Tuesday, August 02, 2011

No Brainer

This shouldn't be a surprise, but I imagine it is to anyone who gets their news from the networks. Regarding the compromise bill to raise the debt limit:

Though the bill removes the threat of imminent default by raising the national debt limit enough to last until 2013, its cuts are only about half the $4 trillion in savings that ratings agencies Standard & Poor's and Moody's have said would be enough to confirm the country's triple-A rating with a stable outlook.

Adding a sense of immediacy to downgrade anxieties, S&P said in mid-July there was a 50-50 chance it would cut U.S. ratings in the next three months if lawmakers failed to craft a meaningful plan to cut the nation's deficit.

S&P could downgrade U.S. ratings soon after the bill is signed by President Barack Obama, given that the agency will have all the information it needs to make a decision.

There was never an imminent threat of default.

The ratings reflect the probability that a bond will be defaulted on. So why should the decision to go out and get more credit cards (and borrow more) make our debt look more solid? It will be bigger. It will be solid in the sense that it will be mountainous; it'll be solid like a mountain, yes. But borrowing more will make default more likely, not less.

That doesn't mean that we shouldn't have raised the debt limit. We probably had to raise it some. But responsible lawmakers (aka "terrorist hostage takers") were trying to get cuts in spending that would at least slow down the rate of debt-growth under Obama. Cutting in out-years isn't the same as getting spending under control. Out-year cuts never happen. By the time the out-years are here we've forgotten about the cuts and the out-year lawmakers will do what they like. (what do they like? spending money)

Heck, if I rated bonds, I'd downgrade us. We've shown that we can't cut spending. When we try, all it takes to derail the effort is a bunch of no-plan liberals crying about being held hostage. Well I like their sweet sweet tears. I wish we had broken their hearts. They don't have to understand that it's for their own good. We should have fixed spending and let them wail. And come 2012 we need to give them at least a four year time-out.