Saturday, August 6, 2011

Credit Ratings, Debt Limits, and Fiscal Responsibility

The United States' national credit rating has been downgraded by Standard and Poor's (S&P) from AAA to AA Plus. A move that it promised it would not pursue if an agreement was reached by Congress on the debt limit. Both sides acquiesced in order to prevent the rating downgrade. That the S&P reacted so quickly is shocking, but more shocking still is message it sends.

Internationalism is the name of the game. How do we raise the debt ceiling? By agreeing to take on more foreign borrowing and interests. This is what we have been doing unabated for years. Further, we are spending far more than we are bringing in by taxes. How do you think that happens? By operating on foreign lines of credit. As long as we become further indebted to other nations, the more we need them and the happier they are to offer more. Its great to have a seemingly unending supply of money . . . until the money is cut-off and the debts are called-in. So what of raising taxes to cover those debts? How quickly can we crawl out of a $17 Trillion debt? And why should the tax-paying citizenry foot the bill because a batch of bureaucrats said we should fight seemingly endless wars, send foreign aid, sell off U.S. land to foreign interests, and bail out companies that cannot get basic economics right? I believe the amount owed to cover this is a bit above $45 K.

If everyone could pay $45 K this year (beyond what we normally pay to keep the government running and providing its services), we could be out of debt 12 months from now. Yet the average income per person in the U.S. (as of 2006) was somewhat above $26 K. So we easily see that we are talking years, likely many years, to pay off this debt, assuming a realistic tax rate, no more economic downturns, no accrued interest (either to our government or foreign creditors), and no further escalation of the debt.

So who can afford to pay more of this debt than others? The Rich! Raise the tax upon the rich (who can afford to pay more tax after-all) and we will pay this down faster! Yet if we tax the rich more, to decrease the debt, how far do we tax them? We already have a tiered bracketing system for income taxes. Do we just tax them down from insanely wealthy to incredibly wealthy, or all the way to average joe? What incentives do they have to remain wealthy (and how can we assume they will remain earning the large amounts that made them wealthy on a constant timeline)? Why work for what you can't keep? Robin Hood may have pursued noble causes, but try telling that to the land-owners he robbed.

Does the elected government know better what to do with our money than we do? Is it right to take what is earned by one to give it to another who doesn't work? the USSR said yes; where did it lead them? Why are we not gleaning lessons from history? How, also, have GM and Chrysler, and the financial institutions paid back the bailouts and all the fraudulent loans they promised and reneged on?

After witnessing about 150 years worth of bad financial and business decisions within this nation, I am not surprised that our credit rating has been downgraded. The bad decisions have inundated Washington (which is prone to this sort of thing even without encouragement). Spend huge amounts of money you don't have to bailout companies that can't keep themselves solvent because they catered to (created?) a culture that cannot save or responsibly handle income. Sounds reasonable. We have not deserved our stellar credit for a long time. We have played the same con-game that brought down Enron.

The liberal policies of spending what isn't there and giving away what they didn't earn has led to this. The welfare state cannot exist for long because it is an ever-growing black hole. Look at Spain and Greece. There will never be enough to satisfy. And if you find yourself unlucky enough to have worked for wealth, you will run afoul of all the slavering money-hounds (right Germany?). Good luck!

What's the solution? A truly balanced budget in which we do not overextend ourselves or give what was never ours, no matter what they do to our credit rating. Where is the adage: never a borrower but a lender be? Where are the debts America can call in? Where is our repayment for what we have given? All I can say is Chrysler better be making one heck of a car - I expect mine delivered tomorrow, in red please.

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