Downgrade: Obama Gambled, America Lost

The recent, explosive growth in government debt is the result of Barack Obama’s historic gamble, betting the future of America on his vision of a big, powerful, central government, that controls the private sector economy for the benefit of politically connected business interests,  unions, and the Democratic Party.

President Obama stepped to the cameras and addressed the nation with his response to the downgrade of U.S. Treasury debt.

He began:

On Friday, we learned that the United States received a downgrade by one of the credit rating agencies — not so much because they doubt our ability to pay our debt if we make good decisions, but because after witnessing a month of wrangling over raising the debt ceiling, they doubted our political system’s ability to act.

The President’s interpretation isn’t entirely accurate.  In Standard and Poor’s downgrade message we found two reasons for the downgrade:

  1. Sudden increase in debt. As the chart shows the ratio of debt to GDP – the number S&P cited as their guiding indicator – has recently rocketed up.  It hasn’t been this high since the early fifties when we were still paying off the World War II debt.   S&P listed other nations whose debt to GDP ratio they found acceptable.  The lowest of those was at 34%, just  one point lower than the U.S.  average from 2001 through 2008.
  2. Quoting from the S&P message, “…the political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable…The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.”

Brinksmanship in Washington is not new.  It’s often the only way to bring about significant change.  There would be no brinksmanship over the debt ceiling if the GDP ratio were still down in the 30s.  Obama continued:

The fact is, we didn’t need a rating agency to tell us that we need a balanced, long-term approach to deficit reduction.

By now virtually everyone knows that when Obama says “balance” he means tax increases enacted into law now combined with unenforceable promises of spending cuts later.  But the rating agency, S&P,  didn’t demand tax increases.  In fact the S&P downgrade message says:

“Standard & Poor’s takes no position on the mix of spending and revenue measures that Congress and the Administration might conclude is appropriate for putting the U.S.’s finances on a sustainable footing.”

Obama continued:

We knew from the outset that a prolonged debate over the debt ceiling — a debate where the threat of default was used as a bargaining chip — could do enormous damage to our economy and the world’s.  That threat…has now roiled the markets and dampened consumer confidence and slowed the pace of recovery.

For two years Obama has blamed President Bush for the painfully slow “pace of recovery.”  He has now decided to pivot.  Republicans in Congress who wanted to apply the breaks to his borrow and spend juggernaut are now his designated blame-takers for the bad economy.  As for “default” the willful failure to make interest payments to debt holders, the Republicans/tea party never once threatened it.  That threat came from the President and the Democrats.

Our problems are eminently solvable.  And we know what we have to do to solve them.  With respect to debt, our problem is not confidence in our credit — the markets continue to reaffirm our credit as among the world’s safest.  Our challenge is the need to tackle our deficits over the long term.

The key words are “long term.” By enacting legislation that promises to “cut” spending way out in the future Obama can avoid blow-back today from any of the Democrats’ favored constituencies who are dependent on business subsidies and entitlements.

The only politicians who can be taken seriously are those who propose to spend less in 2012 than was spent in 2011.  So far, those politicians are rare, and so far no such legislation hasn’t even been written, let alone passed.

Republicans and Democrats on the bipartisan fiscal commission that I set up put forth good proposals…So it’s not a lack of plans or policies that’s the problem here.  It’s a lack of political will in Washington.  It’s the insistence on drawing lines in the sand, a refusal to put what’s best for the country ahead of self-interest or party or ideology.

But Obama completely ignored the findings and recommendations of his own fiscal commission!  And he too had lines in the sand.  They were that ObamaCare must be implemented, even though it will add hundreds of billions to the deficit every year; there must be tax increases on small business employers; Medicare and Medicaid can not be modified in any way.

The American people have been through so much over the last few years…And they’re working so hard to raise their families, and all they ask is that we work just as hard, here in this town, to make their lives a little easier.

Actually we would ask – for starters – that you repeal ObamaCare, repeal the Dodd-Frank financial regulation monstrosity, stop EPA from restricting energy production based on global warming mythology, and allow the private sector to explore for and produce unlimited quantities of oil, coal and natural gas.  Those actions to increase liberty and limit the power of government would create more jobs than any new scheme the best Washington minds could conjure.

Finally, for some optional reading, a couple of the typical, vapid Obama platitudes that sound pretty but mean nothing.  Sorry, no extra credit:

Markets will rise and fall, but this is the United States of America.  No matter what some agency may say, we’ve always been and always will be a AAA country.

What sets us apart is that we’ve always not just had the capacity, but also the will to act — the determination to shape our future; the willingness in our democracy to work out our differences in a sensible way and to move forward, not just for this generation but for the next generation.

he says

he says

5 Comments so far

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  2. AzTex on August 10th, 2011

    Another bogus graph with no CONTEXT! Where do you explain why it was necessary to run higher deficits temporarily? Where do you explain the economic meltdown Obama prevented with these deficits? Where do you explain the pain the middle class would have felt without government stepping in to correct market failure?

    Only a few tea party nuts are fooled by your simplistic, childlike graphs.

  3. Sarah Livingston on August 10th, 2011

    AzTex, you give Obama too much credit if you think he knows what he’s doing. What makes you think he prevented a melt down? What are we living through if it’s not a melt down with millions and millions of people unemployed and millions of small businesses going broke? And millions of foreclosures?

    This is simple. Obama borrows and spends money in ways he thinks will make his friends rich and buy the most votes for himself and the Dems. It has nothing to do with the overall economy or the middle class. Those are just talking points.

  4. GregHal on August 10th, 2011

    AzTex –

    A graph presents arithmetic values. It doesn’t show Obama’s “bogus” (to use your word) rationalization. For that God gave us text and video. Obama looks good on video and his B.S. fools a lot of people. He has plenty of opportunities to explain context for his deficit and debt disaster but he can’t.

    Obama will go down in history as even worse than Jimmy Carter. Obama inherited a bad situation and made it twice as bad.

  5. AzTex on August 10th, 2011

    If the trickle-down-Bush-tea party-conservative tax cuts for the rich work, why is unemployment so high?

    There are dozens of independent studies from credible non-partisan economists attesting to the fact that Obama’s infrastructure spending, the extended unemployment insurance, tax cuts for middle class families all worked together to increased aggregate demand. Millions would be roaming the streets hungry and homeless if Obama hadn’t supplied counter-cyclical spending. Only a teaparty idiot doesn’t understand.

    Millions of small businesses survived only because government stepped up to the plate with increased demand.

    Yelling about deficits is only one side, only part of the picture.