With news of the managers at Standard & Poor’s downgrading U.S. credit from AAA, where it has been for decades, to AA+, it is not surprising that several of Virginia’s U.S. Senate campaigns have weighed in.
Ultimately, the credit rating reflects a belief as to whether or not the U.S. can afford to pay back its debts. Think of it like a credit score. The downgrade just said that S&P thinks the amount we owe and the amount we spend doesn’t accurately reflect the amount we collect in revenue.
It’s really a three piece puzzle – we have to spend less, borrow less, and collect more.
Spending less and collecting more are, really, what our political debates are generally always about.
In general, progressives feel that the public good needs to be nurtured and funded by collecting higher taxes – especially on those who achieve from the free market through their entrepreneurial ability. Classical liberals (aka – modern conservatives) believe that allowing the free market to remain relatively free will create less strain on government to provide public goods and a modest taxation will create the revenues necessary to pay for necessary public functions – and government will collect more than enough revenue as businesses continue to be created and people continue to spend.
So, keep that in mind when you read the following statements.
First, Tim Kaine, the presumptive Democratic nominee said of last week’s compromise:
“While far from perfect, the current approach before Congress maintains economic stability by raising the debt ceiling and enacts important spending cuts that will help preserve our nation’s and Virginia’s credit rating. This is the beginning of a much longer process as we work to rebuild our economy.
“I’m disappointed that my Republican opponents joined the Tea Party in choosing default over bipartisan compromise.”
Oops. Guess he didn’t predict that one so well. (Update – Kaine’s lie of the day from a release today: “The action of S&P downgrading America’s credit rating yesterday was disappointing but predictable.”)
Second, Jamie Radtke, who wants to carry the Republican nomination as a “Tea Party” candidate and is trying everything she can to paint the GOP front-runner, George Allen, and her possible Democratic opponent, Kaine, as part of the problem, not the solution:
I have said time and time again that federal spending needs to be decreased immediately and significantly in order to get our massive debt problem under control, and that the permanent structural restraint of a balanced budget amendment is absolutely necessary. I have noted that this problem can no longer be kicked down the road, because we have run out of road.
The Washington Establishment — of both political parties — called those of us who wanted serious spending cuts and a balanced budget every name in the book. Vice President Joe Biden went so far as to call us “terrorists.” The Establishment promised their debt ceiling increase would preserve our AAA credit rating. We Tea Party Republicans said a debt ceiling increase would almost certainly guarantee a downgrade.
Tonight, less than five days after the debt ceiling was raised, that downgrade has occurred. Through their actions, President Obama and the Washington Establishment have guaranteed much higher interest rates for everything from homes to cars to credit cards. They have effectively raised taxes massively on the American people, and taken us even closer to the brink of financial ruin.
Third, there’s Tim Donner, who points his finger clearly at the Obama administration:
The unprecedented recklessness and fiscal irresponsibility of this president and his leftist cohorts in congress is now beyond question. This fiasco is breathtaking evidence of how vital the 2012 elections really are. Just imagine the specter of Mr. Obama untethered from the will of the voters for four more years. Simply put, if we send this president back for another term, we will hardly recognize the tattered remains of the America we love. Fool us once, shame on you. Fool us twice, shame on us.
The statements clearly reflect where these candidates are coming from. Kaine is happy to go along spending money, seeking a “balanced, bipartisan approach” – which is code for raising taxes. Whereas Radtke and Donner are looking squarely at Washington’s spending problem.
Just to put this into perspective, let’s look at FY2011 (mid-session numbers), and make it easier to relate to by lopping off eight digits to the decimal point (h/t Steve Batton).
Here’s, today, what the government owes in debt: $145,650
Here’s what the government earns annually: $21,320
Here’s what we’re spending annually: $36,030
Here’s what we just decided to cut from our budget: $917 per year for 10 years, with the possibility of cutting an additional $1,500 per year.
So this means that our annual spending might go down to $33,500. Or, if the joint committee chooses to raise all $1,500 in revenue and not cut anything at all (raise taxes) that means our earnings go up to $22,820 while our spending remains at $36k per year.
It doesn’t take a rocket scientist to see why our credit rating went down. No matter how you slice it, if you’re outspending yourself by 1.5 times with a debt that is more than seven times what you earn – you’re not a good credit risk.
None of us should be surprised.
Update: George Allen, who is leading his closest GOP opponent by 60 points, has also commented on yesterday’s move by S&P. In no surprise whatsoever, he lays it at the feet of the president (which, also points directly at Tim Kaine, the president’s cheerleader-in-chief):
“By punting the tough decisions to yet another Washington commission, Washington failed to show it was serious about exercising fiscal restraint and putting a stop to the reckless spending once and for all.
“Since the explosion of government spending we’ve seen in the last two years, Americans have lost 2.4 million jobs, our unemployment rate remains above 9% and now our standing in the global economy has been severely diminished. If we continue down this dangerous and unsustainable path, our children and grandchildren will suffer the consequences. We have an obligation to future generations to provide the long-term solutions necessary to restore confidence in America’s economy and make sure we are never in this situation again.”
