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US Debt Downgrade – Goolsbee Reacts

So straight from the ‘better late than never’ dept, S&P has finally taken official action to warn investors about the ever-so-obvious risks involved with U.S. debt – like, umm, the fact that it’s basically a Ponzi scheme, since they have to issue more debt to pay off current debt.

Anyway, this quote from the White House was too good not to comment on, reacting to the downgrade:  Austan Goolsbee, Chairman of the [White House] Council of Economic Advisors, characterized the S&P move as a ‘political judgement’. “What the S&P is doing is making a political judgement and it’s one we don’t agree with, and it appeared to me that Moody’s and some others don’t agree with that judgement”, Goolsbee said.

A political judgement? What? This is a judgement based on numbers and math, period. In just the last 9 months alone, spending has outpaced govt revenue (taxes & fees) by $1 trillion. Including future Social Security, Medicaid, and Medicare obligations, along with the $14.3 trillion we owe to bondholders, the govt’s debt obligations are well north of $70 trillion, and Treasury Secretary Geithner has stated the importance of raising our debt limit so we can pay our bills. That’s like maxing out your credit card, and then telling the bank ‘please, increase my credit line so I can pay you back’. What is ‘political’ about a rating agency pointing out that someone in this position has increased risks with their debt? And regarding Moodys and Fitch (the other big rating agency), they will likely be following S&P’s lead soon, much to Goolsbee’s dismay.

This is yet another example of govt condescendingly lying to the American people to further promote ‘confidence’ in the economy, and stave off the inevitable rush out of US debt, and out of the US dollar, which started in earnest ever since late August 2010 when the Fed’s QE 2 program was announced.

It is getting more and more obvious that the day of reckoning for profligate govt spending has arrived, and the ramifications are rather bleak for the American economy and its citizens.


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