Two Types of Crazy

The downgrade of America's credit rating reveals the nation's long-term fiscal insanity.

Creditors don’t like risk. And when a nation acts a little crazy, creditors—and the credit rating agencies that decide which sovereigns are risk-free borrowers—are bound to notice. That’s what happened last week, when credit rating agency Standard & Poor’s downgraded America’s credit rating from its risk-free AAA status. S&P’s downgrade notice observed two types of erratic behavior from America’s political system. And the Obama administration is ignoring the one that matters.

The first was short-term and charged by contemporary partisanship—a sort of temporary political insanity. Debt limit brinkmanship from both parties revealed exactly how difficult it would be for America’s political system to resolve even the most basic fiscal policy disputes, much less make substantial fiscal changes. When debt deal talks began, S&P announced that it expected Congress to work out a deal worth a minimum of $4 trillion in deficit reduction—the minimum necessary to stabilize the country’s debt over the medium term. But after months of bickering, Congress only managed to come up with about $2.5 trillion in cuts—and only at the very last minute. Which explains why S&P now believes that “the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges.”

The showdown’s gridlock antics provided the proximate cause of the reduced credit rating. But the S&P’s downgrade notice also pointed to a more fundamental form of crazy: the long-term build-up of federal debt scheduled to come from America’s entitlement system—and the broad refusal to do anything about it. It’s not just that the deal failed to knock the minimum dollar-figure off the deficit. It’s that it failed to address its root cause: “The plan envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability.” Entitlements—and their unsustainable financing systems—in other words, are the core of the long-term problem.

Yet in the days since the downgrade, the White House has focused almost entirely on the question of how to calm the political system’s temporary behavior, or at least assign blame for its current intensity. In a statement on Monday, President Obama grumbled that “we didn’t need a rating agency to tell us that the gridlock in Washington over the last several months has not been constructive, to say the least” and that “we knew from the outset that a prolonged debate over the debt ceiling…could do enormous damage to our economy and the world’s.”   

At the same time, the president brushed off worries about Medicare’s prospects. While administration officials promised not to touch benefits in any way whatsoever, Obama declared that the country needed only “modest adjustments to health care programs like Medicare.” With insolvency on the horizon—even the most optimistic projections suggest the program won’t be able to fund its full obligations by 2024—and total unfunded liabilities pushing past $36 trillion, or almost three times America’s total current annual economic output, it’s clear the program will require more than modest changes. It’s just as clear that the Obama administration doesn’t want to face this reality—or ask the public to do so either.

That’s too bad. Because eventually the bills will come due. The crude political shenanigans of the debt-limit showdown may have provided the reason to downgrade America’s credit today. But political moments and the legislators who make them happen eventually fade; the Congress of 2013 will not be the same as Congress today. The debt build-up, on the other hand, isn’t going anywhere without legislative action. And it is the lousy state of our entitlements—and the failure to deal with their long-term problems—that ensure the nation’s fiscal outlook will be burdened by the threat of debt and risk for years to come. And as the S&P's new rating suggests, it's more than a failure. It's nuts. 

Peter Suderman (peter.suderman@reason.com) is an associate editor at Reason. 

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  • Tim||

    it's Bush's fault.

  • King Ludd||

    Totally dog. I mean what genius cuts billions in taxes, starts 2 unpaid wars and expands medicare coverage? Geez louise homie. Now we got my ninja Obama up in there trying to make everyone happy. Someone's gotta get fucked. Either the little guy or the big guy. Homeboy needs to make up his damn mind.

  • Angry Whitebread||

    Can it be tools who talk ebonics on the internet?

  • King Ludd||

    I was talking about Bush genius. You be whack dog. You be whack.

  • Anomalous||

    And you be wiggin'.

  • Gilbert Martin||

    Indeed.

    He hopped in his time machine and went back to the 1930's and forced FDR to create social security.

    And then he zoomed on up to the 1960's and arm twisted LBJ into creating the "Great Society".

    And he put a spell on every Democrat politican who ever served in elected office in the last 80 years so that they would continually up the ante on benefits paid out of those entitlemnt programs.

  • DK||

    Fuck you, Gilbert. He also signed Medicare Part D into law. He also expanded the DoD to unsustainable levels. Stop being a Republican lackey douche. Fact of the matter is that your beloved Republicans haven't done a fucking thing about any of these programs either.

  • ||

    DK's right -- for the last 30 odd years, the Repubs have played Renfield to the Dems' Dracula.

  • Your Elbow||

    I think you have the roles reversed, but really, does it matter?

  • Tim||

    "No matter what some agency may say, we've always been and always will be a AAA country."

    Now that's crazy.

  • OO||

    buffett says 4 star

  • ||

    Right, assuming, as he does, that the rating merelt relfects that creditors will receive dollars, regardless of their actual purchasing power. That's a ludicrous standard since a lender DOES care about the value of the repayment, and would not lend the money at all if he knew we planned to print 14 trillion tomorrow to "eliminate" the debt.

  • Helicopter Ben||

    " if he knew we planned to print 14 trillion tomorrow to "eliminate" the debt."

    Get that man in here!

    He's a GENIUS!!!

  • sevo||

    "buffett says 4 star"

    He also whines that he's not taxed enough, with no effort on his part to just, well, hand over the dough.
    And when he *does* hand over the dough, you notice he gives it to someone who demands results, not to the government.
    Hypocrite or beginning dementia; you decide.

  • ||

    Buffet knows value, even when its rigged, and has the connections to see such corruption coming before the lumpenproleteriat losers.

    When Scrooge got that sweet deal with Goldman Sachs in late 2008, I knew the fix was in.

  • Realist||

    Just another rich lib....full of shit.

  • Anomalous||

    Warren or Jimmy?

  • mad libertarian guy||

    When I read that the first time, I threw up a little in my mouth.

  • Rrabbit||

    More precisely AAA++ungood.

  • jacob||

    freedom is slavery

  • MrGuy||

    Slavery is freedom.

  • Fearsome Tycoon||

    No matter what some credit card company may say, I've always been and always will be an 800 FICO guy.

  • ||

    I'm not sure I'm seeing how a political system that doesn't rubber stamp every stupid thing that comes along is "crazy."

  • Fist of Etiquette||

    The problem being the prodigious use of the rubber stamp leading up to this point.

  • ||

    Precisely the problem of prior politics.

  • ||

    Have you met our congress? Every single one of them has at least a smidge of bat-shit crazy in them.

  • ||

    Right. That's why the system is designed to encourage "gridlock."

    When Congress actually does "do something", it's like to do something that's batshit crazy.

  • Mabal Zarhairi, II||

    YES!

  • prolefeed||

    When debt deal talks began, S&P announced that it expected Congress to work out a deal worth a minimum of $4 trillion in deficit reduction—the minimum necessary to stabilize the country’s debt over the medium term. But after months of bickering, Congress only managed to come up with about $2.5 trillion in cuts—and only at the very last minute.

    Oh, for fuck's sake. There was no deficit "reduction" or "cuts". Congress agreed to slightly slow the rate of growth in government spending, to continue to increase the deficit, and to make many illusory "changes" which will likely not happen at all.

  • ||

    If there's growth in the deficit under the current plan--and there is--then the failure to cut means that we missed by more than the $4 trillion indicated. We missed by $4 trillion plus whatever the annual increase is.

    We're lucky we're no getting downgraded more than we are.

  • ||

    We're lucky we're no getting downgraded more than we are.

    Luck has nothing to do with it.

    If the rating agencies graded the US debt as it should be graded Congress and Obama would have them behind bars within the week.

    The threat of violence has nothing to do with luck.

  • ||

    It's hard not to wonder how far they might go when the Senate starts investigating a completely legitimate and justified decision by a rating agency.

  • ||

    Oh, I hope they do. It would beautifully expose the legality of government for the sham it is.

  • ||

    We're so fucked.

  • ||

    Once the government gets this out of control, yes, we are fucked. I wonder if there is any historical government that comes close to having the same combination of size, gross receipts (money to spend), and disproportionate military advantage as our government. I doubt it. So we get to see what happens when something that huge and powerful decides it itself is not just too big too fail, but too big to even let people point out that it's failing.

    Good times.

  • ||

    We've got some years before the true comeuppance occurs, but when it does, I'm convinced that economic collapse coupled with almost total military superiority can mean only one thing. And I really don't want that to happen.

  • ||

    Our government now has its own inertia, dude. Note how its trajectory remains unaffected by economic reality; how it will deny a ratings downgrade rather than change that trajectory.

    I don't know what's going to happen, but we are going to find out unless something impossible happens like Rand Paul of Gary Johnson becoming President and they're able to do something about it (assuming Congress lets them).

  • ||

    We either start throttling Leviathan now or soon, or we become imperialistic. I don't see any other likely outcomes, unless robots take over.

  • ||

    It's already too late. I don't see anything or anyone that can throttle it at this point. If 99% of Congress won't throttle it when we're completely off the fucking rails financially, how will it get stopped?

  • ||

    Pro-

    Ah, we have been The Empire for quite some time now. Incredibly, there are so many otherwise "smart" people, across the political and ideological spectra, who just don't get it.

  • jacob||

    We already ARE imperialistic. Why the hell do we have bases in over 60 countries outside of the US? Why do our Naval vessels enter the ports of just about other nation on the planet. We are flying the flag in a 'Pax Aemericana.'

    Face it, the three wars we are involved in with the Muslim's are really just border actions when you look at it from an historical perspective.

    Real wars are ones that threaten a nations survival. The US is running three training camps for the troops. At this point the whole of the military (the Army and Marines at least) have seen actual combat. Think Spain back in the 30's.

    It is a monumental crime.

  • M. Simon||

    Because they invited us? We do get uninvited from time to time.

  • Realist||

    "We've got some years before the true comeuppance occurs,..." Don't kid yourself the time will be soon.

  • ||

    Don't count on the military to side with the government. Each and every military member swears an oath to "support and defend the Constitution of the United States of America", NOT to support the US Government. And many of them take that oath deadly seriously. They may surprise you.

  • ||

    If by "some years" you mean 3, good for you. But if you think it's 10 or more, you need to rethink what's happening.

  • k2000k||

    One word. Rome. During a situation not all too unsimilar to this, growing debt, numerous wars, an increasingly ineffective government. A very powerful man by the Gaius Marius become consul, and was elected an unprecendented 7 times. He began the process, which was later accelerated by his newphew by marraige Julius Caesar, and finished by Octavian of the slide from republic to a true empire. This whole debt debacle makes me shake my head because of what it will reap. America won't stop being the most powerful military nation on earth, we simply will use it even more wantonly and aggressively than we have in the past.

  • k2000k||

    sad considering that America isn't exactly squemish about using military force as it stands.

  • ||

    Hopefully, there will be more Chinooks grounded as there were countless legions which were decimated.

  • ||

    Everybody who gets the Republic-to-Empire shtick going misses illegal dictator 1.0: Sulla.

    Why does everybody miss that guy in such allusions, every time? Poor Sulla!

  • ||

    Everybody who gets the Republic-to-Empire shtick going misses illegal dictator 1.0: Sulla.

    Why does everybody miss that guy in such allusions, every time? Poor Sulla!

  • ||

    Sulla came after Marius.

    I've mentioned this before, but I've been reading a book--Empires of Trust--which makes a good case that the U.S. is similar to Rome during the Middle Republic. Then, Rome tended to make allies, not engage in wars of conquest, and was generally trusted with the great power it had. That all changed, of course, but the parallels between the U.S. and that Rome are striking. If they mean anything, then we may be a proto-empire (meaning that we could end up being the de facto ruler of much of the world if we go true imperial).

  • ||

    Yeah, but no one mentions him. And he's the guy who was first - the very first - to take his army to the gates of Rome and seize power. The fact he pulled a faux Cincinnatus in retiring, after killing all his political enemies (J. Caesar himself was at risk during this time) doesn't exonerate him in any way. He's the one who established that precedent. And nobody mentions the guy.

    But in comparison to Rome I see parallel between the USA of 1945 and the Rome of 146 B.C. That parallel being you see a single political state - for the first time - project power simultaneously to two competitors and crush them both. Everyone remembers Carthage of course. But incompetent Diaeus leading a fool's errand in taking Rome on that same year led to Mummius annihilating Corinth, as thoroughly as Carthage.

    Caesar refounded both cities a century later. The Corinth of the Bible was a Roman city, the Classical Greek one had been gone for century-and-a-half by St. Paul's time.

  • Fearsome Tycoon||

    Everyone parallels Rome ca 140 BC, but I see more the British Empire ca. 1930 AD.

  • ||

    Head over to Hardcore History and download the 6 part Fall of the Roman Empire podcast. Mindblowing.

    Sullu killed of so much of the competent senator class probably leading to the libertine generation of Julius Ceasar.

  • ||

    WINNING!

  • Anonymous||

    And you fools are on record saying we are fucked. First in line for the re-education camps when things go downhill.

  • seguin||

    Dunno, maybe Athens at the end of her Empire? She was getting tons of talents from other Greek cities, and her nearest rival Sparta wasn't wealthy at all.

  • Mabal Zarhairi, II||

    YES!

  • Realist||

    Well I agree with you that it is a sham. But most of the dumb fucks in this country would bite. Look who they elected.

  • ||

    At end of day, S&P (and Moody's and Fitch) get what they deserve dragged before their masters. The rigged system of 'ratings agencies' gives them credibility by fiat.

    So even though they get it wrong (Enron anybody?) again and again and again they have a captive market.

    The same creature which they have eaten off of has now turned on them, simply because the fiction of the USA as a solvent ongoing concern is too great to maintain.

    AA+ my ass.

  • Old Mexican||

    Re: TheZeitgeist,

    AA+ my ass.


    Sorry, Z, but I cannot take your word for it. I will wait for S&P and Moody's to rate your ass.

  • ||

    +1

  • ||

    "Congress agreed to slightly slow the rate of hypothetical growth in government spending"

    Fixed

    There is no reason why discretionary spending has to go up each year and the idea that entitlement spending has to go up each year without congressional approval is not constitutionally sound.

    There is no set rate of growth therefor there cannot be a cut of said rate.

    There is only the increase in spending that they agreed upon.

  • ||

    Didn't Buffet say that we're really a AAAA country? He should know, because he's really smart (and rich too, but we don't have to denigrate him because he supports dems).

  • Mike M.||

    It's deeply pathetic that such a once great capitalist has sold his soul and become a big government ass-kissing stooge to the extent that he has.

    We should probably already be a little closer to BBB than AAA at this point. Destroying your own currency is just another form of default.

  • Kroneborge||

    When you have billions on the line, you talk your book.

  • k2000k||

    He openly threw in with Obama during the 08 election. He doesn't have much choice now but to stay the course. Imagine the fallout if he comes out and says what he is probably thinknig. That Obama has been a complete failure and congress completely inept, hes said the second part, but he could never say the first.

  • Your Elbow||

    A lot of people threw in with Obama during the last election. The alternative was ...unappealing.

  • ||

    The only people who like Buffet are frat boys and alcoholic chicks from the South.

  • ||

    I like "Defaultaritaville."

  • ||

    Never forget that Buffet, at least in part, owes his fortune to rent seeking. I do not know if he would have become so rich without the death tax.

    Getting rich by rent seeking is not to be admired. It is not in the same universe as getting rich by offering one's goods, services and ideas to others upon a voluntary basis without any state inducement or angle.

  • Greer||

    Not only that but he has never actually created, produced, sold or run anything. He obviously has a skill at finding good investements (though some seem be fairly obvious- Coke, good call) but I've never figured out the adulation for this guy. I respect people who build a business, create wealth, build somethign that people want to buy. He is a successful gambler.

  • ||

    Although Buffet pisses me off your statement isn't true. His company often buys managing shares in business that are underperforming and he replaces the management team and turns the company around. That's one reason why nobody has been able to consistently equal his performance.

  • ||

    Yeah, he does something very few investors do: Takes an interest in the companies and is proactive board member every time. And he knows how to crush a union too. He did it his Buffalo paper, and obviously his fingerprints are all over that liberal scion Kathleen Graham's grueling labor ordeals at the Wash. Post. He's a nasty, smart, cheap motherfucker. The last thought in the last firing neuron of his mind before death will be his net worth, which is his version of 'the score' I have no doubt.

    And it will be accurate, to the penny.

  • Mr. Burnes||

    "And he knows how to crush a union, too"

    Exxxcellent!

  • Realist||

    Like the assholes on CNBC.

  • Fluffy||

    Buffet makes money when the stock market goes up.

    Buffet also has considerable holdings in insurance companies that require asset prices to rise.

    Buffet also has considerable holdings in consumer product "value" companies that require increasing cash flow to show earnings growth.

    Buffet has more incentive to seek asset price appreciation via currency depreciation than any follower of William Jennings Bryan ever did.

  • ||

    Its funny the way Dems love the guy. But when you read his Owner's Manual to shareholders (and he's a nasty shit, but a great writer) he's like their darkest nightmare.

    You see his talent in describing insurance business - for any insurance - in terms of 'float' vs. premiums. Most insurance companies don't make a dime on premiums, they make a dime on the 'float' before they invariably pay claims.

    Buffet gleefully tells his shareholders - when he can anyways - about hos Such-and-Such insurance co. is making money on premiums. Because when that happens, as he likes to relate, people are literally paying you to take their money and make money off of it before giving back to them in a claim years and years later. What an aw-shucks guy! What a man of the people!

    Fucking greedy, nasty son-of-a-bitch that Warren Buffet is.

  • ||

    They idolize him because he supported the bailout.

    There is literally no other reason.

    And as stupid and perver and regressive as the bailout was, it justified further government interventions.

    That's it and that's all. They like Buffet because he lent credibility to the notion that government's should manage the economy.

    They don't give too fucks about the specific effects of that intervention, as long as it justified an extension of state power.

  • Realist||

    Buffet also owns Moodys.

  • Realist||

    "...because he's really smart..."
    Citation please. He has billions of dollars and lives in Omaha in the same house for 40 years!

  • OO||

    the S&P CEO said the downgrade was about DC politics not the deficit.

  • ||

    Right, the DEFICIT and DEBT and totally unrelated to a CREDIT downgrade. No relationship at all between those things.

  • DLM||

    the S&P CEO said the downgrade was about DC politics not the deficit.

    Link? Since when does S&P rate the tempmorary political climate? Does this mean a new rating every two years despite what the long term barely affected financial outlook might be?

  • ||

    Of course that's total nonsense.

  • The Other Kevin||

    I second the request for a link. If our current debt were only $1T, and we had that same crazy debate over raising the debt limit $10B, do you really think that downgrade would have happened?

  • Skr||

    Actually, he said something to the effect that there are big debt and deficit issues and the political climate is such that no resolution to those problems are in sight. Therefore the downgrade. It's not like he was just bitching about politics.

  • ||

    It's such an absurd claim to make. The Democrats are just insane right now. If this is a meme they seriously want to try on for size, they're going to get crushed.

  • Rob||

  • Rob||

    Dickwad referring to "OO", of course.

  • ||

    You need to be pretty specific around here.

  • Dickwad||

    I thought he was talking to me.

  • Dick Le Wad||

    but not me, oui?

  • Diq Waad||

    Nope.

  • sevo||

    OO|8.10.11 @ 5:00PM|#
    "the S&P CEO said the downgrade was about DC politics not the deficit."

    And OO was dumb enough to post this.

  • Old Mexican||

    The downgrade of America's credit rating reveals the nation's long-term fiscal insanity.


    Political schizophrenia, brought by this "downgrade":

    a) S&P is a fraudulent rating company making a fraudulent rating.

    and

    b) It's all the Tea Party's fault, anyway!

  • ||

    S&P and Moody's both warned the government that they would be forced to downgrade if the government did nothing. The government did nothing.

    What's the problem?

  • Old Mexican||

    Re: Pro Libertate,

    What's the problem?


    I have no idea. Either S&P is fraudulent, in which case the Tea Party's participation is totally overblown, or S&P is not fraudulent and the government was indeed downgraded. The politicians want it both ways.

  • Bob||

    It's racist! That's the problem.

  • Neu Mejican||

    And the Obama administration AND CONGRESS ARE is ignoring the one(S) that matter

  • ||

    Yeah, fuck the Republicans, too, for not forcing a real spending cut. I don't care about the politics of it--just do it. The Democrats are the principal problem in reform right now, but both parties got us here, and the latest punting of the ball was a bipartisan effort.

  • Neu Mejican||

    The Democrats are the principal problem in reform right now

    I don't think this rings true...there seems to be plenty of resistance on both sides of the aisle against entitlement reform. Add to that the Republican resistance to talk tax reform and I think it is a wash.

  • ||

    Yes, the GOP has lots of blame here, but they've been mostly talking about actual cuts to spending and passing a balanced budget amendment, something the Democrats have clearly opposed.

    And no one is talking tax reform. What the GOP is resisting--and rightfully so--are Democratic calls for tax increases. Spending is the problem, along with the debt. Squeezing taxpayers isn't the solution.

  • k2000k||

    Other than Ron and Rand Paul I cannot think of any member of the GOP, in congress, off of the top of my head that has talked about real spending cuts. Even the Ryan plan didn't have real spending cuts, it simply lowered the rate of spending much more than all the other plans.

  • Neu Mejican||

    no one is talking tax reform. What the GOP is resisting--and rightfully so--are Democratic calls for tax increases.

    Well, Obama did. He used his typical vague, non-specific mumble mumble, approach in his call for basic tax reform, but he called on Congress to simplify the individual tax code significantly in order to broaden the tax base.

  • MJ||

    In other words, Obama did not talk tax reform. He may have used the phrase "tax reform" but it had no real meaning.

  • Red Rocks Rockin||

    What the GOP is resisting--and rightfully so--are Democratic calls for tax increases.

    Which is irrelevant anyway, because the Bush/Obama tax rates and Obama FICA cut expire in 2013. If they were resisting, it was only because the Dems would rather jack up the rate to 90% on everyone making over $200K a year.

  • ||

    Stop lying new mex..even after removing the Bush tax cut and taking away mortgage tax breaks and tax corporate jets you get like 50 billion extra dollars.

    It would not make anywhere near a dent, and all it is is an appeal to class warfare and an attempt to distract from the 4 trillion Obama and his Democratic congress spent in only a 2 year period. A time at which they could not even pass a fucking budget.

  • ||

    Opps...it was 4 trillion that Obama and his democrats went into debt...they actually spent more then that.

  • Neu Mejican||

    even after removing the Bush tax cut and taking away mortgage tax breaks and tax corporate jets you get like 50 billion extra dollars

    Or you could go with the treasuries estimate of 3.7 trillion over the next decade, but that's just rounding error, right?

  • Brian R||

    The debt is expected to increase by what, $7T over that time period? And that's based on the claims of Obamacare being deficit neutral, and GDP growth of 4%, and interest rates near zero. ie, it's total fantasy - the debt will go up by much more.

    In that context... yes, $3.7T over 10 years is pretty much a rounding error. Sadly.

  • ||

    That Treasury estimate is the projected revenue from allowing ALL the Bush tax cuts to expire, which neither party is advocating.

    The Democrats are advocating for allowing the Bush tax cuts at the top marginal rates to expire. This would bring in an estimated $700 billion in revenue over ten years -- nowhere near $3.7 trillion.

    Moreover, all of these estimates are inherently ridiculous insofar as they're static: they assume that tax policy has no effect on economic growth.

  • PR||

    Add to that the Republican resistance to talk tax reform and I think it is a wash.

    Democrats favor tax reform? Not if it lowered taxes.

  • ||

    Pro be warned, New Mex is intentionally trying to blame the tea party by association.

    Yes the old guard republicans are fuckwits...but that was not the intention of New Mex's post.

    Despite the tea party voting against the bill New Mex wants them to take the blame.

  • Neu Mejican||

    Where'd that come from?

    You're off your fucking rocker here Joshua.

  • Neu Mejican||

    Despite the tea party voting against the bill New Mex wants them to take the blame.

    Depends upon what you mean by "take the blame." I don't think that voting against the final deal absolves anyone who participated actively in the failed process. So, share in the blame, sure. Solely to blame. Not even close.

  • Old Mexican||

    Re: Neu Mejican,

    I don't think that voting against the final deal absolves anyone who participated actively in the failed process.


    Wiser words cannot be uttered.

  • prolefeed||

    Depends upon what you mean by "take the blame." I don't think that voting against the final deal absolves anyone who participated actively in the failed process. So, share in the blame, sure.

    Gang of thugs: "OK, now we're all gonna assrape Neu's grandma.

    Neu: "No! That is wrong!"

    Assraping starts.

    Prolefeed: "Neu, you deserve to share in some of the blame, because you participated actively in the failed process to discourage these people to not assrape your grandma."

    Neu: "Oh, right, I guess that makes sense."

  • Neu Mejican||

    Analogy fail.

  • Old Mexican||

    Re: Neu Mejican,

    Analogy fail.


    Ha! Sourpuss. It was a very funny analogy.

    Assrape... He he he!

  • Angry Whitebread||

    Steve Smith loved the analogy.

  • Neu Mejican||

    Funny or not, still an analogy fail.

  • M. Simon||

    A mind is a terrible thing to lose. I can help you find yours. For a price.

  • MlR||

    "I don't think that voting against the final deal absolves anyone who participated actively in the failed process."

    What a dumb rationale for an argument.

  • Neu Mejican||

    Why? There were better ideas on the table, but the jokers couldn't make the hard choices and compromise. They decided to go for empty show rather than coming up with a workable solution. The final result is as much a result of their obstinate inflexibility as the sycophantic trust of the congressional leadership shown by those who went along with the deal.

  • M. Simon||

    Votes.

  • mad libertarian guy||

    Personally, I'm not sure why the Tea Party deserves blame for ANYTHING regarding the debt.**

    They weren't around to rack up the debt, and their calls are to cut out the problem (spending) from DC.


    **Except those TP politicians who joined the TP out of political expediency.

  • DJ 9000||

    Looks like those clowns in Congress did it again! What a bunch of clowns.

  • Bad Morning DJ||

    How do you keep so up-to-date?

  • Spartacus||

    There are basically two ways the debt problem can be addressed:

    1) Congress can sack up and make some some difficult and unpopular decisions, which will probably cost many of them their phoney-baloney jobs, or
    2) the Fed can fire up the printing presses and monetize out way out.

    I used to hold out some hope that (1) might happen, but frankly I think the smart money is on (2).

  • ||

    The smart money is on 2, but of course if you bet against 2 and lose, the money you'll have to pay the winner won't be worth much, anyway. So maybe the smart bet would be on 1. :-)

  • ||

    The smart money has always been on 2. There's a reason that gold has been on a 10 year bull market, and that's it in a nutshell.

  • Fluffy||

    As an aside, can we all agree that the DC reaction to the S&P downgrade discredits for all time MNG's position that some theoretical financial regulator with greater powers would have headed off the financial crisis of 2008?

    You'd have to be brain dead not to realize that no administration official and no Congressperson cares one whit about whether the S&P downgrade was accurate. It inconveniences them, and therefore it is TEH WROHNG. Period.

    If some superregulator in 2004 had said, "Real estate is overheating and these mortgage bonds could be a huge risk to the system when the bubble bursts, let's downgrade them all and penalize the capital ratios of banks that own them," the same chorus of DC outrage would have echoed through the land, because anything and anyone who stands in the way of Washington's fantasy of endless credit growth and endless asset price growth and endless spending growth will get steamrollered as an "economic traitor".

    The Federal Reserve's pseudoindependence is a function of its non-governmental status. A true federal regulator would not even have the Fed's fig leaf of independence.

  • ||

    I agree. It's a great reason for not allowing the government to meddle in every decision on the planet. Politicians don't care about reality and facts.

    Frankly, I think the Senate "investigation" of S&P is an abuse of power, and should result in the removal of some people from office. Naturally, no such thing will happen.

  • Angry Whitebread||

    Unfortunately the only way some of these clowns could be removed with require a box that don't hold ballots.

  • jacob||

    We can always hope they get the plague of E-bola.

  • ||

    ^This.

    Really, popping a stock market or other asset bubble, which the voter are creating, and invested in, is political suicide. No sane politician is going to do it, and the regulators they appoint aren't going to want to commit career suicide by opposing them either.

    It's always been abundantly obvious that the government is likely to be more of a bubble-inflater than a bubble-popper.

    What we ought to have are lots more short sellers.

    I'd really like to see Hollywood make a film idolizing short sellers. They're the ones who are saving us from "speculators" driving up asset prices.

  • Bill||

    They still don't want the bubble to go away, based on all the policies the last few years to prop housing prices.

  • Mr Whipple||

    C'mon. You know if Bush were president, Cheney would have never allowed S&P to downgrade the US, and if they did, there would be a few hunting "accidents".

    Here's what Jim Rogers had to say before the downgrade:

    http://www.youtube.com/watch?v.....r_embedded

  • King Ludd||

    Why do we even care about the debt tho? What are the ramifications for the little guy?

  • Red Rocks Rockin||

    The ramifications are that the little guy will get caught up in the wash when the Central Savior State finally passes the breaking point.

  • King Ludd||

    Specifically what would happen tho? Like ATM's stop workin' or some shit?

  • Southerner||

    Oh, the ATMs will still work. It's just that the loaf of bread you're looking to buy will cost you $100,000 and your cab fare for getting to the ATM will already have cleaned out your checking account. Also, the store owner will insist on seeing all that cash up front before he'll give you the loaf, and there might be another $10,000 increase on the price in the time it took for you to get the cash. The ATM computer may also insist that you're only allowed to draw out cash in $1,000 increments.

    The people at city hall in my town recently indicated they won't be accepting any payments by debit card anymore, which makes me wonder what they might know about the (in)stability of our banking system in the near future that they're not telling.

  • DK||

    And then what? If you're smart and recognize the basic problem, you'll be fine. You'll realize that the U.S. dollar is nothing more than a formerly convenient means of exchange which is no longer convenient. So you'll move into some other means of exchange - maybe you'll barter. So you need something of value in that type of system. Hate to tell you this, but if the U.S. economy collapses, the repercussions worldwide will be tremendous. No currency and not even gold will be safe. All that will be safe is goods and knowledge. Food will keep you alive. Useful goods will be valuable. Skills will be tradeable. Gold and cash will be worthless.

  • ||

    Gold will not be worthless.
    Strange as this is, many people still value gold as a means of holding value.

    I'd bet anything the Saudis will still take gold in exchange for oil, for example.

  • ||

    Gold will not be worthless.
    Strange as this is, many people still value gold as a means of holding value.

    I'd bet anything the Saudis will still take gold in exchange for oil, for example.

  • King Ludd||

    Sounds a little far fetched G. But aight.

  • ||

    More seriously. Devaluation will wipe out the savings of anyone who actually has any, and cause real wages to fall. It will also cause a depression, almost certainly, that would last at least a few years.

    The end outcome would be a huge reduction in the standard of living of most people in the country.

    It's effectively a roundabout way of confiscating everyone's assets and using them to pay down the national debt.

  • Comrade Lenin||

    Of course, of course, but to make an omelet, you must break a few eggs.

  • ||

    While administration officials promised not to touch benefits in any way whatsoever, Obama declared that the country needed only “modest adjustments to health care programs like Medicare.” ....It’s just as clear that the Obama administration doesn’t want to face this reality—or ask the public to do so either.

    That is really the key point. As long as Obama is reassuring Democrats that there is nothing wrong with entitlements, there is no way any serious reform will happen. Someone needs to deliver the bad news to them, and it has to be someone from within their own party. If Obama isn't doing it, he's part of the problem.

  • ||

    Amazing the destruction people will unleash on this country just to keep their offices.

  • House Minority Leader Nancy||

    Eat me.

    No, really. I would enjoy that.

  • sevo||

    Ya know, sometimes when I go to a ballgame, I'm certain you're in town.
    And then I look and see it's only a low tide and the smell will go away in several hours.

  • ||

    Eat me.

    No, really. I would enjoy that.

    A mouthful of the Sahara would be more humid, but on the plus side...

    A shovel-ready job! Fill that hole!

  • Mabal Zarhairi, II||

    +1

  • AdamJ||

    On this note, anyone else sick of seeing CNN's polls they post every day? Let me guess:
    1) Americans don't want any benefits cut
    2) Americans don't want to pay for more benefits
    3) Americans want other people to pay more taxes, just not themselves.

    It's sad that so many in our country either don't understand simple arithmetic and are also so trained to demand things from others, yet not themselves. Sad state of affairs.

  • ||

    It's sad that so many in our country either don't understand simple arithmetic and are also so trained to demand things from others, yet not themselves.


    Those are the self same people who want to raise taxes on the ‘greedy rich’. Can you say projection?

  • ||

    Yeah, people talk about 'illiteracy' all day. But 'numeracy' is the problem in America today. Look at college degrees awarded...there was not a professor in town - of any discipline or school - that didn't know an integration from a difference in calculus for Newton was celebrated, even before everyone knew he was wrong!

  • ||

    Amazing what people will convince themselves of, in the face of what they know to be true, because it is momentarily convenient.

  • BigT||

    Only Nixon could go to China. Only a Prog can lead the Dems to sanity. They can't handle the truth.

  • ||

    I will consider you all my friends and comrades when we meet after the collapse on the the Mad Max-ian road in the near-distant future.
    Right?

  • ||

    Even the cops and other hilariously haberdashered homeboys of Caesar?

  • ||

    all are welcome to my gang, but we do it my way.

  • ||

    My plan is to score a couple of kilo of cocaine right before the apocalypse, and then barter it, a little at a time, to live a lifestyle of luxury.

    Heroin might work better as a means to enslave people, but the trouble with that is that having to manage all your slaves means you're at constant risk over being overthrown and killed.

  • Old Mexican||

    BHO: "we knew from the outset that a prolonged debate over the debt ceiling…could do enormous damage to our economy and the world's."


    This is the kind of statement that really makes me cringe: A man that presides over the most powerful government in the world, saying that the entire world economy depends on the U.S. maxing up the credit card. Which means the US has either a fool or a shyster for a president.

  • ||

    Which means the US has either a fool or a shyster for a president.

    A little from column A, a little from column B.

  • Jebus||

    Canada looks more and inviting all the time now.

  • mad libertarian guy||

    If you think taxes are bad here, try paying a 14% provincial tax and a 14% federal tax on everything you buy, then add a stupid high income tax on top.

    And that doesn't even start to account for the political nonsense Canadians pass as civil these days.

    I really dig visiting Canada, but I'd NEVER live there.

  • ||

    Not sure where you were, but in Alberta, generally viewed as right wing rednecks, we pay the Federal GST (VAT) of 5%, and have no Provincial Sales Tax. Our provincial tax is a flat tax of 10% after the first 12-20K of taxable earnings. As a libertarian, I am not proud of our system, but we are on plan to eliminate our deficit in 3 years. When we cut spending, we actually cut from this years budget to the next. Witness the hue and cry from the Left, when we recently eliminated 400 positions from Environment Canada (EPA)

  • Old Mexican||

    Re: AlfromAlberta,

    Witness the hue and cry from the Left, when we recently eliminated 400 positions from Environment Canada (EPA)


    I'm green....

    .... with envy!!!!

  • Lowdog||

    For all you investment/market savvy types out there:

    Let's say I have a good amount of investment in farms and stocks, with the way this thing is going, what's the best thing to do? Sit on what I have, or sell it all, and use the cash to buy something more valuable, or???

    Just curious what some of ya'll think.

  • Old Mexican||

    Re: Lowdog,

    Let's say I have a good amount of investment in farms and stocks, with the way this thing is going, what's the best thing to do?


    You can always fill your farms with goats, feed them the stocks, and sell goat cheese.

    Goat cheese is delicious with crackers, and on pizza.

  • AdamJ||

    Goat cheese and pepperoni is awesome on pizza. Not a huge fan of either ingredient, but together they are so good!

  • Abdul||

    The only problem with raising goats is the Arabs are going to try to fuck them.

  • prolefeed||

    I'd hang on to what you've got, unless you know for sure you have a higher paying way to invest the money after taking in consideration the risks.

    The transaction costs of buying and selling make "buy and hold" usually the best strategy unless you have insider information on what is going to happen next.

  • BigT||

    The Depression gave us the 'Depression mentality' - remember Grandma saving bits of cloth and Grandpa using old snuff boxes to organize his tool box? We've lost that sense of frugality and have become a disposable society. If the American people can re-learn those values, the coming Depression may turn out to be just what we need to salvage our 'frontier' heritage of self-sufficiency.

  • mad libertarian guy||

    That and the ability to make one's own ammo to stave off looters.

    We live in an entitlement society, one that did not exist during the depression. I can't imagine how bad crime will be if we do indeed hit times as bad as those. Not only will there be suffering, but people pissed off that someone stole their government cheese as well.

  • ||

    I'm going to start using the phrase "government cheese" to refer to entitlement gravy from now on.

  • ||

  • Tony||

    Especially teabaggers. They got so fuming mad that Obama touched Medicare that they elected a bunch of people who want to dismantle Medicare. Blind stupid fury.

  • ||

    Enjoy your health-care Donkey bitches. Obama was not the seeker of bipartisanship and what not the left claims he was over these past few years, he blew his mandate with that idiotic law is what he did. Don't forget that Donkeys.

    And the only fruit it's bore for the Jackasses is them getting kicked out of the lower House, replaced with a bunch of Tea Partiers. There's political consequences for doing stupid shit, even if the answer is as stupid as Michelle Bachmann, seriously Jackasses. If you think electorate is stupid for doing that, well, you don't understand or respect your political customer. And in a democracy, you have to do otherwise.

    And as for the other birds of that bill come home to roost, the Democrats will find that shit-sandwich a poisonous political lunch they have to keep eating; again and again and again from now 'till 2016 or so.

    As the Donkeys so rightly deserve.

  • Southerner||

    Hey Steve, Tony here seems to want more nuts in that purdy mouth of his. You up for it?

  • Mabal Zarhairi, II||

    +1

  • bradley johnson||

    Bad really bad. crime is already escalating in parts that it normally dosen't. Thieves are starting to get really brave and go into the more affluent neighborhoods. They are also targeting students as well. At least this is what I have noticed from the news and word of mouth from locals. Ammo is good but knowing how to shoot a gun effectively is even better

  • prolefeed||

    There's nothing wrong with, say, throwing out a broken toaster that can be bought new for $15 if patching it up yourself eats up your time that is valued at $100.

    The Great Depression gave us poverty, thanks to FDR's meddling, and dropped the value of people's time to the point where such scrimping sometimes made economic sense. That is not a good thing.

  • Southerner||

    The more trash rich people throw out, the more treasure poverty-stricken scavengers will have to salvage. Thus, material wealth in a consumerist society truly does trickle down to the poor from the rich, albeit only to the poor who are smart enough to know where to look and not too proud to dig for it.

  • ||

    Yeah, but having the skills to make your own toaster makes it possible for you to make a cheaper toaster to sell to someone else.

    What is the time you're spending making that $100 is coming from some government gravy train paid for by money looted from someone who actually knows how to make toasters for $5, but has to charge you $15 to pay for the FICA taxes and the health care, and the pensions that he has to provide for his lazy unionized work force?

    I think the point is that people used to value efficiency, but the idiot neo-Keynesians we have in office think that prosperity is a product of spending as much as possible without reference to actual goods and services that are produced.

    It may be cheaper for you to pay $15 for a new toaster, than to fix it yourself, but only if the money your paying for the toaster is obtained by your producing something that is actually worth more.

    If you are getting your $100 fresh of the government printing press, or borrowed from the future, or stolen from a more productive person, then it's NOT more efficient for THEM.

  • ||

    Correction: It may be cheaper to YOU to pay $15 for the new toaster, but unless the $100 you would earn in the same time is obtained by producing something that is actually worth $100, it is not more efficient for society. If you fixed your own toaster instead of buying a new one on the taxpayer dime, we'd all be better off.

  • Bill||

    I usually like your posts Hazel, but this one made my head hurt so I stopped reading it.

  • ||

    It made my head hurt too.
    But really, it's just another way of explaining why government spending fucks up incentives and decreases net utility.

    You are better off buying the new toaster, but I the taxpayer, would be better off if you fixed it yourself and collected $15 less in Social Security.

    The wealth transfer essentially makes it not worth your time to produce anything if you can get it for free while sitting on your ass.

  • King Ludd||

    I feel like part of tha problem is we assume that we live in a capitalist society and we clearly don't. ANd if a true capitalist system were implemented the markets would quickly crash. And so we have this state feudalism bs. I'm happy tho. My family's got $$$$ so I'm set.

  • Mabal Zarhairi, II||

    I can feel you, my negroe.

  • ||

    Let's say I have a good amount of investment in farms and stocks, with the way this thing is going, what's the best thing to do?

    Hang onto the real estate, especially if it pays its own way.

    The stocks? Keep a very close eye; I don't see the fundamentals for the valuations we have now - I think they are in a Fed liquidity bubble. The Fed has promised more liquidity, but there are diminishing returns on that strategy.

    Its late days, but I would hedge against currency collapse with some (physical) precious metals. Also a market that is overdue for a correction/buying opportunity, but if you are buying for a true long-term hedge/insurance, waiting for a correction may not matter to you.

  • قبلة الوداع||

    ThaNkS

  • mbt zapatos||

    For just not giving a shit, he let one out on nation television and didn't lose a beat. I'm not a fan of the guy, but props.

  • jordan retro||

    The wealth transfer essentially makes it not worth your time to produce anything if you can get it for free while sitting on your ass.

  • ||

    Ha ha.

    Libertards ca. 2008:

    S&P are in collusion with government. What looks like wall-to-wall MBS ratings fraud is actually the government distorting the free market for ratings. They can't be trusted because the government uses their services along with their two main competitors.

    Libertards ca. 2011:

    S&P are awesome and beyond reproach! The conflict of interest inherent in S&P being allowed to own the securities they rate, having not been regulated away, is a triumph of The Free Market At Work.

    Ha ha.

  • ||

    What is crazy is an article in an ostensibly libertarian magazine that apparently advocates letting governments turn their populations into indentured servants to private banking cartels - no matter that population be current or a population yet unborn. That is crazy. In a free society one man cannot be held liable for the debts acquired by another. A son cannot be held accountable for the sins of the father or the grandfather or the great grandfather - no real libertarian would buy into this myth. A correct application of libertarian philosophy can only come to one conclusion - default is the moral thing to do.

  • ||

    Health care is a major drain on the U.S. economy. In 2007, the U.S. per capita spending on health care was about $7000 (give or take a few hundred). In Canada, it was about half that. Of course, In Canada everyone is covered, but in the U.S. there are some 50 million who don't have coverage. So why is health care in the U.S. double the cost of health care in Canada? Is it so much better? No, it's the issue of profit. When insurance companies get involved, and when hospitals are privately run, and when each hospital has several floors dedicated to payments and collections, and when doctors are making fortunes on the suffering of their patients, and when drugs are so expensive that drug companies have to give the stuff away to poor people, and when every patient gets an MRI (even for a hangnail), and when half of Americans are obese, is there any real question why health care in the U.S. is so expensive? It's not better quality; it's PROFIT. Create a single payer, government-run system, and $1 trillion will be saved right away. Oh, I forgot. Anything the government gets involved in is plagued by cost overruns, graft, and boondoggles--just like in Canada.

  • King Ludd||

    Preach. But our biggest welfare program aka the armed forces gets lip service all day from the Repugs on this page.

  • ||

    Anything the government gets involved in is plagued by cost overruns, graft, and boondoggles--just like in Canada.

    Everywhere... and in Canada, too.

  • قبلة الوداع||

    thank u

  • air max 24-7||

    so good!

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