Posted by: Rational Voice | August 6, 2011

The Credit Downgrade

While much of the country bemoans the loss of our nation’s perfect credit rating, the talking heads point fingers, and President Obama will likely blame President Bush, I am happy that our credit has been downgraded. This is the wake up call and message Washington needs after passing their pathetic compromise last week, the compromise which does nothing to fix the fiscal nightmare this country faces. It only kicks it the problem down the road, but I expect nothing from our “leadership” in Washington. Only one of the major ratings agencies has downgraded us, the other two are threatening to do it though. In a way, I hope they do it. It will painful for this nation but its a pain we need to endure now rather than later when the debt and deficits get even worse than they already are.

We need this because we need to truly attack our fiscal problems because the plan that passed last week only makes things worse, it just does it a little slower than the course we were on. Federal spending still increases every year under this plan and we’ll still add around $7 trillion to our nation debt by 2021. And yes, I said spending still increases every year. You may question that as all the liberals out there are bemoaning the massive spending cuts that are coming, how kids won’t be able to go to college, how grandma won’t be able to collect her social security, and how the poor aren’t going to be able to get their food stamps or Medicaid benefits. But it’s true. The only “cuts” in the compromise are cuts in the rate of budgetary increase, ie spending going up only 5% instead of 7%, not cuts in any real terms. They’re able to make this misleading claim because of what is called “baseline budgeting” where budget increases are built into every 10 year projection by the Congressional Budget Office. Furthermore, let’s say if the United States projects to spend $46 trillion over the next 10 years but you end up scaling back the projected spending to only $40 trillion, that’s considered a $6 trillion cut, even though the money still hasn’t been spent and that the budgets will still likely increase. So while the Democrats make these claims about unsustainable cuts for next year, which I think only amount to $21 billion dollars out of a nearly $4 trillion budget, those are cuts out of what is still going to be a budget increase. If I had to guess, Federal spending in 2012 will still probably be at least $200 billion more than it was this fiscal year. So tell me, where are the cuts? Furthermore, these $2.5 trillion in cuts are spread over 10 years and guess what, future Congresses aren’t held to them, so while the debt limit will go up $2.5 trillion, I wouldn’t count on actually seeing the corresponding cuts.

To provide an example of how ridiculous the notion of baseline budgeting is, here is an example: if we were to freeze fiscal year 2012 (FY12) spending at FY11 levels, the CBO would score that as a $9 trillion cut over the next 10 years despite the fact that we wouldn’t be cutting a single dime. This is how liberals get away with claiming there are “budget cuts.”

I have a question for these liberals, if we have such terrible budget cuts coming out of this, how are we still able to add $7 trillion to our current amount of debt over the next ten years? Oh yea that’s right, because there are no real cuts. If we had real cuts, the debt wouldn’t increase. It’s simple math but with the state of our public education system, I can’t really hold them responsible for not being able to understand this. Liberals will never tell you the real story about our problems like I just did and the only place you’ll maybe hear the truth in big media is probably FoxNews and even I wouldn’t count on that.

It is because of this reality that the S&P downgraded out credit rating. We are doing nothing to actually solve the problems we face. And while everyone is focused on cutting the deficit, that is only the start. In order to actually create solutions we need to get passed the deficit reduction and get to the point where we can actually reduce the debt, our actual problem. But we haven’t and won’t and soon our debt will get so large that we won’t even be able to pay the interest on the debt. So I say bring on more downgrades. We’ll never get anywhere unless we are forced to actually confront our problems since our leaders are unwilling to actually do so.

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