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Moody’s May Cut US Rating Over Tax Deal

From a joyous terribly concerned Reuters:

Moody’s may shift U.S. rating outlook on tax package

Mon Dec 13, 2010

NEW YORK (Reuters) – Moody’s warned on Monday that it could move a step closer to cutting the U.S. Aaa rating if President Barack Obama’s tax and unemployment benefit package becomes law.

The plan agreed to by President Barack Obama and Republican leaders last week could push up debt levels, increasing the likelihood of a negative outlook on the United States rating in the coming two years, the ratings agency said.

Allowing the tax rates to go up on everybody – or anybody – would do far more harm to the economy and ‘cost’ the government a lot more revenue than letting the rates remain the same as they have been for the last ten years.

A negative outlook, if adopted, would make a rating cut more likely over the following 12-to-18 months.

For the United States, a loss of the top Aaa rating, reduce the appeal of U.S. Treasuries, which currently rank as among the world’s safest investments

Really? Where is this investment money going to go? Europe, which is in worse shape? Communist China, where they simply make up their economic numbers out of thin air?

If the bill becomes law, it will "adversely affect the federal government budget deficit and debt level," Moody’s said

Where was Moody’s when Obama-care was being debated? Or when TARP or Obama’s stimulus were in the works? Or when Obama increased government spending 22%? — Or maybe we should ask, where were the news reports on Moody’s thoughts and fears?

Last week, Moody’s and Fitch Ratings both expressed concerns about the U.S.’s rating longer term, with Moody’s fearing the impact if the tax cuts become permanent.

In a market obsessed with the euro sovereign debt crisis, the Moody’s note reminded foreign exchange investors about their worries of growing U.S. debt and was a factor pressuring the dollar on Monday.

The cost of insuring U.S. government debt in the credit default swap market was little changed on Monday at around 41 basis points, or $41,000 per year to insure $10 million in debt for five years, according to Markit Intraday.

What’s this? Didn’t Mr. Obama outlaw "credit default swaps"? We thought they were evil incarnate.

A negative outlook would indicate that the rating may be more likely to be cut from the top Aaa rating over the following 12 to 18 months. The United States currently has a stable outlook, indicating a rating change is not anticipated over this time frame.

Moody’s estimates the cost of the funding the proposed tax bill, along with unemployment benefits and other policy measures, may be between $700 and $900 billion, which will raise the ratio of government debt to GDP to 72 to 73 percent, depending on the effects on nominal economic growth….

We don’t particularly like this tax deal, either. But these figures are simply fear mongering. But, of course, our watchdog media is only reporting this story to help the Democrats with their class warfare.

This article was posted by Steve on Tuesday, December 14th, 2010. Comments are currently closed.

5 Responses to “Moody’s May Cut US Rating Over Tax Deal”

  1. Rusty Shackleford says:

    “Once again, it’s hard to see how maintaining the status quo “could push up debt levels.”

    Because of the money congress has spent already that we don’t know about yet. As an analogy, let’s say Cooter has a court-case pending for a settlement from his former employer that could award him a lot of money. In anticipation of that award, Cooter goes out and signs for a loan that has 55% interest, thinking he’ll pay it off the minute the settlement is awarded. Then, the case goes to a hearing, Cooter is denied the settlement and he’s up to his ass in huge debt, in addition to the debt he already has from years previous.

    Congress has done exactly that. Spent money in anticipation of the “Bush tax cuts” expiring, thus “bringing in” about 600 billion in tax revenue, give or take. The law of unintended consequences has, once again, bitten them in the shorts and they never anticipated the current tax rates to be such an issue, based on the fact that they also never expected the American people to be smart enough to vote half of them out of office. They, as always, have overreached and caused the nation great harm. So, yes, the nation will be further in debt beyond the already exposed stim-u-loss spending and the new hell-care bill which is completely without funding (and should remain so), etc etc etc.

    I’m all for hamstringing any member of our government who wants to spend tax dollars. I think the review process for doing so should be ten times as hard as getting a home loan. That is, say, in 1968. Checks and balances as currently unenforced, have shown to be not only lacking but ignored completely. If everyone in the government is complicit, then there are no checks and balances. Only cronyism and corruption.

    The argument has to shift away from disagreement over what to spend money on and move to whether money should be spent at all. Both republicans and democrats have acted as if “good” legislation means passing laws and spending money. But in reality, hard restraint in both areas is what’s needed. Someone would impress me greatly if they had ever stood up and said, “Why do we need “hate crime” laws? What’s wrong with enforcing the laws we already have?” Yet this concept was all-but-ignored. And that’s the root of much of our problem in this nation. Instead of going out and getting a new, shiny thing….let’s repair or even just MAINTAIN the old, reliable thing we already have. My god, every year there are about a thousand new laws Federal, state and local that we have to abide by. If you want a laugh, look up some old laws that are no longer enforced. “It is illegal to whisper in the ear of a horse on St Patrick’s Day” or some such. I’m sure you all have read or heard of some of them. But government needs to review all the old crap, throw out that which is useless and NOT write any NEW crap. Seems the platform for re-election has more to do with “Sen so-and-so worked hard to pass the new idiot law….that’s the kind of representative South Loserville needs. Vote for so-and-so”.

    I guess it has to do with the national mentality that cannot remotely fathom that sometimes, doing NOTHING is necessary.

    However, I don’t want to take up tons of reading space here….and it can be argued that wee barry did exactly nothing the whole time he was a senator. I’m talking more of an argument against passing laws just for the sake of “looking busy” in order to claim some sort of lame victory which, in part, I think passage of the destroy-America-bill (healthcare) was. Party loyalty, hatred of capitalism, power-seeking…all that and…..looking productive. How to succeed in business (congress) without really trying. If you vote for it, your re-election campaign will sell itself, right? Or so they thought. Sure didn’t help much this time.

  2. Petronius says:

    “a loss of the top Aaa rating [may] reduce the appeal of U.S. Treasuries, which currently rank as among the world’s safest investments….”

    Good grief. Where has Reuters been for the last few months?

    Bill Gross and PIMCO began bailing out of Treasuries last spring, and the Chinese stopped buying months ago.

    US Treasuries started going downhill fast when Bernanke announced QE2 in November.

    Then Treasuries were hit by a big sell-off to start this month after Bernanke’s remarks on “60 Minutes,” when he said it is a “myth” that QE means printing money (heh-heh-heh).

    And the sell-off is currently gaining momentum, as bond investors run for the exits, worried that American politicians are unable to control the public debt and that the Fed is committed to inflation.

    Corporate bonds and munis are also being hit hard.

    Currently only the Fed is buying US debt.

    This morning the 30-year rate is up once more, to 4.49%, and the 10-year rate is up to 3.36%, driving down the price of bonds even further.

    We stand at the threshold of a mega long-term downtrend in bonds.

  3. tranquil.night says:

    Petronius has it covered.

    Deep spending cuts are our only solution, we can’t even hope to grow ourselves out of this at the moment: too many markets are forked up by regime bureaucratic crowding.

    Indulging a long and pointless debate over how Obama would change the tax code is the worst trap for which the new Conservative Congress can fall right now. Bam wants to talk taxes to fool the irate grassroots into believing he’s begrudgingly heard them – while privately spending pork in Washington and grabbing what theu can in nuance fees.

    The pressure building on municipalities, and really all of us because of commodity prices and inflation, is a clear and present danger. If debt tanks the dollar, Red America might seriously consider pulling out of the dollar. As GBJ notes, it’s only paper issued and owned by a corrupt private organization representing a corrupt public one. We don’t have to eat by their dinner rules, splitting the $1000 meal when all we had was a side soup – leave the Marxists with their own damn tab.

  4. yadayada says:

    funny as it seems, it is by design. those in the fed aren’t incompetent. they simply don’t care what the final outcome means to the general public. they will financially gut our country and take off with their own millions. as long as they and their cronies have, they care not about the have nots. to them inflation cuts their debt worth.

    if you owe $100 to Joe and each dollar buys one lb. of rice (labor output)- you owe Joe 100 lbs. of rice. after rampant inflation, it now costs $10 for a lb. of rice. you now owe Joe only 10 lbs. of rice. you have cut your debt (labor output) by 90%.
    right now we owe china a lot of rice.

    it would sure be nice if the fed and the lamestream media would stop crying about the possibility of DEFLATION. other than a 30 yr fixed mortgage, I have very little debt.
    so far no one has been able to explain to me the downside of with my money being worth more !?!?!?!

  5. U NO HOO says:

    Homosexuals ruined the meaning of “gay.”

    Now Obama and his cronies have ruined the strength of “the full faith and credit of the USA.”

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