Friday, July 29, 2011

Debt Limit Alone Won't Save AAA Credit Rating

Earlier this month, Standard and Poors (S & P, for those of you not familiar with the full name) stated that even if the United States increased it's debt limit there was still a strong chance that our credit would be downgraded.  The Drive-By Media isn't reporting it, but simply raising the debt limit will not save the nation from seeing our credit rating cut from AAA to AA.  It's up to the Conservative media on talk radio and we in the blogosphere to pass the word.

According to the liberal favorite Huffington Post,

Standard & Poor's warned earlier this month that there was a 50-50 chance of a downgrade, if Congress and President Obama failed to find a "credible solution to the rising U.S. government debt burden." S&P said it may cut the U.S. rating to AA within 90 days. Passing a $4 trillion agreement could prevent a downgrade, S&P said. (1)

Let me repeat:  a $4 Trillion spending cut COULD prevent the downgrade.  Inherent in that statement is the fact that cutting less than $4 Trillion over the next 10 years will mean we have a very good chance of losing our AAA rating, regardless of a debt limit increase.  If we simply STAY at our current spending levels as of 2011 which translates into $3.729 Trillion in spending, a $4 Trillion cut would mean cutting spending by a mere 11%.  It's not a bad start, but keep in mind we are already spending just under 30% more than we take in in revenue.

The bottom line here is our nation is continuing to spend about 19% more money than we have, as of the 2011 budget.  This is why our nation is in such trouble. No family could continue on that pace for years upon years without bankruptcy coming upon them within a few years.  Furthermore, how many people do you think would be granted a further credit cards if they had a current debt of about seven times their annual income?  What do you think that person's credit score would be?  Do you think that person will be in the 800s?  (For those of you from Palm Beach County, FL, a person's credit score is between 300-850.  The higher the score, the better your credit.  A person is considered to have good credit if their score is above 700, and your credit is increasingly higher as you get closer to 800.)

The reason we are facing this credit score crisis, if I may interpret the S & P statement, is not because we haven't obtained another credit card to be able to pay our bills with money we don't have.  It's because we have too much debt already, and now we're asking to borrow more money to pay for it.

That's why the S & P is predicting an excellent chance of a credit rating downgrade.  No American family with a debt to income ratio of 7:1 (for those of you from Palm Beach County, that means seven times more debt than annual income) would be given a loan or further credit.  We need to take real steps to get ourselves back within our means.  No accounting tricks, no games.  Just real spending cuts to get us to a balanced budget. 

(1) U.S. Credit Rating Downgrade Looking Likely Even If Debt Ceiling Deal Is Reached

No comments:

Post a Comment

All posts will be reviewed subject to the Rules for Commenting. Any post that does not abide by these rules will not be posted, entirely at the discretion of the blog editor.

Commenters who repeatedly violate these rules will be permanently banned from commenting, and thus none of their comments, regardless of content, will be posted.