On Friday August 5, 2011, the United States government was rapped sharply over the knuckles by Standard and Poor’s, the credit rating agency. The agency lowered the government’s AAA rating to AA+ with a negative outlook. The U.S. had enjoyed a AAA rating for a period of 70 years. The rapped fingers of President Obama, Treasury Secretary Timothy Geithner, Senate Leader Harry Reid, and House Speaker John Boehner, will be smarting badly as I write this column. It is a moment of shame for all Americans.
The shame is of our own making. We have elected into office since 2000 two presidents unfitted by reason of low ability and unacceptably inadequate economic education for the responsibilities that they assumed. We have elected into office for many years members of Congress whose dedication is more to raising campaign monies through pork-barrel spending than to effecting sound policies for a nation in long-term relative decline.
The implications of this folly were publicized worldwide by the childish tantrums and humiliating lack of economic knowledge displayed by all major actors in the debt ceiling debate that took place on a world-wide stage through a period of three excruciatingly painful months.
The world well knows that budget cuts of $2.1 trillion problematic dollars spread over ten long years amounts to a non- response to a U.S. federal debt present value of some $100 trillion. S & P has simply reflected that reality. The sad truth is that the United States – as a consequence of its Constitution – is now locked into an 18-month policy paralysis, during which interest rates will rise, economic growth will be throttled and inflation will rear its ugly head.
In a parliamentary system, the government would collapse and new elections would be called. In the United States, no such reaction is allowed. The honorable reaction to news as devastating for the U.S. economy as that just recorded, would be for President Obama to dismiss his Treasury Secretary, Timothy Geithner, and then to resign his own position, allowing Vice President Joe Biden to succeed him. The honorable reaction would be for Harry Reid and John Boehner to resign their leadership positions, to allow successors more suited to economic crisis and debt reduction to emerge from their respective party caucuses. Senator Mark Warner (Democrat) and Representative Paul Ryan (Republican) would bring much-needed economic intelligence to the leadership of Congress.
But such responses are off the table in a Washington environment where inadequate political leaders stalk the Capital like Roman Emperors during the final corrupt years of Empire. For Washington has now morphed into a Rome, not of the glorious era of Senatus Populusque Romanus- SPQR – but rather of the last decadent era of its Imperial decline and fall:
“the greatest, perhaps, and most awful scene in the history of mankind.” Edward Gibbon, The History of The Decline and Fall of the Roman Empire.
Tags: credit downgrade, debt crisis, interest rate increases, leaders should resign, political paralysis, stagflation looms, stock market decline, Washington is Rome
August 6, 2011 at 1:01 pm |
Hi Charles,
not sure if you have seen this article,
http://www.americanthinker.com/2011/08/the_budget_control_act_of_2011_violates_constitutional_order.html
I am amazed at how Power can corrupt the “smartest men in the room”. Is it a lack of moral standards, or complete indifference and ignorance to the “big picture”.
This Administration continues to move forward at break-neck speed
(maybe that should be “break-the Country-speed”), it really has to be admired for it’s creative destruction, in such an orderly well thought-out plan, and far reaching implementation.
I feel so much better now that these brave politicians have saved us from this debt limit crisis. I wonder if the “key” republicans who helped orchestrate this budget control act were invited to “the” party of the year, Obamas birthday. It was probably the bone that got Boehner to bite.
hope you enjoy your weekend,
Tim
August 6, 2011 at 2:29 pm |
Tim:
Thank you for drawing my attention to the American Thinker essay. It is excellent. The break-down in the separation of power and concentration of power in the presidency threatens dictatorship. In the hands of an unintelligent and under-educated president, such as President Obama, it also courts economic disaster.
Lord Acton famously stated that : ‘All power corrupts, and absolute power corrupts absolutely.’ Therein lies the answer to your question about behavior in Washington.
Thank you for your comment.
August 6, 2011 at 5:25 pm |
The deficit is a sure sign of a lack of integrity on the part of the politicians. They disguise the real cost of spending by borrowing and hope the taxpayers don’t notice. And you are right that George W. Bush bears a large responsibility for this mess. And Obama has taken bad spending habits to new heights. Medicare and Social Security taxes need to be raised if Washington refuses to make reductions in the rate of increase so people can understand the true cost of these programs. But I find disturbing as well the idea that taxpayers are under taxed. I don’t think the people in Washington read the local papers back home. Real estate taxes are going up, state income taxes are up, sales taxes continue to increase. Only Wisconsin and Indiana seem to have found a solution to these spiraling costs. And New Jersey is working on it. However, the dictatorship is weakening; Obama no longer controls the House. All he can do is demagogue about it and demonize the Tea Party. He is like a snake caught behind the head; he is thrashing his body around trying to break free.
But the true evil is seeing politicians using the taxpayers money to buy votes. This is the pork barrel spending you mention; but it is also the social programs like Medicare and Social Security which have effectively bought off the senior citizens. We will have to shame the seniors into backing reforms by showing them how they are burdening future generations. Time will tell if it works.
August 6, 2011 at 6:24 pm |
Jorod:
All your points are well taken, not least those about taxes. Americans tend to forget about payroll taxes, state taxes and local taxes, when looking at marginal rates for average households. A household that pays at the 28 per cent federal income tax rate will be paying 13 per cent in payroll taxesand maybe 6 per cent in state taxes. That bring the marginal rate up to 47 per cent.
All this is why structural reforms to entitlements are essential. it is also why they are difficult to implement given that almost 50 per cent of households pay no income taxes and are getting many of the spending benefits for free.