Alright people, we need to sit down and have a little chat. We saw a bullshit “Budget Control Act” pass through the House and Senate on the backs of politicians who only intend to create an illusion of safety so they can continue their business of extraordinary spending and pocketing of money without anyone questioning them. This act was supposed to right the economy, set straight our budget woes, save us from default. So what happens? The stock market tanks and late Friday night Standard & Poor’s (S&P) lowered America’s credit rating from AAA to AA+. But we’ll come back to the credit score, because that rating from the S&P a whole heaping pile of “go fuck yourself. For now, let’s focus on why the Budget Control Act is seventy-four pages of self-satisfying political twattery.
Let’s take a look at what this deal accomplishes, aside from providing just enough of a distraction to the general public that they’ll completely ignore the problem until it affects their pocket directly.
- The deal will produce $2.1 trillion in budget cuts and debt limit increases over a ten year period.
This is a good place to start, because it sounds like a big number and that has seemed to be enough to suffice for the majority of the public, who hear that figure and assume “Oh, that sounds like it’s enough to fix things.” Here’s a scary fact: That number is minuscule for a plethora of reasons. Firstly, our budgeted spending for the current year (2011, if you’re reading in a time machine or are incapable of looking at the date of this post) is $3.82 trillion with a revenue of $2.17 trillion. Some fancy mathematical figurings will show our deficit for this year alone to be $1.65 trillion. This act barely covers THIS YEAR’S DEFICIT, which is being added onto a national debt of $14.57 trillion. So a $2.1 trillion reduction in that number is a step in the right direction, right?
Yeah, no. Here’s this thing that is totally excluded in these figures: They don’t account for the debt that will be accumulated over the next ten years as well. Let’s go back to the number for how much we spent this year: $3.82 trillion. There is a built in– a built in– budget increase of $7 to 9 trillion dollars over that same ten years. So now you’re cutting $2.1 trillion of somewhere around $21.5-23.5 trillion. Does everyone realize how ridiculously insignificant of a change that is? Going on a year by year basis, that’s a cut of $210 billion on a debt that increases by $700 to $900 billion. If you drew those on a graph to see where they would intersect, they fucking wouldn’t. Unless it was at the axis intersection of “Pretending to Address the Issue” and “Go Fuck Yourself,” because that is what our representatives have been doing have have said to the American people by passing this act.
- The deal provides at least one dollar of actual spending cuts for each dollar in debt limit increase.
Hey, here’s a better idea: Stop increasing the debt ceiling. This answer should seem pretty obvious, right? How did we end up with so much debt? We kept spending and borrowing money that we didn’t have to pay for the spending. So how do we reduce that debt? Did you answer “Borrow more than we ever have before?” You did? I didn’t realize you were an elected official. If a regular person, a citizen of this country, was in debt and attempted to borrow more to get out of debt, they would be turned away immediately and would be laughed out of the bank. American politicians just passed the exact same plan as that for a way to decrease the budget and then congratulated themselves on how great of a job they did. All this means is that we’re cutting spending by just enough to stay under debt ceiling– the newly raised debt ceiling, that is– for long enough that we can ignore the problem for a little bit longer. At least that was the plan.
And then the markets crashed. The Dow Jones dropped over 500 points on Thursday. If you don’t know the stock market, just know that the idea of a 500 point drop is usually enough to make most traders shit themselves and panic. Expect to see more of that on Monday. The Nasdaq was down nearly a full percent as well on the backs of reports that tech spending is down, which was a touch call to make seeing as pretty much all spending is down because no one has any goddamn money. And then the S&P dropped the US credit rating from AAA to AA+.
The strange thing about this is that the drop in the credit score is probably well deserved. In fact, it probably should have happened a while ago, we’ve kind of been in the nation version of that friend that is constantly bumming money off of others for some awesome project that is going to make everyone rich for some time now. But here’s the reason that the decline in credit rating coming from the S&P is the biggest pile of bullshit that has ever been presented: The S&P is the same organization that rated all of the sub-prime mortgages– you know, the ones caused the housing bubble burst that helped put us in this situation in the first place– as AAA securities. Here’s why: Banks choose who will rate the securities. When the choose an organization to rate them, they pay a fee to the rater. If the rating given is low, the bank isn’t going to take that security. So S&P inflated the ratings to approve the sub-prime mortgages so they could receive the fee. While this isn’t all their fault and these mortgages should have been addressed long before they had time to become an issue, for them to now downgrade the US’s credit score when they fucked up in the first place is laughable. Or it would be laughable if it wasn’t so depressingly frightening.
The Obama administration has challenged the S&P’s downgrade decision, stating that their analysis is off by trillions of dollars– and the S&P agrees. They just aren’t sure if they’re going to change the rating back yet or not. The fact of the matter is they’ve been artificially boosting America’s credit rating for years, just as they did with the sub-prime mortgages. But to lower it now seems ludicrous considering the Budget Control Act, despite being a pathetic excuse for a solution, met every requirement that was put forth by the credit rating agencies. Moody’s, another credit rating organization, is maintaining the US as a AAA rating.
Should we as a collective nation be afraid of what is coming? Yes. Very much so. Monday is more than likely going to be a shit show on the stock markets. Gold is more than likely going to increase exponentially and the US dollar is going to be valueless. A lowered credit rating may not come now after the reassessment, but it will be looming again soon. Good luck trying to borrow money with a damaged credit rating and a worthless monetary system. People don’t invest in something they know they won’t get their money back on, and America is looking like a pretty terrible investment.