Moody's May Cut US Rating on Tax Package http://www.cnbc.com/id/40641123 Moody's warned Monday that it could move a step closer to cutting the U.S. Aaa rating if President Obama's tax and unemployment benefit package becomes law. The plan agreed to by President Obama and Republican leaders last week could push up debt levels, increasing the likelihood of a negative outlook on the United States rating in the coming two years, the ratings agency said. A negative outlook, if adopted, would make a rating cut more likely over the following 12-to-18 months. For the United States, a loss of the top Aaa rating, reduce the appeal of U.S. Treasuries, which currently rank as among the world's safest investments. "From a credit perspective, the negative effects on government finance are likely to outweigh the positive effects of higher economic growth," Moody's analyst Steven Hess said in a report sent late on Sunday. After Obama announced his plan, Treasury prices fell sharply in volatile trade last week and yields have hit a six-month high, in part due to concerns over the effect the package will have on government debt levels. If the bill becomes law, it will "adversely affect the federal government budget deficit and debt level," Moody's said. On Monday, the Democratic-led U.S. Congress moved toward grudging approval of President Obama's deal with Republicans to extend expiring tax cuts, even for the wealthiest Americans, Last week, Moody's and Fitch Ratings both expressed concerns about the U.S.'s rating longer term, with Moody's fearing the impact if the tax cuts become permanent. For more, see In a market obsessed with the euro sovereign debt crisis, the Moody's note reminded foreign exchange investors about their worries of growing U.S. debt and was a factor pressuring the dollar on Monday. The cost of insuring U.S. government debt in the credit default swap market was little changed on Monday at around 41 basis points, or $41,000 per year to insure $10 million in debt for five years, according to Markit Intraday. Negative Impact A negative outlook would indicate that the rating may be more likely to be cut from the top Aaa rating over the following 12 to 18 months. The United States currently has a stable outlook, indicating a rating change is not anticipated over this time frame. Moody's estimates the cost of the funding the proposed tax bill, along with unemployment benefits and other policy measures, may be between $700 and $900 billion, which will raise the ratio of government debt to GDP to 72 to 73 percent, depending on the effects on nominal economic growth. Slideshow: 9 Tax Cuts Set to Disappear in 2011 This means that the government's debt relative to revenues will decline much more slowly over the coming two years, to just under 400 percent from 420 percent at the end of fiscal year 2010. "This is a very high ratio compared with both history and other highly rated sovereigns," Moody's said. =-=-================== Hooray for supply side golden shower economics wrapped up half assedly in stimulus clothing!
Let's look at the logic behind the whole deal. 1. Tax cuts put less than one dollar into the economy for every dollar cut. 2. Unemployment puts about $1.61 into the economy for every dollar in unemployment benefits. Tax cuts for the wealthy add 700 billion into the deficit. Unemployment benefits something like 33 billion. So with the tax cuts we get less for the economy, and more towards the debt. While extending unemployment is a bigger stimulus to the economy, and adds far less to our deficit spending. There just was no logic the GOP's argument here.
^That's 700 billion over 10 years. The portion both were arguing about (for the wealthy) was centered around 70-80 billion a year. The two year extension for everyone will cost ~560 billion, but the Democrat proposal, the Middle Class extension is still hefty at ~387 billion. http://www.pewtrusts.org/uploadedFi...ax Cut Addendum FINAL 9 2 2010 _v2.pdf?n=7577 Given that some Democrats were lukewarm on not extending it for the wealthy, this is an overall bad decision by both parties with short term political gain in mind. And it works because Americans can spend their hard earned tax $$$$ better than Big Government run by idiot politicians. Like interest only mortgage payments or the minimum amounts on their 5 credit cards. Thank god for last election! I can understand if people like Deckard thinks Obama just gave him a fat bird. The reason is there aren't more people like Deckard or real deficit hawks who'll take lumps to reduce the deficit and vote where their mouth is.
Either way it was a good deal more costly to our debt than the unemployment extension with less benefit to the economy. And despite this, this was what the GOP was willing to hold up everything in the Senate for in order to make a stand. That kind of stupid governing is not what anyone should pick as their issue to make a stand. I agree completely with what you posted about it being short termed political gains in mind.
Unfortunately there are few people willing to put up with short term pain and even fewer politicians willing to administer that pain in tax increases and spending cuts.
What's done is done. It was a bad move for the fiscal strength of the country. But unemployment benefits were a must. I think Obama could have gotten a deal done without caving on the estate tax at least. In any case, the only hope is that in two years they can increase taxes once the economy has recovered and everyone realizes the budget deficit is really hurting growth. Until that time, it seems that Obama will need to lax gov't regulation across the board to make the U.S. more competitive. The reality is that businesses can't compete when they have higher standards than 3rd world countries in a free trade world. I think we may see things like benefits continue to erode. Pension plans, health care, and environmental standards will need to drop. At least until the world has equalized.
Our government is knowingly ****ing us over, with the guidance of the wealthy, because they think we're too stupid to recognize that they'll **** us over long term if they think they'll be able to maintain their positions in the short term. And you know what? They're probably right. The last election offered sufficient proof of that.
And if you dare to criticize Mr. Obama, you're either "buying into the Republican talking points," or simply not paying attention. What a ****ing nightmare.
I'll say one more time, this is crazy. The GOP stopped all other Senate business to fight for one thing. Of all the options that were out there the GOP fought for the one that provides the least boost to our economy, and the most to our deficit. That is what the GOP held up all other business of govt. in order to do. Yet now, we don't see the supposed deficit hawks like da Whopper, Commodore, Thumbs, or even basso lamenting this a bit. In fact they seem to be in favor of it. Again... The GOP held out for the option that ADDED THE MOST TO OUR DEFICIT, and PROVIDED THE LEAST BENEFIT TO OUR ECONOMY. Keep cheering for them guys. The funny thing is that they often refer to people on the left as sheep. Look at what they bought in to.
Where's the teabagger crowd? Is thumbs protesting this at the capital under a giant stage where Glenn Beck is crying?
Not only that but republicans whined AND SIGNED AN OATH, that nothing, NOTHING will get done intil the tax cut “compromise” was complete. Now that it’s done, they’re whining that there’s no time left and democrats are disrespecting Christmas because those GODLESS Democrats want to work to get a few other issues done before the end of the lame duck session.
Exactly. What's crazy is the only tea party opinion of this I've heard is favorable. Somehow whenever anybody says they only reason they are concerned is because Obama is the president, Thumbs and the others always no, that it's been a real concern for a long time but now is just the time that they've had enough. It's only a coincidence that Obama happens to be the first black President. I'm wondering why thumbs, and the other tea partyiers aren't up in arms over this. We haven't seen him oppose this "compromise" at all even though it adds to the deficit more than any of the other options out there.
This whole Obama is black thing is getting really old. People dont oppose him because he's black people oppose him because he's a democrat. Unfortunately that is how most of the country is and how this two party system works. Most Republicans hate all things Democrat and most Democrats hate all things Repbulican. Are there Racist out there who hate Obama simply because he's black? Yup most likely but that is a small minority.
Yeah I don't really care much for the racism angle even though it no doubt exists to a certain extent. It's moot honestly, because both "I hate what he's doing because he's black" or "I hate what he's doing because he's a democrat" are ****ing r****ded.
QFT FranchiseBlade is wrong to assume that the right is against Obama because he is half white, half black. It's because his policies are trash.
I'm not saying that's why the tea party opposes him because he is black. But that charge has been made, and when it is made the tea baggers say "No, we oppose the growing debt. Even though we weren't organized during the Bush years we were all concerned about the debt." Yet now, when there were numerous options out there and the GOP held up congress to make a stand in favor of the one option that grows the debt more than the others, and has the least stimulating effect on the economy, the tea baggers either support it or are silent about it. The tea baggers claim they aren't Republican or Democrat. So there is the question, why do the tea baggers who supposedly care most about a federal deficit, now support or at least remain silent about the GOP push for this option. Whether it's racism or not it's hypocritical, shows that their supposed concern over the deficit is only a paper thin excuse.
