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S & P's Decision Appears Justified
Standard and Poor's decision to downgrade the U.S. debt rating appears justified because of the inadequacy of the U.S. response to the debt issue. Allowing the U.S. to keep the top rating would falsely indicate the U.S. is doing the best it can to correct its debt problem. American voters are choosing politicians who lack the ability or willingness to deal realistically with the U.S. debt problem.
I waited to write about Standard and Poor's decision to downgrade the U.S. debt rating because I wanted to think about it for awhile instead of taking a knee jerk reaction.
Dealing with a major crisis requires a strong experienced president. Unfortunately, Barack Obama is the weakest president since Gerald Ford. Obama's only apparent skill is an ability to read a teleprompter.
A smart president would have recognized he couldn't change the minds of House members and ended the debate early so he could prepare for a return match later.
Obama won the election because neither the voters nor the media understand the qualifications for an effective president. The President is the chief executive officer of the most powerful country in the world. Electing an president without executive experience makes no more sense then asking a high school quarterback to play quarterback in the Super Bowl.
Too many voters will support someone who promises to do "this, that and the other thing" even though the candidate has never demonstrated an ability to deliver on his promises. It's easy to make promises, but delivering on those promises can be difficult. Any quarterback can say he will win the Super Bowl, but very few are capable of doing so.
Unfortunately, many Republicans want to make the same mistake the Democrats did. These Republicans support Michele Bachmann who is just as inexperienced and unprepared for the presidency as Obama was.
The deficit debate was what we used to call the game of chicken. Two cars would approach each other in the same lane. The driver who veered off first was "chicken". Both sides seemed more interested in scoring political points than in conducting a serious discussion of the issue. They reminded me of the old beer commercials in which one side yelled "less filling" and the other side yelled "great taste".
One editorial cartoonist suggested the old Looney Tunes cartoon debate in which Daffy Duck says "Rabbit Season" and Bugs Bunny says "Duck Season". Bugs eventually gets Daffy to say "Duck Season", but Obama doesn't have Bugs Bunny's ability.
Too many members of Congress are either incapable of understanding the nature of the deficit crisis or don't care about dealing with the deficit in a realistic manner. Fixing the deficit will require an increase in revenue, preferably a tax on those with surplus income.
Cutting spending won't reduce the deficit as much as some expect because the federal government gets a kickback in the form of Social Security and income taxes from those it employs or from businesses government, and its employees, purchases from. Money given to welfare recipients goes to those they purchase goods and services from who in turn pay taxes.
If unemployment increases due to spending cuts, the next Congress may feel it needs to spend even more borrowed money to stimulate the economy.
Republicans and their supporters seem incapable of understanding the fact that it is not the amount of money someone has, but the financial status of the United States that is important. The financial health of the U.S. determines what its money is worth. For the rich, taxes are an investment in the financial health of the United States. Reducing the deficit would improve the financial health of the U.S. and make the money the rich have worth more.
There is a danger if the "rich" have too much money. Money can be addictive. As people obtain a certain amount of money they start wanting more and more. Like alcoholics they need more and more money to be satisfied.
When the "rich" obtain too much money a boom psychology can develop in which investors ignore the possibility of risk. They don't think they can lose money. They may think the stock market can only go up as many believed in the 20's.
The crisis of 2008 occurred because the rich had too much money and had bid stock prices up too high because too many expected everything to go up "forever". Many invested money in garbage like mortgage derivatives or gave it to crooks like Bernie Madoff who promised to make them even richer. If they had invested it in taxes, the country's financial health would be better today and many of them wouldn't have lost so much.
Talk about defaulting on debts incurred in the past raises concerns that the U.S. might default on newer debts. Those who started working 40 some years ago were told the Social Security taxes they were paying were for a pension program. They were loaning money to the federal government in return for a promise to provide them with retirement income. Congress may have handled Social Security funds like the program was a Ponzi scheme, but "investors" (Social Security taxpayers) were told they were investing in a pension plan.
Social Security and Medicare are debts, not entitlements. Benefits go to those who have paid in advance for them.
If the current Congress decides to default on the promise of Social Security payments to those who will be retiring in the next few years because the program was poorly administered by previous Congresses, how can those who purchase U.S. government securities today be sure that a future Congress won't decide to default on that debt because Congress in 2011 was not borrowing responsibly.