The Standard & Poor’s Report In Plain Language


On Monday Standard & Poor stunned everyone by rating the United State’s long term credit rating from stable to poor.

Let’s break it down.

From Keith Hennessey:

Yesterday’s report by Standard & Poor’s on the U.S. government’s credit rating is driving headlines. You can learn a lot more from reading the primary source document than from news coverage of it.

Here is what S&P did:

“On April 18, 2011, Standard & Poor’s Ratings Services affirmed its ‘AAA’ long-term and ‘A-1+’ short-term sovereign credit ratings on the United States of America and revised its outlook on the long-term rating to negative from stable.The news is in the latter part: S&P downgraded its “outlook on the long-term [credit] rating [of the U.S. government].” This is a warning sign.

Right. Kind of like a gaping bleeding wound is a warning sign that you might bleed out.

Let’s put this in plain jargon.

Basically S&P said that they didn’t believe that these yahoos in Washington (and I’m paraphrasing here) were going to reach an agreement on our “budgetary challenges.” They say if these yahoos don’t reach a long term agreement and implement it by 2013, the U.S. fiscal profile is screwed. That’s not a technical term, but it fits.

“In 2003-2008, the U.S.’s general (total) government deficit fluctuated between 2% and 5% of GDP. Already noticeably larger than that of most ‘AAA’ rated sovereigns, it ballooned to more than 11% in 2009 and has yet to recover.”

The S&P and Hennessey agree with Chairman Paul Ryan that entitlement spending is “the main source of fiscal pressure.”

Plain jargon? Entitlements are killing us.

When are we going to take this seriously? What is it going to take? This is no longer partisan. This is about the financial health of our country. No leader has had the guts to force us to look at entitlements, with their fraud, with their ridiculous handouts. I believe we can cut entitlements, and still take care of those who truly need it. The problem is we take care of too many who are more than capable of taking care of themselves. It’s become a con artist’s game. It’s time to shut that part down. We also pay for senior’s health care costs when they are wealthy AND have their own insurance (my parents come to mind). It’s crazy.

Hennessey has a more sophisticated view than mine. He describes the other short-term fiscal risks, so please read his.

But he ends with why this might not get done. He hits the nail on the head.

The greatest obstacle to constructive negotiations is the President’s attack rhetoric, in which he today accused Congressional Republicans of “doing away with health insurance for … an autistic child” and potentially causing future bridge collapses like the one in Minnesota that killed 13 people.

Maybe the S&P report will scare the President’s team into treating the long-term problem seriously rather than using it as a campaign weapon. I’m not holding my breath.

As long as Democrats use this sort of unacceptable scare rhetoric, nothing will get done. This isn’t how a leader does things. He doesn’t throw out fireballs when our country’s health is at stake. This isn’t about his re-election. This isn’t about his campaign. So stop with the nonsense. Roll your sleeves up Mr. President, come to the table like a leader, not a candidate, and do your job.

Update: The Obama administration tried to get S&P NOT to lower it’s outlook for the United States. No surprise there. S&P retained their integrity though.

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