Global credit agencies: stop whining about the sequester and fix your deficit, America
To the surprise of no one outside the Democrat Party, the planet’s top credit agencies don’t think a 2.3 percent reduction in the rate of spending growth is going to fix America’s deficit problem. As reported by The Hill:
Credit rating agencies are shrugging off sequestration, saying the U.S. government will need to do more to reduce the deficit if it wants to prevent a downgrade of the nation’s credit rating.
While the agencies say the $85 billion in automatic spending cuts represent at least a step towards deficit reduction, they argue much more is needed to prevent the United States from losing its “AAA” rating.
“It’s not the most ideal outcome,” said David Riley, Fitch Rating’s global managing director for sovereign ratings, on CNBC Europe. “You’d rather have intelligent cuts and some revenue measures as well … but we don’t live in an ideal world, and it’s better to have some deficit reduction than none at all.”
Boy, there’s a ringing endorsement. The Hill goes on to say that it’s good sequestration was not abandoned completely, as Barack Obama has insisted, in between bouts of loudly declaring that he’d veto any effort to abandon the sequester he insisted upon. Can’t imagine why those global credit analysts think we’ve got a dysfunctional government! On the other hand, the very same Hill story says that the very same agency, Fitch Ratings, said just before sequestration went into effect that allowing it to occur “would ‘further erode confidence’ in policymakers’ ability to strike the broader deficit deals needed to get the country’s debt under control.” So maybe we’ve got dysfunctional credit agencies sneering at our dysfunctional government. It would be nice if something just functioned for a change.
But who’s this “you” Mr. Riley refers to, and why would “you” think a government that hasn’t actually cut spending in decades needs “some revenue measures as well,” especially when tax revenue just hit a record high?
Releasing its monthly budget report, the Treasury Department said Thursday that through the first seven months of this budget year, the deficit totals $80.8 billion, significantly below the $184.1 billion imbalance run up during the first seven months of the 2006 budget year.
So far this year, tax revenues total $1.505 trillion, an increase of 11.2 percent over the same period last year. That figure includes $383.6 billion collected in April, the largest monthly tax collection on record.
Tax collections swell in April every year as individuals file their tax returns by the deadline.
For the first seven months of this budget year, which began Oct. 1, revenue collections and government spending are at all-time highs.
However, the spending total of $1.585 billion was up at a slower pace of 3.2 percent from the previous year.
Granted that credit analysts desire fiscal solvency above all else, but right now the best-case scenario has us getting back to George Bush-scale deficits for a couple of years in the mid-two-thousand-teens, then blasting back into Obama orbits and beyond as the entitlement crisis hits. The only combination of policies that produces the growth needed to sustain functional government is low taxes + low spending. Other combinations can chug along for a little while, but only modest governments go the distance. And nothing can sustain our entitlement programs – there is literally not enough money on the entire planet to pay for it. The idea that we’re going to put that off while Democrats insist on tax increases to keep the robot squirrel program running is dangerously delusional.
The credit industry has been weird for decades, thanks in no small part to ideologically-driven government meddling, but do you recall what it used to be like? You had to demonstrate stable income and a reasonable debt load, before you were judged an acceptable risk for a mortgage, credit card, or car loan. The point was not to deny good things to nice people, for the cruel amusement of financial counselors. The point was to minimize the risk that loans would not be repaid, which in turn minimized the risk of massive bailouts for over-extended lenders. The rules are different in some ways for the world’s largest, richest, biggest-spending government… but in other ways, they are the same, as no investor wants to be holding worthless paper on the day Uncle Sam decides to stop paying his notes, and dares the world to do something about it.
By a happy coincidence, the same pro-growth, small-government policies that would maximize our liberty, and make America a sound credit risk, would also make it unnecessary to accumulate huge amounts of federal debt.
Say… you don’t think that understanding colors some of the advice coming from these credit agencies, do you? They need us trim enough to avoid insolvency, but fat enough to keep borrowing big money in perpetuity. Maybe that’s why “you’d rather have intelligent cuts and some revenue measures as well” in the “ideal world” envisioned by Fitch Ratings’ global managing director. Speaking for myself, I’d rather keep government under control, accumulate my own responsible debts, and have a chance to earn the money it takes to pay them off.