Thread in which the world laughs at America

[Japher]

I'm Delirious... I feel like Dark Helmet from Spaceballs, and the US is my ship

[Dinner]

I have to admit one has to laugh or they'd cry listening to the tea baggers exclaim it was a great idea to force the US to default because "it would hurt Obama!" Those people are just stupid and crazy.

[giblets]

The defense cuts show how, contrary to conventional wisdom, the budget deal reflects liberal preferences. The liberal agenda came in three parts: First, raise taxes on high-income Americans to limit domestic spending cuts; second, protect the social “safety net,” especially Social Security and Medicare; and finally, cut defense spending to spare (again) domestic programs.

Liberals got two of three. They failed on taxes, the Republicans’ litmus test. But they prevailed elsewhere. Social Security, Medicare and most benefits (food stamps, Medicaid) for the poor, regardless of age, were put off-limits. Medicare reimbursement rates might be cut by 2 percent as part of a second round of reductions, but that’s small potatoes. Because retiree benefits constitute half of non-interest federal outlays, the deal isn’t hard on overall government spending.

The real budget story is how protecting these vast retiree benefits dominates policymaking. If you shield almost half of spending and still want to cut, pressure intensifies on everything else. Along with defense, the budget deal also squeezes that catch-all category, “domestic discretionary spending.” This covers many programs: roads, food safety, financial regulation, grants to states and localities, and much more.

We are penalizing general government to protect all retirees, no matter how healthy or wealthy. Earlier this year, the Congressional Budget Office projected that domestic discretionary spending would drop 30 percent — as a share of the economy — from 2011 to 2021. The budget deal will deepen that. President Obama keeps saying this spending will fall, again as a share of the economy, to its lowest level since Eisenhower. Why is he bragging about this?

The Welfare State Wins This Budget War

Awesome

Can't wait for the next debt ceiling fiasco to cut more defense spending.

[giblets]

Clueless. Absolutely clueless. Since the end of WW2 government spending has averaged 25.5% of GDP while taxes have averaged 24.5% of GDP.

I don't think this information is correct.

[Tupac Shakur]

Just cutting defense spending won't get America's AAA rating back. Any debt reduction plan that doesn't touch entitlements is insufficient.

[Elok]

I wasn't planning to come back for another month, but then a blog on The Economist linked to this. Does Kitty have a law degree I didn't know about? And, if not, is this guy right about S&P?

[Asher]

He strikes me as a smart man who is just caught up in a world where he can't see the forest through the trees. He's probably a big patriot, too. How dare anyone downgrade his nation.

The US' spending and addiction to debt is unsustainable. S&P was right to downgrade, Moody's just didn't have the balls. The US' plan seems to be "borrow some to pay off what was borrowed, then borrow some more". If you repeatedly paid off your credit card with other credit cards, I doubt you'd have a perfect credit rating...

[Elok]

I'm not sure how S&P's downgrade made the slightest bit of real-world difference. I mean, I admit I know little of economics, but I just can't see somebody saying, "gee, I want to invest, but in what? Hmm, let's try this 'US Treasury' thing. But I know nothing about this 'US Treasury' entity. I'd better check with a ratings agency to be sure they're a good bet--whoa! Only two As instead of three? I'd better buy from this Isle of Man place instead." I mean, maybe there are investors out there who are that doltish, but I assume the vast majority aren't, for purely Darwinian reasons. How could a market with that much money be dominated by people so stupid?

EDIT: Also, we've been going into debt to pay off existing debt since when, 1980-odd? We've had a flawless rating for my entire lifetime. The only thing that changed was that Obama failed to deliver a plan which was pretty obviously beyond his power to negotiate in the first place.

[Asher]

It's meant to scare people. That's its purpose. Hopefully they respond by spending less money or raising more money.

[Tupac Shakur]

Asher is a moron; don't listen to him. Some large investors (like pension funds) are required to hold AAA securities.

[Guynemer]

Well it apparently scared Wall Street ****less, Dow down ~650 today.

[Hauldren Collider]

Those contracts can be rewritten, though, right?

xpost

[Hauldren Collider]

Well it apparently scared Wall Street ****less, Dow down ~650 today.

That might have little to do with the ratings.

[Hauldren Collider]

This might not be the right thread for this, but hey they're all ultimately about the same thing so:

To be honest, the idea that Republican intransigence on taxes is unreasonable completely ignores the fact that the only taxes that were ever laid on the table were completely irrelevant to the deficit. The reality is that the democrats don't want to raise taxes enough to fix the deficit, and they don't want to cut spending, either.

[Tupac Shakur]

I'm not a huge Krauthammer fan, but I thought this was an interesting column on how the coming Congressional select committee might plausibly achieve a grand bargain on debt reduction.

How the Super-Committee Can Strike a Grand Bargain

I remain extremely skeptical that the Dems will give enough on entitlements or the GOP on taxes for a bargain to be reached, but at least we'd get much needed tax reform before talks blew up if Krauthammer's plan were followed.