America: Downgraded & Degraded

Arnold Ahlert is a former NY Post op-ed columnist currently contributing to JewishWorldReview.com, HumanEvents.com and CanadaFreePress.com. He may be reached at atahlert@comcast.net.


Pages: 1 2

Friday night, after another wild day on Wall Street, the Standard & Poor (S&P) ratings agency made good on its three-month-old warning and downgraded the credit rating of the United States for the first time since it was granted in 1917. The move from AAA to AA+ reflected the ratings agency’s contention that “difficulties in bridging the gulf between political parties,” which resulted in a compromise to reduce the nation’s debt by $2 trillion, didn’t go far enough. “Political brinksmanship” made the ability of the U.S. to confront its growing debt problem “less stable, less effective and less predictable,” the agency contended.

The move capped a contentious debate between the ratings agency and government officials at the Treasury Department, who claimed S&P’s analysis was “fundamentally flawed,” according to administration sources who remained anonymous because they were unauthorized to speak about the issue publicly. Officially, the Treasury issued a statement claiming that “a judgment flawed by a $2 trillion error speaks for itself.” S&P conceded the mistake, but John Chambers, head of sovereign ratings at the agency, claimed the error “doesn’t change the fact that [America's] debt-to-GDP ratio, under most plausible assumptions, will continue to rise over the next decade.”

And despite the Obama administration’s anger, the agency itself remained unruffled. Noting that the debt deal didn’t go far enough to “stabilize the government’s medium-term debt dynamics,” S&P also announced it was issuing a “negative outlook,” raising the possibility of additional downgrades in the next two years. S&P was looking for $4 trillion in cuts. As noted above, the current debt ceiling deal calls for half that amount — and only after additional negotiations by a 12-member committee, which aren’t due to be submitted until Thanksgiving.

S&P contended some of its assumptions were based on the idea that the committee itself could remain dysfunctional, meaning it wouldn’t come to an agreement on the additional cuts, and that the Bush-era tax cuts would remain in place past the end of 2012. These assumptions are somewhat dubious. With respect to additional cuts, there is a trigger mechanism in place should the committee fail to reach a consensus. With respect to taxes, it remains unclear as to whether those tax cuts will expire completely, remain intact, or be retained for the middle class and eliminated for higher earners.

Unsurprisingly, the reaction to the downgrade was both swift and predictable, with Democrats and Republicans reiterating their conflicting worldviews. “The action by S&P reaffirms the need for a balanced approach to deficit reduction that combines spending cuts with revenue-raising measures like closing taxpayer-funded giveaways to billionaires, oil companies and corporate jet owners,” said Senate Majority Leader Harry Reid (D-NV). “It is my hope this wake-up call will convince Washington Democrats that they can no longer afford to tinker around the edges of our long-term debt problem,” said House Speaker John Boehner (R-OH). “As S&P noted, reforming and preserving our entitlement programs is the ‘key to long-term fiscal sustainability,’” he added.

Other Republicans also weighed in, with presidential candidate Michele Bachmann (R-MN) calling on the president to fire Treasury Secretary Timothy Geithner, and to submit a plan to “balance the budget, not just reduce deficits.” The fire-Geithner sentiment was echoed by Sen. Jim DeMint (R-SC). “For months [Geithner] opposed all efforts to reduce the debt in return for a debt ceiling increase. His opposition to serious spending and debt reforms has been reckless and now the American people will pay the price,” he said. Both criticisms were likely engendered by the fact that Geithner had said in April there was “no risk” the U.S. would lose its AAA rating.

Current Republican presidential front-runner Mitt Romney also weighed in. He characterized the downgrade as “a deeply troubling indicator of our country’s decline under president Obama.”

How troubling remains to be seen. If interest rates rise as a result, borrowing costs would be driven up for everything from governments at every level to rates on mortgages, credit cards and business loans. The announcement was made after the stock market closed for the weekend following a five-day span in which investors trimmed 699 points off the Dow Jones Average. That was the DJA’s worst weekly showing since October 2008.

Opinions were mixed on where we’re headed. “I think we will have a knee-jerk reaction on Monday,” said Jack Ablin, chief investment officer at Harris Private Bank. Harvey Neiman, portfolio manager of the Neiman Large Cap Value Fund, disagreed. “The market’s already been shaken out,” he said. “It knew it was coming.”

The initial indication of which sentiment is correct will be reflected in the opening of the Asian stock markets Monday (late Sunday night in the U.S.). Early reports suggest Asian investors are likely to retain their holdings in U.S. Treasuries, due in large part as a means of stemming gains in their own currencies versus the dollar. Currency gains make exports more expensive in a region which depends heavily on them to remain prosperous.

Pages: 1 2

  • Maxie

    The steep drop in the stock market three straight days in advance of the negative S&P ratings announcement is the real news. This tells you the insiders had prior knowledge of the pending announcement and made a ton of money shorting the market. Just to add insult to injury. America is being destroyed and the destroyers are getting rich in the process.
    Have a nice day.

    • Fred Dawes

      See Obama he did this to a free nation and will not stop until all americans are inside the third world, see globalist plan for this nation.

      • Jim_C

        Um, this all started happening before Obama.

        So what do you think he should have done about it?

  • crackerjack

    These so called rating agencys should have been dissmantled straight after the Lehmann disaster. They are the golden egg laying hen of the finance mafia. Put out a law making them liable for their ratings and they will be out of business tomorow.

  • franz von fear

    Rating agencys are becoming a tool to inforce neo-liberal economics on goverments worldwide. Goverments that do not adopt a fiscal policy the rating agencys favour are put on a debt spiral.
    These agencys are a threat to democracy.

  • Fred Dawes

    Most people just don't get what is happening in the USA And why standard & poor's did and why, you can yell all you want but the reason why this is happening is the obama boys now have away to make all Americans into total state slaves its called the SUPER CONGRESS.
    THE BILL WAS PASSED On aug 2 2011 making this nation into a obama DICTATORSHIP YOU MAY Not see it now but you will soon.

    Our money will soon be a world joke and within 10 years the USA Will disappear into some third world hell, by the way say goodbye to your guns your homes and your bank book and your jobs and your 401k's and say goodbye to your life and freedom.

    May God help you all.

  • SHmuelHaLevi

    The pre trade rate fell 5% in Tel Aviv since here it is open on Sunday.
    This not due to internal economics but a result of the US spiral and downgrade.
    Israel has bought about 150 billion dollars to try to stem the dollar collapse and now it is saddled with increasing high risk heading into junk papers.
    "PROTESTS" here: Financed through the NIF and US controlled subversive elements. I believe that the Oslo styled cadre will be finally but very carefully stomped.
    Back to the US. In reality most states overseas cannot fathom how or why is that with an economy? is totall disarray such as the US economy is still rated a AA+.
    The us debt load is now 100% of GDP.
    Israel, albeit a much smaller economy but a very robust one so far is at 44% of GDP. The rating is A1….
    China has rated the US at A level.
    Good US folk should take a very hard look at the "achievements" of the US systems since 2008 and even before that.

  • ze-ev ben jehudah

    If you stack ten soccer field full of $ 100 bills and three stories high that
    will be the depth of the fiscal deficit of America.China has the most of the
    outstanding loans. So like Fred Dawes "above"wrote. The democrates
    made the debt bucket overflow and Barack Hussein Obama, as the most
    responsible,should step down from the oval office.He has got a litle garden
    in the back of his house so let him shufle weeds in his own back yard and
    leave politics to competent man/woman.

  • TheBigFig

    Obozo will not be happy until he destroys this country. With his very liberals beliefs and muslim background, he is going keep implementing certain rules and government power that will bring the US to its knees. Why do liberal Jews vote for this empty suit? Didn’t they learn they’re lesson from germany and the second world war? They can’t wait to fill the coffers of this muslim scumbag. This is the beginning of the end of this great country. G-d bless USA and Israel.

    • johnnywoods

      "GOD bless America and Israel" if HE is willing to do so. I`m not sure HE is.

  • tanstaafl

    Is it possible for Congress and Obama to cut another 2 trillion from our budget? Certainly. But will they?

    It's obvious that changes will need to be made in 2012.

  • jacob

    Other than having everybody and his/her brother driving a 2011 model car, may I ask who did the so highly cackled 'STIMULUS" from the "ANNOITED ONE" benefit ???

    Could it be possible that this narcissist firmly believes he is doing a good job ??

    Did it occurr to him that he is better off resigning ????

    I can understand 98% of African-Americans voting for him but for 80% Jews who
    somehow must have been aware of his political baggage also voting for him
    just because, being generically DEMOCRAPS, they didn't care even if he was a
    NAZI as long as he was their political party's choice, proves that Jews are as
    stupid as the rest of the population and that crap of having accumulated that
    many Nobel Prizes must be purely coincidential…..

  • mrbean

    Blacks ruin every society at every level they exist in from the Presidency of the United States to the ghettos. All over America, Black teen mobs robbing stores, starting riots and robbing and assaulting white people in the streets at the beaches, at state fairs, epidemic of black men raping white women, and in London killing 3 and injuring 50 over some black thug getting shot just like the LA riots. Trillions of dollars in welfare since the great society and still they have an 80% illegitemacy birth rate with absent fathers, Send them all back to Africa – they are a contagion,

    • Jean-Claude

      I can't believe that a human being could write something like this in 2011!
      You're extremely disturbed!

      • mrbean

        Name what wasn't true? Blacks who are starting riots and robbing and assaulting white people in the streets at the beaches, at state fairs, raping white women at epidemic , and killing and injuring over 100 peoplw just because they are white over some black thug getting shot just like the LA riots and in London. That is being disturbed!

        • Ghostwriter

          The attitude you're displaying belongs in 1915,not 2011,mrbean. Your comments are still appalling and disgusting.

      • Supreme_Galooty

        Check your spelling. I thinks it's "human bean."

    • Supreme_Galooty

      Your observations, though accurate enough, are not entirely germane. While there is no doubt that a certain amount of dysfunctionality on the part of Obama is rooted in some sort of racial miasma, the far more dangerous elements spring from his inate hatred of America, his Marxist delusions, and finally from his puppet-masters. God spare us such a specimen of ANY race.

    • Ghostwriter

      Unbelievable!!! mrbean,I feel like I was reading something from a KKK screed. Not every black person is like what you describe and you should be condemned for writing such an ignorant piece of tripe. Not every black person is like President Obama. Your comments are disgusting and vile. You deserve whatever nasty comments come your way.

  • http://mypage.direct.ca/l/lbouchar/ SeaMystic

    The core clause that is creating the Nat’l Debt Crisis around the World including the U.S., is in a clause of the Bank of England since 1694, this has spread around the World, and now has come to roost.

    Check: http://mypage.direct.ca/l/lbouchar/

    Particularly chapter 2 & 3. Titled, “Guardians of Democracy, a Mystical View.”

    The Nat’l Debt was created as a “DEBT in PERPETUITY”, ever expanding through the noted Process of Issuance with Compound Interest, for Government needs, through selected Banks.

    IT’S UNPAYABLE!

    The Sword of Damocles, may be avoided this time, but it is inevitable, unless the enslaving clause is changed.

    Humanities present Enslavement , is not through Chains, but with Compound Interest, WITH INTENT.

  • http://mypage.direct.ca/l/lbouchar/ SeaMystic

    The core clause that is creating the Nat’l Debt Crisis around the World including the U.S., is in a clause of the Bank of England since 1694, this has spread around the World, and now has come to roost.

    Check: http://mypage.direct.ca/l/lbouchar/

    Particularly chapter 2 & 3. Titled, “Guardians of Democracy, a Mystical View.”

    The Nat’l Debt was created as a “DEBT in PERPETUITY”, ever expanding through the noted Process of Issuance with Compound Interest, for Government needs, through selected Banks.

    IT’S UNPAYABLE!

    The Sword of Damocles, may be avoided this time, but it is inevitable, unless the enslaving clause is changed.

    Humanities present Enslavement , is not through Chains, but with Compound Interest, WITH INTENT.

  • aamador1776

    A classical case for smaller government. Entitlements are a real problem and the Left for all their talk of the Tea Party holding government hostage, are the ones holding everyone hostage with entitlements and steadfastly refusing to reform the system. It makes one wonder why? We all know why. Serious Entitlement reform, a flat tax or other serious reform is the answer. The Left who's agenda we all know, would never agree. I guess is up to the voters to deal with the politicians now.

  • alexander

    What NASDAQ? What DOW???
    You minus well may show profit of Chinese or Mexican companies…..
    Goods made in other countries sold in USA…ALL MARKET INDICES ARE FRAUD
    -no connection to real "economy"-

  • Jean-Claude

    It's time that we stop the financial aid to countries like Egypt and Israel. These 2 countries alone cost us 5 bilions+, and I'm not including other countries which we also help.
    It's time that we use that money to help America. Also, we need to slowly bring back our soldiers from Afghanistan and Iraq to cut down spending. I'm pretty sure than sooner than later America will stand up on its feet and will prosper again. Long live USA!

    • muchiboy

      America has been generous to less developed countries.It may be that there will always be strings attached to such aid.By all means continue aid to the Zionist state,but pull the strings till it hurts.The aid to Egypt may have paid off,given the army's actions in their Arab Spring.Investing in Democracy and Human Rights is indeed a good and righteous investment. muchiboy

  • Steve Chavez

    CORRECTION! "OBAMA: DOWNGRADED AND DEGRADED!

    He did get one of his Birthday wishes and more will come till go the way of the Soviet Union, a country Obama, and his "Circle of Communists" were brainwashed to love more than their own country.

    Did you know KGB Putin called to wish a happy birthday? Obama also did a birthday interview with Russian TV but he won't ever go on Fox, his real enemy!

  • Victoria

    Our leaders will most certainly find a way to cut more spending, just like they eventually raised the debt ceiling. Was just a lot of kicking and screaming and low class in-fighting in the process. Problem is, it happened in public. Like a couple of hicks on the Jerry Springer Show, they wre like a divorcing couple fighting in the bank lobby before they make the inevitable payment. Then feel sorry for themselves and wonder why their lenders indicate their displeasure by lowering their credit rating.

    • Supreme_Galooty

      heh heh

  • WilliamJamesWard

    If you spent more money than you had and borrowed more to spend more and
    continued to spend more and more and borrow more and more and depend on
    the lending ability of others to continue, eventually you have spent all of your
    money and are living off of the lenders. It would be a no brainer that eventually
    your credit would be shot shot so full of holes that no one in their right mind
    would lend you anything except for the fact that maybe you can confiscate the
    wealth of your constituents and maybe they are not out of wealth yet but what
    they have is all that is left and that is where we are. Our natural wealth is tied up
    by leftist envionmentalists who are green as they keep us from our green, which
    is not theirs, they only do what they do to make us spend our wealth outside of
    our sphere to bankrupt us, folks we have been played and our political system
    is the culprit. A Nation of 300 million and we can not find 545 honest people
    capable of working ths show, come on we must be able to do it…………..William

  • mrbean

    Ray Stevens has the answer!
    http://www.youtube.com/watch?v=J6TcpfBHlbs

  • Supreme_Galooty

    Standard and Poors has sustained some tarnish on its halo for calling a spade a …. dinkum shovel. AA+ is not accurate. It is too high, too optimistic. As long as Americans vote for Democrats or "compassionate conservatives," the ranking should be in the basement with the junk.

    • johnnywoods

      Well said , Galooty.

  • muchiboy

    The answer is not cut spending or raise taxes,it is a combination of both,and,as has been observed,the devil is in the details.Democrats may favor a balance in favor of taxing,Republicans spending cuts.Those who have a black and white world view,i.e.The Tea Party,need to moderate.
    America is so important to us that the West may need to assist her.However,America does need to put her house,finances and foreign policy in order.God Bless America.muchiboy

    • Ghostwriter

      Amazing,muchiboy! You got through your comments without bashing Jews or Israelis! That's a monumental achievement for you and should be applauded. Now if you can do that for the rest of your comments,you'll be great.

  • http://www.adsforblackfriday.us Black Friday TV deals

    I am no longer positive the place you’re getting your information, but good topic. I must spend some time finding out much more or understanding more. Thank you for great information I was on the lookout for this info for my mission.