White House denial

The debt downgrade:

Last Updated: 8:39 AM, August 8, 2011

AP
More turmoil: Wall Street traders (like this one reacting on Friday) can expect fresh grief today.

The White House narrative on how the country lost its triple-A rating and began a descent toward Third World status goes something like this:

Standard & Poors woke up Friday morning and out of the blue decided to downgrade Uncle Sam’s debt despite the administration’s best efforts to show the wrong-headedness of the S&P analysis.

Don't buy it.

Yes, last Friday saw lots of meetings in Washington with Treasury Secretary Tim Geithner & Co. haranguing S&P executives with phony evidence that they’re getting a handle on the nation’s $14 trillion and rising debt, and the rotten economy that has squeezed tax revenues. But the fact remains, federal debt is set to grow for the foreseeable future, even with the spending cuts imposed in the recent debt-ceiling deal.

More important, the downgrade should hardly have been a surprise for the administration -- it was among the most telegraphed in the history of downgrades.

The Obama Treasury Department had been on thin ice with the ratings agencies -- companies that offer opinions to investors on the safety and soundness of debt both public and private -- for at least a year. And the failure of Obama’s near-$1 trillion stimulus package was among the chief culprits for the downgrade.

Without the job growth the president and his economic team had promised from the stimulus, tax revenues would remain weak -- and with Team Obama planning to keep on spending, the nation would have no choice but to add to its growing mountain of debt to make up the difference.

The ice got considerably thinner in the early spring when raters, in meetings with White House financial officials, found the Obama team unwilling to face the facts of the nation’s deteriorating finances. It got even thinner during the weeks of the debt-ceiling debate -- when S&P told anyone with a heartbeat on Capitol Hill and at Treasury the country's triple-A was in jeopardy.

So the final straw came Friday -- and only after the S&P spent the last week or so handwringing about what to do, factoring into its equation the much-heralded debt deal, which (the S&P wonks concluded) had done little to dent the feds’ massive-and-rising”Š-”Šas-far-as-the-eye-can-see debt load.

Coupled with the likely prospect of prolonged 9 percent unemployment and weak GDP growth -- that seemed to leave S&P no choice but to downgrade.

The decision certainly didn't come easy for the rating agency. I’m told there was a fierce internal debate: Since the other two rating agencies had maintained their triple-A assessments, S&P would be an outlier and a target for reprisals from the administration and its political allies. But in the end, the corporate bureaucrats at S&P decided their credibility was at stake.

In a sense, the company had boxed itself in, issuing statements during the debt-ceiling fight that it wouldn’t be satisfied unless $4 trillion was cut from the budget. If it backed down after the final deal far short of achieving those savings, why would traders and investors ever listen to anything the company ever said again?

It picked Friday as the day to alert the administration that the downgrade was coming as a favor: It gave the Obama crew one last chance to provide evidence they’re getting a handle on the deteriorating economy and gave the markets two full days to prepare for the downgrade’s potentially devastating impact.

But all Geithner & Co. could come up with was some bickering about math, claiming S&P’s analysis somehow overlooked $2 trillion in revenues. Right or wrong, that didn’t come close to touching the big-picture issues that were at the heart of the downgrade.

Wall Street is used to turmoil, and every major firm held meetings all weekend to get set for today’s opening. There’s no agreement on what to expect, beyond a sharp decline in stocks at the opening bell.

“The bottom line, no one really knows,” said William Heinzerling, head of fixed income at Stifel Nicolaus and a veteran bond trader. “We are in truly uncharted territory.”

Charles Gasparino is a Fox Business Network senior correspondent.


Source: http://www.nypost.com/p/news/opinion/opedcolumnists/white_house_denial_ZfOp2744oRbTRrG8dmgqjM#ixzz1UUS7cLYw

Obama's Tune at 50 -- 'Happy Birthday to Me'

By Dan Gainor

Published August 04, 2011 FoxNews.com

Happy Birthday to me,

Happy Birthday to me,

I’m narcissistic you see,

Happy birthday to me.

It’s the perfect romance: a man who loves to be loved and, well, his biggest fan – himself. It’s hard to tell if we should mark August 4 as Barack Obama’s 50th birthday or his 50th anniversary with himself.

In ordinary times, a concept now long-forgotten in Washington, we’d commemorate the president’s birthday with cake and candles. This anniversary is appropriately marked by the red ink of debt –- trillions more than ever before.

“One nation under debt” should be our new motto as Congress approved another couple trillion in spending and a budgetary gimmick that doesn’t actually cut much of anything.

But all that’s OK. It’s the president’s birthday, so America should party. That’s certainly the president’s position. In a nation swamped by trillions in bills we can’t pay, the Debtor-in-Chief is holding a Chicago fundraising party for “roughly 1,000 guests paying between $50 and $35,800,” according to ABC’s Jake Tapper.

What’s a bigwig’s party without top talent? The Washington Times reports the event will include “a concert featuring Herbie Hancock and Jennifer Hudson.” Even with A-list talent, Obama will be on center stage, his congressional failings hundreds of miles away.

That’s more than appropriate given Obama’s self-obsessed nature. No matter what the news of the day has been, Obama’s favorite topic has been himself. In his first 41 speeches back in 2009, Obama talked about himself nearly 1,200 times – 1,198 to be exact. Scarily enough, the condition seems to have gotten more acute.

In 40 speeches and remarks on the national debt, Obama has talked about himself 39 times more than he has the debt – more than 3,200 times about Obama to a mere 160 about the national debt.

Let me put that another way, keeping in the spirit of the president’s birthday. Picture two big cakes. The first has 160 candles on it. It’s burning pretty bright – a bit more than three times the number of candles the graying Obama should have. Then imagine the other cake in the shape of an “I.” That cake has more than 3,200 flaming candles on it – alarming party-goers and smoke detectors alike. That’s not a cake, it’s a weapon of mass destruction.

But that’s our president as he turns 50, or "Hawaii 5-O," if documents are to be believed. He’s a man who manages to insert himself into every issue and bypasses the issue entirely. He can’t see the forest or the trees. He’s too busy looking in a mirror. And the media are ignoring it as always.

It’s nothing new. For example, back in May 2010, he talked about the economy in Buffalo, N.Y. That appearance had Obama talking about Obama nearly 100 times and the national debt just once. In 40 appearances discussing debt, he only used the actual word “debt” 10 or more times recently, after the GOP forced the issue. Those three talks make up a third of all the mentions he’s made of it as president. The transcripts, pulled from the White House web site’s “economy” section, run from when he first took office through July 25, as the debt ceiling “crisis” was finally subsiding.

When Barack Obama was born, the United States budget was a bit more than $94 billion and ran only a $3 billion deficit that year. Ah the good ol’ days. The most recent Obama budget proposal was about 39 times higher – an inflationary growth equal only to the president’s burgeoning ego.

The Financial Times reports that a third of the people in a recent Pew research poll “have come away from the ordeal with a diminished view of Mr Obama.” Certainly, no one in 1600 Pennsylvania Ave. has acknowledged that reality.

It’s time they should. The economy is in trouble – national debt is still piling higher, residential real estate is continuing to fall, and unemployment stands at an unacceptable 9.2 percent. Our economic growth is just as paralyzed as our politics. Washington gridlock barely delivered any so-called “fix” in time. Wall Street fixes boosted the markets, but not the lives of everyday Americans.

That all might as well have happened in 1961, when Obama was born. It’s ancient history. We must look ahead. Like him or not, President Obama has about a year-and-a-half left in office and we all need him to do a good job – at least on the economy. But conservatives are up against an awful alliance of liberals, media and some in their own party who care more about getting re-elected. That alliance desperately wants to grow government as a universal solution to all problems.

The right has to fight that growth, but still try to find common ground with Obama to help get government out of the way so the economy can grow once again.

Dan Gainor is the Boone Pickens Fellow and the Media Research Center’s Vice President for Business and Culture. His column appears each week on The Fox Forum. He can also be contacted on Facebook and Twitter as dangainor.


Source: http://www.foxnews.com/opinion/2011/08/04/obamas-tune-at-50-happy-birthday-to-me/#ixzz1U6aSY1Lz

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U.S. debt negotiators hammer out tentative agreement

English.news.cn 2011-07-31 20:27:02 FeedbackPrintRSS


WASHINGTON, July 31 (Xinhua) -- U.S. debt ceiling negotiators are working on a tentative agreement on raising the federal government's debt limit to avert a looming debt default crisis.

The United States is not going to default, Senate Republican leader Mitch McConnell said Sunday morning in an interview with CNN.

"We're very close to a deal," McConnell added.

He said that both parties were working on a 3 trillion U.S. dollars package, and some conservative GOP members wanted a balanced budget amendment to the Constitution to be included in the deal.

Leaders from both parties are discussing the compromise plan "in a constructive way," Democratic Senator Charles Schumer said on Sunday.

However, Schumer held that it was "premature" to say now that a deal has been reached, as there are many details to talk about before sealing the deal, Schumer noted.

There has to be compromise on each side to push forward a solution in a divided government and Congress, noted Schumer, adding that the negotiators were discussing defense cuts of equal magnitude to domestic spending cuts.

Sunday was a "critical day" to cut a deal to raise the nation's debt limit, White House senior advisor David Plouffe said on Sunday, adding that "we have to get this solved."

Plouffe said there was not a deal yet, as both sides were working out on details of a plan.

The federal government's borrowing limit, currently at 14.29 trillion dollars, was reached on May 16. The Treasury Department said the nation would begin to default on its debts unless the Congress agreed to lift the limit by Aug. 2.

Obama's top economic adviser Gene Sperling Sunday also urged Congress to raise the debt limit to lift the uncertainty cloud over the economy and financial markets.

A procedural Senate vote on a debt ceiling proposal put forward by Senate Majority Leader Harry Reid was postponed until Sunday afternoon to give negotiators more time to hammer out an agreement.

Editor: Zhang Xiang


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"Non-negotiable Terrorist Demand"

Mark Shields: Debt talks have become a "non-negtotiable terrorist demand"...
TeresaGorman




TeresaGorman - Mark Shields: Debt talks have become a "non-negotiable terrorist demand"
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Emanuel vows no tax hikes to bridge $635.7 million budget gap

Mayor Rahm Emanuel at City Hall today. (Brent Lewis/Tribune)


By Hal Dardick
Tribune reporter
12:23 p.m. CDT, July 29, 2011

Mayor Rahm Emanuel today said next year's city budget hole is nearly $636 million and he won't use one-time fixes or reserves to fix it.

"Today is to inform the public who pays the bills of the size and the scope of the problem," Emanuel said at a City Hall news conference. "The system needs reform. It is calling out for it."

Emanuel also said he won't raise taxes on Chicagoans who feel "nickeled and dimed" until the city's financial structure gets reformed.

"I can't ask people to pay more into a system that needs to be fundamentally restructured," he said.
Without significant changes in how the city operates, the city budget gap would widen in coming years to $741.4 million in 2013 and $790.7 million in 2014, the administration estimates.
Much of the budget imbalance results from long-term union contracts with locked-in raises, rising health care costs for workers and increased borrowing in recent years that brought higher interest payments.

The budget figures do not include shortfalls in city pension systems, which could add costs of $500 million or more annually in coming years. Absent changes in the pension systems or new revenue sources, that could result in a doubling of the city property tax, according to The Civic Federation, a non-partisan budget watchdog group.

Emanuel is required under state law to make them public by July 31.

Release of the preliminary figures is the first step in fashioning a budget for the coming year. Emanuel’s task will be to find ways to close that gap without tapping one-time revenue sources, as former Mayor Daley did repeatedly in recent years.

Emanuel, who personally briefed City Council committee chairmen on the budget this morning, told them he has asked his department heads to come up with ideas to close the gap. His appearance at the briefings was a break from past practice, when Daley had his financial chiefs present the news to aldermen.

In May, Daley said he anticipated a budget shortfall next year of $587 million, but incoming Emanuel administration officials have said they anticipated it would be higher.

Last year, the city plugged a budget gap of $655 million largely by dipping into dwindling reserves, refinancing debt and drawing money from once-sacrosanct special taxing district funds.

During his first couple of months in office, Emanuel has taken steps to curtail spending. He announced plans to cut $75 million from this year’s $6.15 billion spending plan, and he has pushed unions to make concessions, so far to little avail.

Critics note that even in 2007, when the economy peaked, the city faced a budget gap of $95 million, and spending has only increased since.

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Soros Says a Euro Exit Mechanism Is ‘Probably Inevitable’ Amid Debt Crisis

Billionaire investor George Soros. Photographer: Stephen Yang/Bloomberg

By Zoe Schneeweiss - Jun 27, 2011 5:39 AM ET

Billionaire investor George Soros said it’s “probably inevitable” that a mechanism will be put in place to allow weaker economies to exit the euro.

“There’s no arrangement for any countries leaving the euro, which in current circumstances is probably inevitable,” Soros, 80, said at a panel discussion in Vienna yesterday on whether liberal democracy is at risk in Europe. “We are on the verge of an economic collapse which starts, let’s say, in Greece, but it could easily spread. The financial system remains extremely vulnerable.”

Concern Greek lawmakers will fail to pass austerity measures to ensure the next installment of the nation’s bailout is roiling global markets and pushed the euro to a record-low against the Swiss franc last week. Greece is one of three euro- region members to have sought international bailouts amid the sovereign debt crisis.

“I think most of us actually agree that” Europe’s crisis “is actually centered around the euro,” said Soros. “It’s a kind of financial crisis that is really developing. It’s foreseen. Most people realize it. It’s still developing. The authorities are actually engaged in buying time. And yet time is working against them,” he said.

The euro was created in 1999, with 11 member states -- Germany,France, Italy, Belgium, the Netherlands, Luxembourg, Finland, Austria,Portugal, Spain and Ireland. Greece was the 12th country to adopt the shared currency in 2001, while Estonia is the newest member of the euro region, joining this January.

Winning Bet

The euro erased its decline versus the dollar to trade little changed at $1.4191 as of 10:14 a.m. in London. The 17- member common currency earlier slid as much as 0.6 percent to $1.4103, the weakest since June 16.

Soros is chairman of Soros Fund Management LLC, which has about $28 billion in assets. He’s best known for reportedly making $1 billion in 1992 on a bet that the U.K. would fail to keep the pound in the European exchange-rate system that pre- dated the euro.

He also expressed concern the currency union would dissolve on Jan. 26 at the World Economic Forum in Davos, Switzerland. He said then that European policy makers must address their two- speed economy or risk the euro collapsing, though he added this was unlikely to occur.

‘Plan B’

European Union leaders have vowed to stand behind Greece as long as Prime Minister George Papandreou, who won a confidence vote last week, pushes through his 78 billion-euro ($111 billion) package of budget cuts and asset sales. Investors are concerned a default would trigger contagion that would engulf other euro-region members including Ireland, Portugal and Spain.

Europe’s leaders should look for alternative strategies to solve the debt crisis, Soros told the Vienna panel, which also included Former Belgian Premier Guy Verhofstadt.

Because the “survival of the EU is of vital interest to us all,” there’s a need for a “Plan B,” he said, explaining that this could include EU-wide taxes, a “banking system guaranteed by European institutions, not a bunch of national banking systems,” or a financial transaction tax.

“You need a Plan B and there’s no Plan B at the moment,” Soros said. Instead, “authorities are sticking to the status quo” and not “recognizing that there are fundamental flaws that need to be corrected,” he said.

To contact the reporter on this story: Zoe Schneeweiss in Vienna atzschneeweiss@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong atParmstrong10@bloomberg.net

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Nouriel Roubini: This "Perfect Storm" Of Threats Could Slam The Economy By 2013

Gregory White

Jun. 13, 2011, 7:19 AM

Image: US Air Force


There's a "perfect storm" of threats brewing, and it could slam the global economy as soon as 2013, according to Nouriel Roubini.

Roubini believes that a slowdown in China, the damage done to Japan, the current debt crisis in Europe, and the emerging one in the U.S. have a one third chance of damaging the global economy.

Roubini, from Reuters:

“There are already elements of fragility,” he said. “Everybody’s kicking the can down the road of too much public and private debt. The can is becoming heavier and heavier, and bigger on debt, and all these problems may come to a head by 2013 at the latest.”

Roubini still believes we may escape the worst of this scenario, with the global economy bumping along, with weak growth.

One of the big threats Roubini believes the world is facing is a hard landing in China. He sees that country's non-performing loan problem expanding, if it does not quickly reshape its economy around domestic demand.

Combining that with the situation in Europe, and the U.S. failing to get its debt situation under control, and the world economy may have the right mixture for another dark period as early as 2013.


Source: http://www.businessinsider.com/noriel-roubini-perfect-storm-economy-2013-2016#ixzz1PlxGFJmK

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Home Raided By SWAT for Student Loans

Uploaded by lonelantern on Jun 8, 2011


http://RTR.org | A SWAT team broke into a home at the request of the US Department of Education to arrest and collect on a defaulted student loan. Kenneth Wright was dragged from his Stockton California home in his underwear while his children were in held police custody for several hours as they searched for his estranged wife. We bring you coverage of the unfolding story with remarks from Sheriff Richard Mack on the increased use of SWAT teams nationwide and Congressman Ron Paul's remarks on the Department of Education.

Debt limit reached! 'Treasury's latest debt scam'

Geithner borrowing money from retirement accounts to leverage hike

--------------------------------------------------------------------------------
Posted: May 16, 2011
3:19 pm Eastern

© 2011 WorldNetDaily




WASHINGTON – With the $14.3 trillion debt limit reached today, Treasury Secretary Timothy Geithner began borrowing money from a new source – government worker retirement funds.

The organizer of a grass-roots campaign to persuade Congress to deny any hike in the debt limit sees the action by the administration as a trap – what he calls "Treasury's latest debt scam."

"The goal of Barack Obama and Geithner is to force Congress' hand to raise the debt limit," says Joseph Farah, who created the "No More Red Ink" campaign. "The latest trick by Obama and Geithner is to steal money from retirement accounts that must be repaid. They'll do anything not to curtail current and future spending levels. It's a shell game designed to coerce Congress to allow unlimited borrowing."

Farah explained the more Geithner is allowed to borrow, the more raising the debt limit is perceived as a necessity – if only to repay money confiscated from other funds.

"If Washington is given an unlimited credit card again, Congress' constitutional role in setting spending is thoroughly eroded," said Farah. "That's the goal. There is no need for Congress to pass tax increases, because skyrocketing debt will force responsibility for government's reckless spending on taxpayers through inflation and future tax increases. It is as if government has invented a new way to fund itself without being accountable to the people."

Farah says there is an answer – convincing House Republicans to take a stand through the "No More Red Ink" campaign.

"There is only one way to stop this abuse of the Constitution with certainty," said Farah. "That is to persuade Republicans in the House of Representatives to say no to any hike in the debt limit. Anything short of that just keeps the nation on this repeating cycle of binge spending and ever-escalating debt. We can't possibly borrow our way out of this economic morass. We can't solve a borrowing problem with more borrowing."


Source: http://www.wnd.com/?pageId=299653#ixzz1MfDyQNQ7
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S&P issues warning on U.S. government credit rating

Source: (AHN) Reporter: Linda Young
Location: Washington, DC, United States
Published: April 19, 2011 11:27 am EDT


Credit rating agency Standard & Poor's Ratings Service has rattled financial markets by changing its outlook for U.S. government debt from "stable" to "negative" over concerns that lawmakers might not reach an agreement on dealing with the budget deficit.

The news caused the U.S. dollar to drop in value against the euro and oil prices fell. In New York the S&P 500 stock index declined while in Europe the main French, German and United Kingdom stock indexes also fell.

S&P's move increases the likelihood that it might downgrade the U.S.'s AAA rating within two years unless more is done to bring down government debt.

As one of the three major ratings agencies, if S&P lowers the U.S. credit rating it would make it harder and more expensive for the nation to borrow money.

In changing its outlook to negative, S&P officials said the agency views the U.S. economy as being diverse with a sound monetary policy, but that a downgrade of the AAA rating is possible if congressional lawmakers and the Obama administration are unable to agree on a viable plan to reduce the nation's deficit.

U.S. Treasury officials did not agree with S&P's move, saying they have a better ability to deal with the national debt than the ratings agency estimated.


Source: http://www.allheadlinenews.com/articles/90045495?S%26P%20issues%20warning%20on%20U.S.%20government%20credit%20rating#ixzz1JzcMvq4d

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LIBYA MAKES OBAMA’S FINAL FOUR-- TOO BAD AMERICA LOSES

Photo (Courtesy) http://rds.yahoo.com/_ylt=A0PDoX3kuopNHGkAC6CjzbkF/SIG=13ns1255u/EXP=1300966244/**http%3a//articles.nydailynews.com/2010-03-17/news/27059297_1_final-four-president-obama-march-madness

Tuesday, March 22, 2011, 05:43 PM


By Wayne Allyn Root, Former Libertarian Vice Presidential Nominee and Author of “The Conscience of a Libertarian”

The Middle East is in flames, we’re now fighting wars on three fronts, Japan has suffered a catastrophe, real unemployment is twenty percent, the housing market is in free fall, and the country is drowning in debt. Nero fiddled while Rome burned. Obama chooses to play golf, make Final FourMarch Madness picks, and party with his family in Rio.

This is madness. Did we elect the President, or “The Ultimate Sports Fanatic?” Will Obama choose the day there’s a massive earthquake in California, or a stock market crash, to honor the college Frisbee Champions?

As befuddled and detached as our President has proven to be, nothing compares to the sin of cooking up a war, and putting American soldiers’ lives at risk, to distract the masses from his disastrous reign. As everything Obama touches turns to disaster, has Obama’s cynical kitchen cabinet decided war is the perfect “Weapon of Mass Distraction?"

Wars tend to make Americans patriotic and rally behind the President. They tend to forget the economic tragedy building by the day and ignore the signs of Armageddon all around them. Mission Accomplished! Haven't we heard that before? It didn't work out too well the first time either.

Why should we risk American lives in Libya? Is Gadhafi any worse than all the other murdering, tin pot dictators we either support or do nothing about? Why not invade Darfur on George Clooney’s recommendation? Innocent people are dying there, too.

Before we start a third war, shouldn’t we all ask a few questions? Has Libya attacked us or any American interests of late? I know of no such attacks. And, by the way, who is Obama to tell Gadhafi to step down because he’s "lost the confidence of his people?" Sounds like Obama has been looking in the mirror again. Maybe the French should demand Obama step down?

Last I checked, Gadhafi is a bad guy -- a murdering thug. But he’s been a bad guy for forty years. Why now? Worse, the rebels fighting Gadhafi are supported by al Qaeda. So now we’re fighting on the same side as al Qaeda -- the terrorist murderers of American soldiers, women, children, and the elderly.

What’s our goal? Does anyone have any idea? Clearly our President doesn’t. Who takes over after Gadhafi? I assume radical Muslim friends of al Queda. Is that why we’re risking American soldiers’ lives?

Who is in charge? The French. Are you kidding? It’s rumored that Patton once said “I’d rather have a German division in front of me, than a French division behind me.” And, have you heard about the rules of engagement? No ground troops allowed. Funny, but I’ve never heard of a war won by only bombers from the air. What happens when Gadhafi digs in? He’s now arming a million citizens to defend him. The Arab League is condemning our bombing. What now? Mr. Obama, you’ve just created another fine mess.

Do we get dragged into a third ground war? What defines winning? Charlie Sheen? And other than the French, who is in charge -- the United Nations, a bunch of lawyers, and a President whose major concern is his golf game? Are you kidding? I’ve been a patriot my entire life, but you won’t find me supporting this war.

It’s past time to get out of Iraq and Afghanistan, and Obama is adding a third war? Is he mentally unstable, or just totally incompetent? And by the way, who declared war? Congress? Doesn’t that pesky document, the U.S. Constitution, say that only Congress can declare war?

There’s one more little problem with a third war. We’re broke. The USA can no longer afford to be the world’s policeman. We have a $14 trillionnational debt and unfunded liabilities of $60 to $80 trillion more. Cities, counties and states are insolvent and Obama is starting a third war where we don’t belong, in the hope it will help him get re-elected by distracting the masses from the financial disaster destroying the country.

Look at Obama’s record. Two wars he promised to end, but never did. Guantanamo he promised to close, but never did. The Patriot Act he criticized, but then extended. How about the torture Obama condemned? Yet now under President Obama we torture a U.S. soldier named Bradley Manning (of Wikileaks fame), even though he’s been convicted of nothing. Twenty-three hours a day of sitting shackled, naked and freezing in his cell…and this is how we treat an American soldier who is innocent until proven guilty under Obama?

Mr. Obama, you’ve already won a Nobel Peace Prize for doing nothing. Are you now trying to win an Oscar for impersonating George W. Bush? Your hypocrisy knows no bounds.

Obama is deliberately trying to ruin this great country (and doing a good job of it), is completely and utterly incompetent, or is having a nervous breakdown in reaction to the nonstop crises exploding under his leadership (or lack thereof).

Now he’s got us in a war in which we don’t belong, based on no threat to America, with no clear definition of victory, spending billions more we do not have. It is time to ask an important question -- Can this nation survive until 2012?

Wayne Allyn Root is a former Libertarian Vice Presidential nominee. He now serves as Chairman of the Libertarian National Congressional Committee. He is the best-selling author of "The Conscience of a Libertarian: Empowering the Citizen Revolution with God, Guns, Gold & Tax Cuts." His web site: www.ROOTforAmerica.com

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You Call This An Economic Recovery?

You Call This An Economic Recovery? 44 Million Americans On Food Stamps and 10 Other Reasons Why The Economy Is Simply Not Getting Better

When Barack Obama, the Federal Reserve and the mainstream media tell us that we are in the middle of an economic recovery, is that supposed to be some kind of sick joke? According to newly released numbers, over 44 million Americans are now on food stamps. That is a new all-time record and that number is 13.1% higher than it was just one year ago. So how many Americans have to go on food stamps before we can all finally agree that the U.S. economy is dying? 50 million? 60 million? All of us? The food stamp program is the modern equivalent of the old bread lines. More than one out of every seven Americans now depends on the federal government for food. Oh, but haven't you heard? The economy is showing dramatic improvement. Corporate profits are up. The stock market is soaring. Happy days are here again.

It just seems inconceivable that anyone can claim that the economy is improving when the number of Americans on food stamps continues to set a brand new record every single month. But the food stamp program is not the only indicator that the economy is still having massive problems. The following are 10 more reasons why the U.S. economy is simply not getting any better....

#1 Some recent statistics actually indicate that the number of unemployed Americans is still going up. According to Gallup, unemployment in the United States rose to 10.3% at the end of February. That is the highest number Gallup has reported since early last year.

#2 The housing industry is still a complete and total disaster. In fact, new home sales in the U.S. in January were 11.2% lower than they were in December. Not only that, the number of new home sales in January was 18.6% lower than the number of new home sales in January 2010. That is not a sign of improvement.

#3 There wouldn't even be much of a housing industry at all at this point if it was not for the U.S. government. Right now the U.S. government is either writing or guaranteeing well over 90 percent of all mortgages in the United States. So what would the housing market look like in 2011 if the government was not in the picture?

#4 In 2010, more than a million U.S. families lost their homes to foreclosure for the first time ever, and that number is expected to go even higher in 2011.

#5 Due to rampant economic decay and record numbers of foreclosures there are areas in most of our major cities that now look like "war zones". For example, the Huffington Post is reporting that there are now approximately 15,000 vacant buildings in the city of Chicago and there are approximately 60,000 vacant houses and apartments in the city of Las Vegas.

#6 According to the Oil Price Information Service, U.S. drivers spent an average of $347 on gasoline during the month of February, which was 30 percent more than a year earlier. This represented 8.5% of median monthly income. So what is going to happen when gas prices go even higher? Sadly, the average price of gasoline in the U.S. has risen another 4 cents since yesterday and it is likely to go much higher from here.

#7 The U.S. trade deficit continues to grow. The trade deficit was about 33 percent larger in 2010 than it was in 2009, and the 2011 trade deficit is expected to be even bigger.

#8 The CredAbility Consumer Distress Index, which measures the average financial condition of U.S. households, declined in every single quarter in 2010.

#9 The number of Americans that have become so discouraged that they have given up searching for work completely now stands at an all-time high.

#10 The U.S. national debt is growing faster than ever. The Obama administration is projecting that the federal budget deficit for this fiscal year will be a new all-time record 1.65 trillion dollars. It is hard to even imagine how much money that is. If you went out today and started spending one dollar every single second, it would take you over 31,000 years to spend one trillion dollars. Long ago the U.S. government should have been getting these deficits under control, but instead they are just getting even larger.

So in light of the statistics above, can anyone really claim that we are in the middle of an economic recovery?

The truth is that there is no sign that any of the long-term trends that are destroying the U.S. economy are even slowing down.

Millions of jobs continue to be shipped overseas.

The U.S. dollar continues to be devalued.

The federal government continues to go into more debt.

State and local governments continue to go into more debt.

Our trade deficit continues to grow.

Our cities continue to be transformed into wastelands as they are being systematically deindustrialized.

The number of Americans that are dependent on the government continues to soar.

The U.S. middle class continues to shrink.

I know that I harp on these themes over and over, but it is vitally important that everyone understands that the mainstream media is lying to us.

The U.S. economy is dying a very painful death and there is no hope on the horizon.

Things are not going to be getting better. Well, they may get a bit better for the boys down on Wall Street, but for the rest of us our standards of living are going to continue to decline.

The best days for the U.S. economy are already behind us. What lies ahead is a whole lot of pain.

We are going to pay the price for decades of corruption and incompetence.

An economic collapse is coming and you had better get ready.

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Threat of US Municipal Default

The debt being carried by state and municipal governments in the United States generates a risk massive financial problems for the U.S. economy, according to one widely published banking analyst. Meredith Whitney manages her own advisory firm, and is a frequent contributor to CNBC, Fox Business, and Bloomberg News programs.

The state and local governments have been getting by on the billions of dollars handed out by the federal stimulus programs, but the debt is making investors on Wall Street nervous about another big bailout.

“It has tentacles as wide as anything I’ve seen. I think next to housing this is the single most important issue in the United States, and certainly the largest threat to the U.S. economy,’ Whitney said.

Whitney added that people are not paying attention to the state of the local governments, “Cause they don’t pay attention until they have to.”

“There’s not a doubt in my mind that you will see a spate of municipal bond defaults,” Whitney predicted, which could include 50 to 100 defaults adding up to hundreds of billions worth of damage to the financial system (Meredith Whitney: State Economic Crisis Is being Ignored; Crisis on the Way,” http://www.streetinsider.com, Dec. 20, 2010).

In a rebuttal, a spokesperson for the National League of Cities wrote:

“The municipal bond market remains strong for a variety of reasons: Local and State debt levels are low; borrowing is longer-term and predictable; local and state governments have balanced budget requirements; rules require preemptive steps to prevent defaults.

“Sky-is-falling reports about the municipal bond market are a distraction from a much more common and economically significant story about cuts in other arenas – cuts in services that impact the quality of life in communities; job losses in the public sector; cuts in pension and health care benefits for employees and retirees as local and state governments seek to rein in liabilities” (“Crying Wolf On Muni Defaults: 60 Minutes And Wall Street Analyst Miss The Real Story,” press release from PR Newswire quoted on www.thestreet.com, Dec. 22, 2010).

Inspired commentary

There is no doubt that money, representing security can be a major motivating factor the the behavior of individuals and groups. Some future crisis will ignite a call for a Sunday law to try to win God’s favor:

Those who honor the Bible Sabbath will be denounced as enemies of law and order, as breaking down the moral restraints of society, causing anarchy and corruption, and calling down the judgments of God upon the earth. ... Ministers who deny the obligation of the divine law will present from the pulpit the duty of yielding obedience to the civil authorities as ordained of God. In legislative halls and courts of justice, commandment keepers will be misrepresented and condemned (The Great Controversy, p. 592).
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Illinois Passes 66% Tax Hike

Garrett Spangler
Jan 13th 2011 at 8:30AM

Filed under: Tax, In the News

Lawmakers in Illinois moved quickly yesterday, Jan. 12, to pass a new bill that increases the state's personal income tax rate by a whopping 66%. This appears to be the largest tax increase any state has approved in the wake of recent economic woes.

Newly-inaugurated Illinois Governor Pat Quinn has publicly defended the move to raise taxes, citing the state's dismal financial picture and budgetary shortfalls, which are expected to expand as stimulus spending comes to an end this year. The new legislation will increase the current 3% rate to 5% for the next four years and includes an increase in income taxes assessed on corporations.

With a budget deficit hovering at nearly $15 billion, there's no question that Illinois has its back against the wall and needs to make meaningful changes to its fiscal policy. While tax increases are seldom popular politically, it seemed a foregone conclusion that Illinois would utilize tax changes along with budget cuts to start making a dent in the current deficit and rein in future spending. It came down to yesterday morning, when the lame-duck legislature finalized the deal before new lawmakers were scheduled to be sworn in mid-day.

Past lawmakers in Illinois have routinely used debt to finance budget shortfalls and new spending, but the time to make tough choices appears to have been put off as long as possible. Thompson Reuters now rates Illinois state bonds as the riskiest in the country in terms of perceived risk of default.

Recently interviewed by 60 Minutes about the severe economic issues facing Illinois, state Comptroller Dan Hynes said, "The state of Illinois is known as a deadbeat state." Hynes added that Illinois earned its reputation over many years and seemed genuinely upset by the fact that he frequently can do little more than apologize when the state's creditors come calling.

While the increase is huge in terms of percentages, the new tax rate of 5% is still lower than most other states. States such as California and Hawaii have top tax rates that exceed 10%, and only about a dozen states continue to enjoy rates under 5%. Under the terms of the bill, the 5% rate is set to expire after four years and return to a rate of 3.75%.

Unfortunately for Illinois lawmakers both in support and opposed to the new legislation, the tax rate hike is only the first of many difficult decisions that must be made on the journey back to sound fiscal responsibility. Illinois politicians will have to devote considerable time to reviewing the budget for redundancies and waste as well as to determining where cuts can be made to state sponsored programs. Some options originally proposed but cut from the final tax bill included an additional $1 tax on packs of cigarettes and a plan to borrow an additional $8 billion to help pay at least some of the overdue bills to businesses and agencies engaged with the state.

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Shipping Our Economy, Our Jobs And Our Prosperity To China

As the U.S. economy continues to implode, large American corporations are investing billions upon billions of dollars in China. But all of this investment comes at a price. Over the past several decades, hundreds of factories and manufacturing facilities that would have been constructed in the United States, along with millions of decent paying jobs, have ended up going to China instead where labor is so much cheaper. In the process, China has become a massive economic powerhouse, while once thriving manufacturing cities in the United States such as Detroit are now rusted-out corpses. In fact, China's economy has grown so rapidly that it is being projected that in 2010 China will replace Japan as the world's second-largest economy. Not only that, but China has already overtaken Germany and is now the biggest exporter of goods in the entire world. But none of this growth in communist China would have been possible without all of the globalism and free trade that U.S. politicians from both parties have been pushing on us for the last 40 years. When they were selling us on the benefits of "free trade" they didn't tell us that we would end up shipping our economy, our jobs and our prosperity over to China.

American consumers never seemed to be able to put two and two together. As we were busy running out and filling up our shopping carts with cheap plastic crap made in China, we didn't seem to realize that a "global economy" meant that we would be competing for jobs and wages with workers on the other side of the world.

So now the U.S. economy, with its high wages and repressive government regulations, is suffering while China's economy is thriving.

So just how much money are U.S. corporations pouring into China?

Well, according to the U.S.-China Business Council, U.S. corporations combined for $3.6 billion in direct foreign investment in China in 2009. That was substantially up from $2.9 billion in 2008.

As U.S. companies pour increasingly large amounts of money into China, the economies of the U.S. and China are becoming inextricably linked.

In fact, some of the biggest "American" success stories are now manufactured in China.

For example, have you purchased an Apple iPhone? Well, if you have, there is a really good chance that it was made in China. Of course what Apple doesn't tell you is that ten workers at the facility in China where the iPhone is manufactured have committed suicide in the past year by jumping off buildings at the factory. Perhaps they were depressed over their low pay - the workers at the factory work very long hours but make less than 300 hundred dollars a month.

How would you like to work for 300 dollars a month?

But things could be even worse.

Reuters recently described the ordeal of one Chinese worker who spends at least eight hours a day standing on an assembly line putting together locks for Honda cars....

"Each year is the same. It makes me sick in the stomach. There's no freshness to things anymore," he said of his job which pays around 30 yuan (US$5) per day.

How in the world can American workers be expected to compete with someone who makes 5 dollars a day?

But some Chinese workers toil in even more difficult conditions. According to the Toronto Star, employees at the Pingdingshan Cotton Textile Company work grueling two day shifts and yet only make 65 cents an hour.

These low wages have enabled big global corporations to make huge profits, and they have helped provide lots of low price products for American consumers, but in the process they are cannibalizing U.S. jobs, factories and businesses.

In fact, it is getting quite hard to find things that are made in the United States anymore. Even many of the "organic foods" that you are buying at organic food stores are now actually made in China.

As tens of millions of American workers sit at home collecting unemployment checks, U.S. companies are busy making plans to invest billions more in China.

According to Pacific Epoch, a China-focused research firm based in Shanghai, Pepsi "has committed $1 billion over the next four years to build 14 new beverage production plants, in a move that will almost double its production capacity in the country."

Couldn't we use a few of those beverage production plants in the United States?

But who wants to pay U.S. workers 12 dollars an hour when they can pay Chinese workers 2 dollars an hour?

But Pepsi is far from alone. Forbes recently detailed the massive investments that some of the major car companies are making in China....

General Motors and Volkswagen have invested billions in China, starting more than a decade ago. Ford is rushing to catch up by adding production capacity and expanding its dealer network in China. Ford and its joint-venture partner, Chang'an Ford Mazda Automobile, plan to start producing next-generation Ford Focus models at a new, $490 million plant in Chongqing in 2012.

Meanwhile, once thriving American manufacturing cities such as Detroit and Flint, Michigan are so dilapidated and run down that they literally look like war zones.

But it is not just U.S. companies that are investing in China. According to China's Ministry of Commerce, overall direct foreign investment in China rose 14 percent to approximately $39 billion in the first five months of 2010. Nearly half of that money was spent on building or expanding factories.

The implications of all this are staggering.

First of all, nobody can deny any longer that China has become a superpower. China now has one of the largest economies in the world, their military has been dramatically upgraded and modernized and they have developed a network of economic and diplomatic contacts around the globe that would have been unthinkable 20 or 30 years ago.

Meanwhile, the United States has an economy that is imploding, a reputation that has been deeply tarnished and a debt that is the largest in the history of the world.

In fact, China owns about a trillion dollars of U.S. government debt.

Yes, the United States is falling and China is rising.

So now that China's economy and manufacturing base has been built up so dramatically, what happens when someday the communist Chinese government decides that it doesn't want to be such great friends with the United States anymore?

If relations between the two nations really go south someday, could U.S. corporations suddenly lose the billions upon billions that they have poured into China?

Also, many Chinese military strategists believe that it is inevitable that there will be a war between the United States and China someday. So could China end up using all of the technology and manufacturing capacity that they have gained at our expense against us someday?

The truth is that all of the money and technology that we have poured into China could end up being one of the greatest national security blunders of all time.

China is not a democracy. The Communist Party runs China, and most of their leaders still believe in the ultimate worldwide triumph of communism.

So in the end the United States may look back and realize how incredibly stupid it was to build up communist China at the expense of our own economy.

But this is the world our leaders have built for us. A world where globalism and "free trade" force us to compete for jobs against sweatshop laborers around the globe.

The reality is that this "new world" is not very good at all for the American middle class. The economic realities of the 21st century are very cruel for Americans who are seeking to live a middle class lifestyle.

Gradually, everyone in the world is being pushed into two economic groups. The massive global corporations that dominate everyone and everything, and the worldwide mass of expendable labor that serves those global corporations.

It is this kind of "neo-feudalism" that we must avoid at all costs. If the American people would just wake up this trend towards increasing globalism could be reversed.

But will they wake up?

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Atlantic Union College will lose its accreditation

Thursday, July 8, 2010


College appeals accreditation decision


By Karen Nugent TELEGRAM & GAZETTE STAFF

LANCASTER — Atlantic Union College will lose its accreditation by the fall semester unless the financially troubled Seventh-day Adventist college wins an appeal it has filed with the New England Association of Schools and Colleges, the accrediting body.

The college was placed on its most recent two-year probation by the association in March 2008, for financial reasons.

In spite of improving financial conditions, according to Clarence E. “Chip” Ates, AUC’s vice president of academic affairs, college officials were unable to convince the association that it has long-term financial stability, and filed an appeal last month.

Mr. Ates said Tuesday that with a new executive team in place, some of the college’s debt has been paid off and it is operating in the black now.

“The school is on its way up again, but it wasn’t enough for the association,” he said.

The college, he said, retains its accreditation and financial eligibility through the appeal process, which is expected to take a few months.

The college is open for summer adult education classes, registration for fall, and other business. Mr. Ates said planning for the fall semester is under way. No course credits received or degrees are threatened.

The appeal was filed with Bedford-based NEASC by College President Norman W. Wendth on June 30. According to the association’s website, college officials have 15 days from the filing to submit supporting evidence, and NEASC has 60 days to hold a hearing on the appeal.

Barbara E. Brittingham, director of the association’s Commission on Institutions of Higher Education, said yesterday the college has been very cooperative, and is working closely with NEASC.

An association statement on the college’s probationary status released in 2008, after a special visit to AUC in September 2007, says AUC was placed on probation because it does not meet the commission’s standard for financial resources, one of 11 standards required for accreditation. About 10 years ago, under the previous administration, the college did not meet several standards, including those on curriculum and student services. Mr. Ates, who is teaching a course at the college this summer, said the reasons are strictly financial this time.

Acknowledging that the college has been struggling financially for “quite some time,” Mr. Ates stressed that private and faith-based colleges have to rely on tuition and donations from the denomination for support — something that wanes in a poor economy.

“We were able to pull ourselves out of the red in one year, and now we need to build up reserves,” he said.

A large financial gift expected from an alumnus last year did not materialize.

Mr. Ates said if the appeal is unsuccessful, there is a backup plan to explore mergers with other Adventist colleges and universities. A 2008 proposal to merge or partner with Loma Linda University, an Adventist university in California, fell through.

In 2007, when Mr. Wendth took over, he announced a new focus for the 128-year-old college, which would involve more programs on social action and Christian leadership rather than liberal arts. The college cut back on associate’s degrees, but started offering several one-year certificate programs.

The college’s forte has long been its nursing program, and it is accredited by the National League for Nursing Accreditation Commission. AUC’s nursing class carried a 100 percent pass rate on the state registered nurse board exam, placing it among the top nursing schools.

Source: http://www.telegram.com/article/20100708/NEWS/7080777/1003/RSS01&source=rss

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Biden 2008 Campaign Owes $219,000

By ROBERT PEAR
Published: July 17, 2010

WASHINGTON — The Biden for President campaign committee owes the Treasury more than $219,000 because it accepted excessive campaign contributions and understated the value of a trip taken on a private plane in the 2008 campaign, the Federal Election Commission said in a new report.

Auditors from the agency found numerous violations of campaign finance rules by the committee that Vice President Joseph R. Biden Jr. used in his bid for the Democratic presidential nomination.

Mr. Biden’s press secretary, Elizabeth Alexander, said Saturday that he would pay the amount owed.

The report paints a picture of sloppy bookkeeping by Mr. Biden’s campaign. But aides to the vice president said the errors were relatively minor. The excess contributions were less than 1 percent of the total raised by the campaign, they said.

The Biden campaign received more than $2 million in federal matching money. Federal law requires the commission to conduct audits to determine if candidates were entitled to all the money they received and if they used it in compliance with the law.

Auditors found that the Biden campaign committee had accepted an improper “in-kind” contribution in the form of a round-trip flight on a private plane between New Hampshire and Iowa.

The campaign paid $7,911 to GEH Air Transportation, but should have paid the charter rate, which is much higher, the auditors said. The Biden campaign committee agreed to make up the difference by paying $26,889 to the Treasury.

The commission also found that the Biden campaign had accepted many contributions exceeding the legal limit of $2,300 per election from any one person.

Mr. Biden’s campaign committee agreed to pay $106,216, representing the amount of the excessive contributions.

In addition, the campaign agreed to reimburse the government for $85,900 worth of checks issued by the campaign but never cashed by the payees.

Some of those checks were refunds sent to donors whose campaign contributions exceeded the legal limit. Aides to Mr. Biden said he had no control over the donors’ failure to cash the checks.

The audit, reported by Politico on its Web site, found that the Biden campaign had not adequately disclosed more than $3.7 million in spending and $870,000 in debts. The campaign filed amended reports to correct the errors and omissions.

Ms. Alexander, the press secretary, played down the problems.

“Some repayment is commonplace after presidential campaign audits, and the repayment ordered here is relatively small,” Ms. Alexander said. “Payment is due to the Treasury 30 days after the F.E.C. issues its formal ruling, and Biden for President will comply with that.”

Auditors said the campaign could not document a number of statements it made about the handling of campaign contributions.

Mr. Biden declared his candidacy in January 2007, but never generated as much excitement or raised as much money as two of his rivals, Barack Obama and Hillary Rodham Clinton.

Mr. Biden pulled out of the race in January 2008 after a poor showing in the Iowa caucuses. Less than eight months later, he became Mr. Obama’s running mate.
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Source: http://www.nytimes.com/2010/07/18/us/politics/18biden.html

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Orszag Leaves, Red Ink Remains

by Pejman Yousefzadeh

Now that the Obama Administration is going to see its sexiness quotient go down, it is time to consider just what Peter Orszag’s legacy to the nation is. Unfortunately, in considering that legacy, we see that the bad outweighs the good.

As Jonathan Weisman notes, the most obvious Orszagian legacy is a debt of $1 trillion. That’s right; trillion. With a T. The natural consequences of that debt will be higher interest rates, a decreased capacity to borrow when we really need to borrow, and a coming era of austerity that will lead to economic stagnation, and even recession, as we grapple with the debt that Orszag and the Obama Administration bequeathed to us. The parlous fiscal situation in which we find ourselves could have been avoided if only we chose not to implement a stimulus that isn’t working, and a health care plan we plainly cannot afford. To be sure, the Bush Administration’s fiscal policy did not help matters, but the current Administration will outspend its predecessor–and put the country even more deeply in the hole as a consequence–by a significant amount. It’s impossible for the current Administration to blame its predecessor for the budgetary morass; indeed, blame cannot even be transferred with a straight face anymore.

Just as lamentable is Orszag’s record as a cheerleader for health care reform. While he helped successfully drive the effort to change the health care system, he did so at the expense of actually instituting good policy. As James Pethokoukis writes, the drive for health care reform was fueled by massive amounts of intellectual dishonesty which we will all pay for:
. . . Orszag made the case to the president that reducing healthcare costs was an important element to slashing the long-term budget deficit. More importantly, he persuaded Obama the U.S. healthcare system was so inefficient, overall spending could be restrained while also providing near-universal health insurance coverage. In effect, “bending the curve” was a free lunch. Or at least close enough for government work.

It was an audacious claim, mostly based on a single controversial academic study. Republicans never bought into the theory, and neither did Orszag’s successor at the Congressional Budget Office, Uncle Sam’s fiscal scorekeeper. In the end, Obama was forced to cut future Medicare spending and raise taxes to make the numbers balance out — at least on paper. Few Washington observers think those cuts will happen, meaning that the budget deficit could explode if Orszag’s novel theories don’t pan out. And even if the cuts occur, many budget hawks were counting on them to make Medicare sustainable over the long-term, not create a new entitlement.

Speaking of intellectual dishonesty, in what parallel universe is it acceptable to introduce a budget that neglects to mention a whopping $3.6 trillion in liabilities? Again, this would be trillion. With a T. Any business that pulled such a stunt would have found itself answering to people called “prosecutors,” and “class action attorneys.” One doesn’t wish Peter Orszag legal trouble–despite the manifest policy failings he is responsible for, he certainly seems like a nice guy–but it is worth noting that after leaving the Office of Management and Budget, Orszag will land some cushy, remunerative position in a think tank, or a private sector company, or both. Is this the price one pays for perpetrating budgetary fraud and chicanery upon the United States of America?

Orszag’s announced departure as Budget Director has set off speculation as to who his successor will be. Whoever ends up taking the job will need a strong sense of duty and patriotism, a strong stomach, and just the right amount of insanity to want to try to whittle around the gigantic budget deficit, and the truly terrifying national debt left to use by Orszag, and by the President he has served. About the only thing that we can hope for is that whatever sexiness quotient the next Budget Director lacks, he or she will make up for with a commitment to responsible policymaking. After having had to put up with Peter Orszag’s bad calls on the budget, and on health care reform, we are due for some competence at the Office of Management and Budget.
Is it possible that we will get competence? Possibly; Orszag has set the bar so low, that his successor will have to work extra hard to fail to clear it. Of course, the setting of that low bar is the source of many of our problems, now isn’t it?

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Source: http://newledger.com/2010/06/orszag-leaves-red-ink-remains/

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No room for error on U.S. debt

By Colin Barr, senior writer

March 16, 2010: 6:06 AM ET


NEW YORK (Fortune) -- The United States isn't in jeopardy of losing its gold-plated credit rating, though by one measure America is closer to the ratings-downgrade danger zone than Spain.

That's according to credit rating agency Moody's. In a quarterly report about sovereign debt, Moody's analysts wrote that despite market worries about rising government debt levels, there is "no imminent rating pressure" for the United States and other big governments carrying its highest triple-A rating.


But the report added that these governments' margin for error "has in all cases substantially diminished," thanks to a weak outlook for economic growth and enormous debt loads taken on to quell the financial meltdown of 2008-2009.

Cutting back on public spending too soon risks a double-dip recession, Moody's said, while leaving stimulus measures in place too long could lead to a sharp rise in interest rates "with more abrupt rating consequences a possibility."

What's more, governments that wish to avoid credit downgrades may need to implement harsh and potentially unpopular policies. The Moody's analysts, led by London-based managing director Pierre Cailleteau, wrote that "preserving debt affordability ... will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion."

Nor can big developed countries expect to export their way to health on the back of booms in emerging markets such as India and China. "Demand from the emerging world undoubtedly provides some support, but cannot on its own compensate for weak domestic demand," Moody's said.

In the case of the United States, interest payments on general government debt -- combining the federal government with the states -- could rise above 10% of revenue by 2013, according to the report.

That's the level at which the rating agency typically considers a downgrade. Moody's said debt affordability is the key factor to consider in ratings decisions, because debt costs are apt to constrain policymakers.

The report notes that U.S. debt service costs could rise from around 7% in 2009 to 11% in 2013 under Moody's baseline scenario, which calls for a muted economic recovery and a moderate interest-rate shock.

In this forecast, Moody's analysts expect the yield on the five-year Treasury to be above 4% by 2012, a level it hasn't reached since the end of 2007. It was around 2.4% Monday.

U.S. debt service costs are higher in 2013 under the Moody's assumptions than in any of the other major triple-A-rated governments -- the United Kingdom, Germany, France and Spain.

Moody's cautioned that debt service costs alone don't drive the decision, and noted the key role of politics in driving longer-term fiscal policies. The analysts said it would only downgrade a triple-A government's debt if analysts "concluded that the government was unable and/or unwilling to quickly reverse the deterioration it has incurred."

Accordingly, Spain continues to carry Moody's highest rating in spite of its inclusion in a Wall Street epithet for fiscally challenged countries around Europe's periphery, the PIIGS (Portugal, Italy, Ireland, Greece, Spain). Spanish government finances have been hammered by the collapse of a major housing bubble and unemployment is near 20%.

The rating agency acknowledged that "Spain's debt affordability has already deteriorated significantly and is expected to deteriorate further," to a level near the point at which Moody's might consider a downgrade to double-A.

But it said Spanish deficit-reduction plans are "already reasonably well formulated" and the ratings firm doesn't expect to downgrade Spain's debt.

Source: http://money.cnn.com/2010/03/15/news/economy/moodys.sovereign.fortune/

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