong rapidly.
I give up with you. If you want to argue that more debt is somehow not worse than less debt, that's like trying to argue that water is not wet.
> that's like trying to argue that water is not wet.
Your fallacy is assuming that both glasses contain water. Again you're just restating your assumptions as truth.
I refer you to my original parent comment; "Government debt and household debt don't work the same way." and "You have not shown that government debt and private debt are even the same thing at all"
What I am saying, and all that I am saying, is that they aren't the same thing, at all.
Saying "this is larger than that" is neither here nor there when they aren't comparable.
Saying "larger government debt must be bad because more household debt is bad" is not a valid argument. It might be good or bad, but not for those reasons. Argument that rests on the assumption that it works the same will go wrong rapidly.
Your fallacy is assuming that both glasses contain water. Again you're just restating your assumptions as truth.
I refer you to my original parent comment; "Government debt and household debt don't work the same way." and "You have not shown that government debt and private debt are even the same thing at all"
What I am saying, and all that I am saying, is that they aren't the same thing, at all.
Saying "this is larger than that" is neither here nor there when they aren't comparable.
Saying "larger government debt must be bad because more household debt is bad" is not a valid argument. It might be good or bad, but not for those reasons. Argument that rests on the assumption that it works the same will go wrong rapidly.
> Future economic prospects for the US have never been so grim in living memory
Everything is cyclical, and no one truly expected the US to rise indefinitely. Perhaps we're past the peak now.
Everything is cyclical, and no one truly expected the US to rise indefinitely. Perhaps we're past the peak now.
I do not see the need for the US to rise indefinitely. It just needs to stay the best option.
The best option.. for what? To live in? To invest in? To look at? Besides, isn't it incredibly personal? What's the best option for someone, might be a poor option for someone else.
The best option to invest in and do business in. If you want to make a deal, and are interested in consistent rule of law, and enforceability of the contracts and juridical outcomes, then you have an interest in doing it in the US.
This is in the context of the USD maintaining its relative value.
This is in the context of the USD maintaining its relative value.
What are the practical effects of this?
Credit ratings of countries that control their own central bank and only issue bonds in their own currency are kind of just make-believe. They only matter as much as people play along…
Although the debt limit thing is a risk, there’s no practical or financial reason why the US would ever default on its bond payments, but the debt limit brinkmanship creates a potential to default due to politics (for no real reason).
Although the debt limit thing is a risk, there’s no practical or financial reason why the US would ever default on its bond payments, but the debt limit brinkmanship creates a potential to default due to politics (for no real reason).
They're not make-believe. Plenty of insurance companies and pension funds can only invest in AAA-rated investments. Will their policies change to accommodate downgrades? Possibly. But there's a very real risk of lessened demand for treasuries.
There may be investment funds that have internal rules limiting how much they can invest in lower rated countries.
Fitch isn’t the primary rating agency, the downgrade is fairly small, and this being about the USA, I don’t expect huge effects, though.
Fitch isn’t the primary rating agency, the downgrade is fairly small, and this being about the USA, I don’t expect huge effects, though.
Normally, interest rates for debt increase as lenders factor in additional risk. Realistically with it being the USA, probably not a large impact.
I'm not sure how any other vehicle may have better rating than U.S.
If U.S. somehow fails, then it's all at large.
If U.S. somehow fails, then it's all at large.
I think people are right to be nervous about the brinkmanship around the debt ceiling. We pretend to be about to default every couple years, then at the last possible second, we say "haha, just kidding". It's possible that one day, the "haha just kidding" part might not happen.
That said, I'm not sure that this is any more dangerous than any other kind of debt. In the past, people considered US government debt to be equal in safety to a savings account. It is definitely a little more risky than that these days. The FDIC has never said "just kidding about that insurance!"
That said, I'm not sure that this is any more dangerous than any other kind of debt. In the past, people considered US government debt to be equal in safety to a savings account. It is definitely a little more risky than that these days. The FDIC has never said "just kidding about that insurance!"
Let’s be clear it’s not “every couple of years”. It’s “every time there is a democratic president, the republican-controlled legislative branches refuse to raise the debt ceiling”.
How many times has this ever happened in reverse?
Democrats must stop compromising with people that blatantly do not operate in good faith.
How many times has this ever happened in reverse?
Democrats must stop compromising with people that blatantly do not operate in good faith.
> it’s not “every couple of years”
"Since 1960, Congress has raised, extended, or revised the debt limit 78 separate times, of which 49 were under Republican presidents and 29 were under Democratic presidents, according to the Department of Treasury. In each of those instances, Congress took action on the debt limit before the nation defaulted."[0]
> Democrats must stop compromising with people that blatantly do not operate in good faith.
I wouldn't want any politician (regardless of party allegiance) to agree on any spending if there is not also an agreement on how to finance such spending.
If companies or individuals were to run their own finances like politicians run government finances, they'd go bankrupt and/or land in jail pretty quickly. Why should our elected representatives (yes, all of them!) not have to worry about this stuff?
[0] https://time.com/6281003/debt-ceiling-history/
"Since 1960, Congress has raised, extended, or revised the debt limit 78 separate times, of which 49 were under Republican presidents and 29 were under Democratic presidents, according to the Department of Treasury. In each of those instances, Congress took action on the debt limit before the nation defaulted."[0]
> Democrats must stop compromising with people that blatantly do not operate in good faith.
I wouldn't want any politician (regardless of party allegiance) to agree on any spending if there is not also an agreement on how to finance such spending.
If companies or individuals were to run their own finances like politicians run government finances, they'd go bankrupt and/or land in jail pretty quickly. Why should our elected representatives (yes, all of them!) not have to worry about this stuff?
[0] https://time.com/6281003/debt-ceiling-history/
>If companies or individuals were to run their own finances like politicians run government finances, they'd go bankrupt and/or land in jail pretty quickly.
Amazingly, the government is structured differently than your family's finances! I'm all for fiscal responsibility and would love to see the US slash it's corporate welfare budget, but the government is not a family and shouldn't be run like one.
Amazingly, the government is structured differently than your family's finances! I'm all for fiscal responsibility and would love to see the US slash it's corporate welfare budget, but the government is not a family and shouldn't be run like one.
Government spending and business/personal finance management are two completely different things. While lots of people like to equate them, they are fundamentally very different.
Thank you for the additional facts, I was only looking at the most recent 25 years and "debt ceiling crises" on Wikipedia.
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> I wouldn't want any politician (regardless of party allegiance) to agree on any spending if there is not also an agreement on how to finance such spending.
In the case of the debt ceiling spats, Congress has literally already authorized the money to be spent. The debt ceiling prevents the executive branch from borrowing money to spend according to Congress's wishes. That's why everyone thinks it's weird.
In the case of the debt ceiling spats, Congress has literally already authorized the money to be spent. The debt ceiling prevents the executive branch from borrowing money to spend according to Congress's wishes. That's why everyone thinks it's weird.
> Congress has literally already authorized the money to be spent
If you were a business or a family, you'd talk about how you plan to agree to finance any serious purchase before (or at the very least in parallel ) with agreeing the purchase itself.
If you were a business or a family, you'd talk about how you plan to agree to finance any serious purchase before (or at the very least in parallel ) with agreeing the purchase itself.
Sure but that's apples to oranges.
Congress authorizes say 10T to spend. Over the next years the president spends 7T and then the coffers run empty and says hey I need more money to do what you told me to do! And then congress raises the debt ceiling and borrows to cover that 3T.
Which of course differs from your example in that when you go to buy say a car you also agree to borrow the money (or not). Congress only makes just-in-time decisions.
I also don't think its true that as a business you'd have made that decision. Do you consult the CFO every time you use the corporate card?
Congress authorizes say 10T to spend. Over the next years the president spends 7T and then the coffers run empty and says hey I need more money to do what you told me to do! And then congress raises the debt ceiling and borrows to cover that 3T.
Which of course differs from your example in that when you go to buy say a car you also agree to borrow the money (or not). Congress only makes just-in-time decisions.
I also don't think its true that as a business you'd have made that decision. Do you consult the CFO every time you use the corporate card?
> Congress only makes just-in-time decisions
Do they have to do it like that, or is that just how it's done?
How about in parallel with the budget they also discuss the debt ceiling? Get the finance in place, then agree how to spend what money they've agreed they can raise? Apologies in advance if that suggestion is completely ignorant and/or completely crazy :)
Do they have to do it like that, or is that just how it's done?
How about in parallel with the budget they also discuss the debt ceiling? Get the finance in place, then agree how to spend what money they've agreed they can raise? Apologies in advance if that suggestion is completely ignorant and/or completely crazy :)
As far as I know, no other democracy does anything like this. If the legislature authorizes spending then the agency with that budget is allowed to spend it.
> Congress authorizes say 10T to spend. Over the next years the president spends 7T and then the coffers run empty
I'm not sure what to understand by politicians "agreeing 10T of spending" if everyone involved knows the financing has a hard stop at 7T.
That's not agreeing 10T, that's agreeing 7T. Plus a 3T wishlist.
I'm not sure what to understand by politicians "agreeing 10T of spending" if everyone involved knows the financing has a hard stop at 7T.
That's not agreeing 10T, that's agreeing 7T. Plus a 3T wishlist.
> if everyone involved knows the financing has a hard stop at 7T.
Well, technically they don't know there is a hard stop at 7T. Since revenue (taxes) and expenditures are very separate things it could've been at 8T or say 11T but if it was at 11T we'd have a surplus and so this conversation would've never happened.
When you pass a bill requiring the president to do something there is no requirement to justify how anything the bill will be paid for.
Similarly, you can pass a bill adjusting the tax code without explaining where the additional revenue will go to or in the case of a decrease what programs will be removed.
---
Business works very similar to this as well. Divisions are given budgets to spend but those budgets aren't in lock-step with revenue.
Well, technically they don't know there is a hard stop at 7T. Since revenue (taxes) and expenditures are very separate things it could've been at 8T or say 11T but if it was at 11T we'd have a surplus and so this conversation would've never happened.
When you pass a bill requiring the president to do something there is no requirement to justify how anything the bill will be paid for.
Similarly, you can pass a bill adjusting the tax code without explaining where the additional revenue will go to or in the case of a decrease what programs will be removed.
---
Business works very similar to this as well. Divisions are given budgets to spend but those budgets aren't in lock-step with revenue.
> When you pass a bill requiring the president to do something there is no requirement to justify how anything the bill will be paid for.
It could well be that pretty much everyone outside the USA is reading that description - and indeed the rest of this thread - and thinking "sorry, but in this instance the US system is broken".
> Business works very similar to this as well. Divisions are given budgets to spend but those budgets aren't in lock-step with revenue.
Umm, if revenue falls during a financial period, would corporate budgets not be adjusted? A division claiming "you handed us the budget, we're damn well going to spend it to the last cent, up to the CFO to figure out how to finance it" isn't exactly best practice.
It could well be that pretty much everyone outside the USA is reading that description - and indeed the rest of this thread - and thinking "sorry, but in this instance the US system is broken".
> Business works very similar to this as well. Divisions are given budgets to spend but those budgets aren't in lock-step with revenue.
Umm, if revenue falls during a financial period, would corporate budgets not be adjusted? A division claiming "you handed us the budget, we're damn well going to spend it to the last cent, up to the CFO to figure out how to finance it" isn't exactly best practice.
Congress does not make "just in time decisions" in the way you imply. If Congress passes a bill for some program, they agree in the bill what the program will and won't do and they estimate the costs of that program over the lifetime specified in the bill. The nonpartisan Congressional Budget Office (CBO) does those estimates for Congress before the bill is passed. Those budget estimates are part of the bill.
A note on how Congress works for those who are not from the US: Congress, specifically the House of Representatives, has "the power of the purse", meaning that they alone have the ability to create laws that require spending money. The Senate--the other half of Congress--must also pass those bills before they are signed into law by the President, but cannot originate them. The Senate can modify them with the approval of the House, in process known as "reconciliation".
Once a bill is signed into law, the Executive Branch, headed by the President, is required to initiate (or continue) the program defined by the law, and to direct the Treasury pay the bills for that program. Neither the President nor the Treasury has the option to just ignore the parameters of the law that has been passed.
Because the CBO estimates are just that, sometimes the spending required to run the program exceeds the estimated budget, simply because the CBO cannot foresee every circumstance (war, global pandemic, inflation, etc.) In that case, the Executive and the Treasury are still required to continue to run and pay for those programs.
When the Treasure runs out of money to pay for the programs that Congress passed, it must borrow money. The amount of money that it can borrow is defined as the "debt ceiling". Once the Treasury exceeds the Debt Ceiling, Congress must authorize more money so that the Treasury can continue to pay for all of the programs that Congress has passed into law.
When Congress says they won't raise the debt ceiling they are saying "We are not willing to let the Treasury borrow money to pay for the things we told the Executive branch that they must do." But the Executive branch didn't pass the laws, Congress did. The laws that require money to be borrowed may have been passed last year, or decades ago.
If Congress really wishes to control spending (which is what is claimed as the reason not to raise the debt ceiling), then they can do so by not passing bills that require spending more money, since they are in sole control of what the Executive branch can spend money on. Which is why the debt ceiling debate is completely artificial, and not a "just in time" function. Rather it is the current Congress basically saying that they didn't like the spending passed by either themselves or previous Congresses, and they want to retroactively change the laws, and they wish to do so without having to go through the process of actually creating the laws, debating them, and passing them--usually because the spending they really disagree with is wildly popular and would not likely survive the regular legislative process.
A note on how Congress works for those who are not from the US: Congress, specifically the House of Representatives, has "the power of the purse", meaning that they alone have the ability to create laws that require spending money. The Senate--the other half of Congress--must also pass those bills before they are signed into law by the President, but cannot originate them. The Senate can modify them with the approval of the House, in process known as "reconciliation".
Once a bill is signed into law, the Executive Branch, headed by the President, is required to initiate (or continue) the program defined by the law, and to direct the Treasury pay the bills for that program. Neither the President nor the Treasury has the option to just ignore the parameters of the law that has been passed.
Because the CBO estimates are just that, sometimes the spending required to run the program exceeds the estimated budget, simply because the CBO cannot foresee every circumstance (war, global pandemic, inflation, etc.) In that case, the Executive and the Treasury are still required to continue to run and pay for those programs.
When the Treasure runs out of money to pay for the programs that Congress passed, it must borrow money. The amount of money that it can borrow is defined as the "debt ceiling". Once the Treasury exceeds the Debt Ceiling, Congress must authorize more money so that the Treasury can continue to pay for all of the programs that Congress has passed into law.
When Congress says they won't raise the debt ceiling they are saying "We are not willing to let the Treasury borrow money to pay for the things we told the Executive branch that they must do." But the Executive branch didn't pass the laws, Congress did. The laws that require money to be borrowed may have been passed last year, or decades ago.
If Congress really wishes to control spending (which is what is claimed as the reason not to raise the debt ceiling), then they can do so by not passing bills that require spending more money, since they are in sole control of what the Executive branch can spend money on. Which is why the debt ceiling debate is completely artificial, and not a "just in time" function. Rather it is the current Congress basically saying that they didn't like the spending passed by either themselves or previous Congresses, and they want to retroactively change the laws, and they wish to do so without having to go through the process of actually creating the laws, debating them, and passing them--usually because the spending they really disagree with is wildly popular and would not likely survive the regular legislative process.
The reference to "every couple of years" was not to routine, non-dramatic votes. It was clearly about only "brinkmanship around the debt ceiling", which as stated only tends to happen with Republican majority in one or both parts of Congress and Democratic president.
The debt ceiling "crisis" is a completely manufactured political cliff. It serves no purpose other than to be used as a wedge during political debates.
When Congress passes a bill for anything that requires spending, the time to debate that spending is before the bill is passed. Once that bill passes and is signed into law, then US government is now responsible to cover that cost.
The debate about the debt ceiling is all about one party saying that they don't want to pay for the spending that has already been debated, approved, and signed into law. This is akin to going to an expensive restaurant, ordering the food, enjoying dinner, and then when the bill arrives, saying "Oh, I won't spend that much on dinner!". That's not the way the world works. If you can't afford the food, the time to make that decision is when you are making your restaurant choice, or when you are ordering, not after the bill arrives.
When Congress passes a bill for anything that requires spending, the time to debate that spending is before the bill is passed. Once that bill passes and is signed into law, then US government is now responsible to cover that cost.
The debate about the debt ceiling is all about one party saying that they don't want to pay for the spending that has already been debated, approved, and signed into law. This is akin to going to an expensive restaurant, ordering the food, enjoying dinner, and then when the bill arrives, saying "Oh, I won't spend that much on dinner!". That's not the way the world works. If you can't afford the food, the time to make that decision is when you are making your restaurant choice, or when you are ordering, not after the bill arrives.
Looking from outside the USA: If they don't cooperate then the budget won't be approved at all, no? It's all good and well not to want to cooperate with people that don't act in good faith, but since the other party has almost half the seats in the senate and a majority in the house of reps then how do you govern at all?
The budget is already approved, the debt limit has nothing to do with it, it's just a cudgel with which one party bludgeons the other. It serves no other purpose.
> How many times has this ever happened in reverse?
How many times have democrats been pro-gun and anti-abortion?
Of course republicans play games with the debt ceiling- part of their platform is predicated on cutting government income / spending.
How many times have democrats been pro-gun and anti-abortion?
Of course republicans play games with the debt ceiling- part of their platform is predicated on cutting government income / spending.
> Of course republicans play games with the debt ceiling- part of their platform is predicated on cutting government income / spending.
Part of their _campaigning_ is on cutting government spending. But when they're actually elected the spending goes up.
https://www.presidency.ucsb.edu/statistics/data/federal-budg...
Part of their _campaigning_ is on cutting government spending. But when they're actually elected the spending goes up.
https://www.presidency.ucsb.edu/statistics/data/federal-budg...
If that were true they would be consistent about the debt ceiling while there were republican presidents in office. That’s what “bad faith” means.
The difference is that Republicans are pro debt ceiling only when they’re not in power, but happy to take trillions more debt when they are.
Democrats don’t suddenly pass anti-abortion bills when they have the House.
Democrats don’t suddenly pass anti-abortion bills when they have the House.
I think we’re too in the weeds and too tribal with this analysis.
Outside of privacy-invading legislature (or corporate legislature), both sides of the aisle fail to agree or compromise on working for the people.
When there’s an opportunity to use leverage, it makes sense to use it. But it’s like MAD concept, they’re not going to actually let the US default. It’s not in either party’s self interest.
Switch the roles, and there are cases where democratic controlled X has halted something when there’s a republican president. It’s the nature of the game.
To say one party does this but the other is absolved of sin, I feel, is playing into the hands of blissful ignorance. I’d like to believe one side has my back, but they don’t. I can name maybe 4 senators that come off as authentic, and have a track record that shows it.
Outside of privacy-invading legislature (or corporate legislature), both sides of the aisle fail to agree or compromise on working for the people.
When there’s an opportunity to use leverage, it makes sense to use it. But it’s like MAD concept, they’re not going to actually let the US default. It’s not in either party’s self interest.
Switch the roles, and there are cases where democratic controlled X has halted something when there’s a republican president. It’s the nature of the game.
To say one party does this but the other is absolved of sin, I feel, is playing into the hands of blissful ignorance. I’d like to believe one side has my back, but they don’t. I can name maybe 4 senators that come off as authentic, and have a track record that shows it.
>Switch the roles, and there are cases where democratic controlled X has halted something when there’s a republican president. It’s the nature of the game. To say one party does this but the other is absolved of sin, I feel, is playing into the hands of blissful ignorance. I’d like to believe one side has my back, but they don’t. I can name maybe 4 senators that come off as authentic, and have a track record that shows it.
Can you provide some examples of Democratic controlled "X" threatening to default on the debt to achieve a policy goal?
If you're going to play "both side-ism", you should provide some examples. I can't remember Democrats doing things equivalent to holding an economic gun to America's head.
Can you provide some examples of Democratic controlled "X" threatening to default on the debt to achieve a policy goal?
If you're going to play "both side-ism", you should provide some examples. I can't remember Democrats doing things equivalent to holding an economic gun to America's head.
>Switch the roles, and there are cases where democratic controlled X has halted something when there’s a republican president.
But we're not talking about just "something", we're talking about paying the bills that have already been authorized.
But we're not talking about just "something", we're talking about paying the bills that have already been authorized.
So far we've always had the backup plan of just minting a billion dollar coin. Once that option is taken away at some point this whole thing becomes a lot more serious, and I would expect an accelerated move away from US government bonds and the USD (from people outside the US). Of course actually minting that coin might also damage trust in the USD.
This was never about the U.S. not having enough money, with the USD as the currency for oil it's never going to be too hard for the U.S. to get enough USD together one way or another.
The problem is the U.S. simply being unwilling to pay interest. Which you cannot solve by printing more money.
The problem is the U.S. simply being unwilling to pay interest. Which you cannot solve by printing more money.
It's about the US playing silly political games on a regular schedule. Which you can solve by minting coins, because minting coins generates income without needing approval from congress.
https://en.wikipedia.org/wiki/Trillion-dollar_coin
https://en.wikipedia.org/wiki/Trillion-dollar_coin
Wait so congress can stop lending but not minting new coins? That's just weird. Although the whole concept of a hard debt limit is weird, not saying you can't limit the amount of debt but you can't just back out of existing obligations.
The minting thing was meant for commemorative coins, which was probably though not important enough to bother congress with. But the law doesn't set a limit on the value of those coins, creating the loophole of creating ridiculously valuable commemorative coins.
It essentially has infinite dollars, it just hasn't told you about them yet.
I'm not sure what happens to your savings account in an US bank if US government debt is in the state of even mildest of default.
At the very minimum, you may see decades of interest wiped by devaluation of currency (a good question is "compared to what", but that's another story). FDIC becomes seriously unbacked in this case.
At the very minimum, you may see decades of interest wiped by devaluation of currency (a good question is "compared to what", but that's another story). FDIC becomes seriously unbacked in this case.
The point here is that the country and government don't have to actually fail here to fail paying the debts. The debt ceiling rules and the behaviour of the Republican party make it a plausible outcome that the US decides to simply not pay their debts at some point in the future.
Demographics are going to prevent paying back the debt eventually. The line will stop going up and our kids aren't going to be willing to pay for our wars.
Except that the federal government is likely conditionally required to pay its debts.
Eh, how? The fed government opened slightly the door to “we can but won’t” territory.
After second world war the US economy represented a majority of the world economy. This hasn't been true anymore for a while. To have a better rating than the US-Dollar you simply need to have a lower risk of default and not be over-dependent on the US-Dollar.
The US has proven quite willing to just take assets off Russians for political reasons. Fitch probably isn't going to say it outright; but if a country has a record of saying "nah, I'm taking it back" about someone else's assets then it seems reasonable to rate them below an AAA.
Even if the US doesn't fail, it isn't really credible to claim its debt is an AAA security. For a lot of participants in the market there is an obvious risk that the US will take their money and not return it.
Even if the US doesn't fail, it isn't really credible to claim its debt is an AAA security. For a lot of participants in the market there is an obvious risk that the US will take their money and not return it.
Unfortunately only freezing. In a more reasonable world yes they'd be taken and used for restoration (you break it you buy it), nothing political about it either. Nor does it have anything whatsoever to do with this.
I agree the assets of defence contractors, politicians who voted in favor of war and their families in the United States should all be nationalized and used to repair the smoking crater left in the middle east.
Oh you weren't talking about those war crimes? Only the one's the media tells you to be mad at? Rachel Maddow would know what is justified in war, given she was just the keynote speaker at a weapons manufacturers conference.
Oh you weren't talking about those war crimes? Only the one's the media tells you to be mad at? Rachel Maddow would know what is justified in war, given she was just the keynote speaker at a weapons manufacturers conference.
Imagine you are buying some coal from a dude and that dude settles with getting an IOU note from you.
Later on, you decide you no longer have to honor that IOU debt because you no longer like what that dude does with other people. You've also put that coal to a good use. A win-win for you.
Later on, you decide you no longer have to honor that IOU debt because you no longer like what that dude does with other people. You've also put that coal to a good use. A win-win for you.
This may be a chink in the armor, but so long as the USD still the dominant reserve currency and oil is mostly traded in dollars, does anyone care what Fitch thinks? Now there may be some movement away from USD for both of these uses, but I think this has more to do with geopolitics than what Fitch thinks or the petulance of the GOP.
Afaik there are companies/investment products which can only invest in AAA. As long as two of three rating agencies said the US was still AAA they could probably argue that that counts. Now that it's 1/3 that probably won't work anymore.
The smarter ones have a phrase like “US treasuries or AAA rated securities” or similar.
People who aren’t familiar with the bond market would be surprised to learn all the ways you can lose money on perfectly secure bonds - if you have to sell before maturity.
People who aren’t familiar with the bond market would be surprised to learn all the ways you can lose money on perfectly secure bonds - if you have to sell before maturity.
Who cares if the world is signalling that they are starting to think about getting off the dollar and credit agencies are downgrading the US? Saudi Arabia is also talking about accepting Yuan as an alternative to USD.
Here we have three signals among others, go ahead and ignore them I guess…
Here we have three signals among others, go ahead and ignore them I guess…
The key is that you can always dump dollars into US bonds. Any alternative currency needs something similar, until they have that sink it doesn’t really matter.
They have been signaling that for decades, yet no action indicates that people around the world still trust the US and hence USD more than any other currency.
Well just shove a missle up someone's ass if it gets too bad. I'm not worried.
This, Arabia sits on the Big American Missile.
It seems like both Americans and non-Americans overestimate the importance of the US dollar being the dominant reserve currency and petroleum trade currency in the world.
I would say the S&P500 and the long-term economic productivity it represents is a far more important economic asset of the US than their currency. Many European pension funds would have little to show for if they didn't hold trillions in US stocks.
I would say the S&P500 and the long-term economic productivity it represents is a far more important economic asset of the US than their currency. Many European pension funds would have little to show for if they didn't hold trillions in US stocks.
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USD being a desirable currency to do business in is a function of the trust people have in the US’s long term economic productivity. And being able to apply force to anyone who messes with the currency such as counterfeiting it.
Oil consumption will in the medium term go down and in the long term become unimportant.
Debatable if it’ll go down by a significant amount. Still have electric cars being infeasible from a price and charging standpoint for much of America (and our electric grid can’t come anywhere close to handling a sizable percent of people changing to electric)
Batteries are getting better, but energy density is still superior with oil
Oil used for many manufacturing processes and items. I’m all for switching from plastic to glass, but the world loves plastic
Speaking of the world, developing nations still rely on coal, never the less moving to electric cars
I’d like to think we would make progress in medium term, but given the geopolitical instability, if a major world war breaks out (if it hasn’t already), I think we’d be stuck in time with oil-to-electric progress unless there’s some national security reason to go away from it.
But relying more on our grid seems to be more of a national security risk, given it’s weakly protected. And the US has been (still is?) a net exporter of oil. Worst case we ramp up production if the Saudi’s/OPEC do something crazy.
I’m still young, but I see a constant cycle of XYZ tech being promoted, promised, investors jump in, then it evaporates for 5-10 years and we slowly get the actual promises (sometimes). There’s a famous graph for this somewhere.
Batteries are getting better, but energy density is still superior with oil
Oil used for many manufacturing processes and items. I’m all for switching from plastic to glass, but the world loves plastic
Speaking of the world, developing nations still rely on coal, never the less moving to electric cars
I’d like to think we would make progress in medium term, but given the geopolitical instability, if a major world war breaks out (if it hasn’t already), I think we’d be stuck in time with oil-to-electric progress unless there’s some national security reason to go away from it.
But relying more on our grid seems to be more of a national security risk, given it’s weakly protected. And the US has been (still is?) a net exporter of oil. Worst case we ramp up production if the Saudi’s/OPEC do something crazy.
I’m still young, but I see a constant cycle of XYZ tech being promoted, promised, investors jump in, then it evaporates for 5-10 years and we slowly get the actual promises (sometimes). There’s a famous graph for this somewhere.
China has a comparable oil consumption to the US and has almost gained 25% market share for BEV.
But also in the US electric cars sales are rising.
You are most likely thinking of the Gartner hype cycle, which is about visibility of topics. I think we reached the plateau of productivity by now. BEV cars also have their issues, but in many cases are the better pick over ICE cars.
A way more fitting graph to look at now are sigmoid functions, also known as sigmoid functions. They tend to model the technology adoption life cycle fairly well. Adoption in the beginning is fairly slow then speeding up just to slow down again until the technology is affordable and good enough to also handle special needs. We are currently in the phase of accelerating adoption that looks like exponential growth.
You are most likely thinking of the Gartner hype cycle, which is about visibility of topics. I think we reached the plateau of productivity by now. BEV cars also have their issues, but in many cases are the better pick over ICE cars.
A way more fitting graph to look at now are sigmoid functions, also known as sigmoid functions. They tend to model the technology adoption life cycle fairly well. Adoption in the beginning is fairly slow then speeding up just to slow down again until the technology is affordable and good enough to also handle special needs. We are currently in the phase of accelerating adoption that looks like exponential growth.
The family requirements lead me to get a minivan. There simply is no electric one, and the closest you can get is the Chrysler PHEV, which is so much more expensive than the other options (and you lose the stow and go seats) that even with the tax rebate I can’t fully take advantage of its not competitive.
$10k buys quite a bit of fuel.
But if someone wants to send me $10k I’ll buy the Pacifica today ;)
Otherwise it’s a Kia or Sienna for us.
We’ve even looked at going up to the electric Transit and the money just doesn’t work out.
$10k buys quite a bit of fuel.
But if someone wants to send me $10k I’ll buy the Pacifica today ;)
Otherwise it’s a Kia or Sienna for us.
We’ve even looked at going up to the electric Transit and the money just doesn’t work out.
Have you considered the Toyota Hybrid minivan? The people I know who have them love them. Might be a good compromise.
That's the Sienna.
Downsides - second row seats are not removable, there is no interior kidspycam, they just don't exist (have waited 1+ years so far, and time is running out)
Upsides - best mileage
Downsides - second row seats are not removable, there is no interior kidspycam, they just don't exist (have waited 1+ years so far, and time is running out)
Upsides - best mileage
I would add that they also do not reduce CO2 or human suffering very much. Ford is switching to hybrid instead of full EV and people are going to eat it up. Had they presented hybrid options when building a truck I would have bought one already. For some reason they have been sandbagging the option but are now slated to go full hog.
EV battery weight is the killer. Nevermind the charging issues.
EV battery weight is the killer. Nevermind the charging issues.
I think AI is going to be the driving force behind technological innovation for at least the next 10 years. And the US has that market cornered expecially with the CHIPS act. I think that will drive growth in the US and be more relevant than the reserve currency status.
What do you do if you are the #3 ratings agency, and your ratings never make headlines?
Money loss for investors [1]
[1] https://finance.yahoo.com/news/stock-futures-slide-after-fit...
[1] https://finance.yahoo.com/news/stock-futures-slide-after-fit...
Zoom out. The Market has had a great year. S&P500 "sliding" 0.5% overnight is literally nothing.
It's a US company. It doesn't really matter for the US. If it was any middle eastern or African country the downgrade would have put their currency into freefall and the country into hyperinflation. There are dozens of recent examples for that.
US national debt per capita is on par with plenty of other developed countries. Why has it become such a big talking point in the US?
National spending per capita is higher here in Denmark but we actually tax our wealthiest 10% so we have a lower debt per capita than many other developed countries.
National spending per capita is higher here in Denmark but we actually tax our wealthiest 10% so we have a lower debt per capita than many other developed countries.
> Why has it become such a big talking point in the US?
Because one of the two dominant political parties has adopted a strategy for the past several decades of trying to cripple governmental programs by reducing their income or otherwise increasing their outflows (see: USPS), and the national debt is a convenient scapegoat for them to make their point about "see, we're spending too much!"
Because one of the two dominant political parties has adopted a strategy for the past several decades of trying to cripple governmental programs by reducing their income or otherwise increasing their outflows (see: USPS), and the national debt is a convenient scapegoat for them to make their point about "see, we're spending too much!"
In the US congress sets a budget that the executive (represented by the president) has to spend, and at the same time puts a limit on the amount of debt they are allowed to take out to spend that money. Somehow they always end up requiring more spending than what's covered by income and allowed debt, just so they can have a regularly scheduled fight to get some concessions in return for graciously allowing the country to pay their bills and continue employing people.
It's a somewhat unique disfunction, and few countries in the world would survive these kinds of games.
It's a somewhat unique disfunction, and few countries in the world would survive these kinds of games.
> to AA+ from AAA
Btw, what's up with the scale? Wasn't A good enough at some point, and they made A+, then later AA etc.? What would happen if someone decided AAA+ is the new best and all the AAAs are now not at the top anymore?
Btw, what's up with the scale? Wasn't A good enough at some point, and they made A+, then later AA etc.? What would happen if someone decided AAA+ is the new best and all the AAAs are now not at the top anymore?
No matter what excuses people make this is the direct result of politicians playing with the debt ceiling with the will they or won't they crap.
If it continues I'll buy with discount an aircraft carrier with entire personnel.
Look at this little beauty right here. Nuclear powered!
Play stupid games, win stupid prizes
I think this has more to do with the US spending itself into debt in an unsustainable way. Up to $32T now. The interest carrying cost of that debt is soon going to surpass the entire defence budget. With no end in sight. It doesn't take an expert to see that's not fiscally responsible.
While nobody seriously thinks the US will default anytime in the near future, they're obviously going to have to keep rates low and have the Fed buy bonds with "printed" money, inflating their way out of it. There's no free lunch. Future economic prospects for the US have never been so grim in living memory, and that's not some doomsday fear-mongering, that's just basic economic theory and math. It's well known that high debt levels weigh on future economic growth. At the end of the day it has to be paid, either by raising prices of everything (inflation) or raising taxes. Both are incredibly destructive to the economy.
https://realinvestmentadvice.com/deficits-debt-and-why-32-tr...