American Credibility

Source

By: Wayne Brown


The talk of the weekend was the late day downgrade of the American credit-rating by the S&P. Then the finger-pointing started in Washington as our elected elite were shocked and surprised that the reality of their poor choices had finally come home to roost. So, the scramble for political survival begins in all areas of the executive and legislative branches. Never mind the truth, there is little or no place for the truth when it comes to political survival. Washington has proved that point time and again throughout our history.


Standard & Poor’s executives made the explanation quite clear for anyone who cared to listen to it. They made the downgrade as a cautionary step to say that they saw nothing in the recent actions of our leadership to effectively gain control of spending nor did they see any effective actions which would reduce the outstanding debt already on the books. Washington can spin that explanation all it wants but it seems very clear and straight-forward.


The Treasury immediately pointed out that something was amiss in that no such action had been taken in prior times when the government raised the debt ceiling and borrowed more money. So why was a downgrade taken this time? Apparently, the treasury failed to notice that in times past the rationale between the debt accumulated on the books was not running dangerously close to the total annual gross domestic product (GDP) of the nation. In other words, never has our debt to assets ratio been so tight and never has there been such a real threat that the debt figure would surpass and exceed the assets of the country. That reality is upon of as the Obama Administration is projected to add 9 trillion dollars in spending to the national debt in the first four year term. If this projection is true, and it likely is, the national debt will begin to close in on the 20 trillion dollar figure. That figure will equal or exceed the GDP. In effect, when this occurs, our country is bankrupt which impairs both our ability and our desire to repay our debts.


The President and his side of the aisle would like Americans to believe that this downgrade is nothing more than a product of the shenanigans of the Republicans and the Tea Party ilk. That excuse is lame to say the least. America, even if the economy rebounds on the short term, is not going to see double-digit growth in the GDP any time soon. In fact, we will be very luck to sustain a high single digit growth in an upside economy. Given the current rate that government regulation is growing, that possibility also becomes more of a dream than a reality. In July of 2011 alone, the Obama Administration added 9 billion dollars in regulatory costs for American businesses. That projects to a rate of over 80 billion in additional costs caused by simply the government over-regulating the business sector. Many business are finding that the level of regulation in America is not only making it undesirable to base business here but, in essence, it is unaffordable. Given that attitude and the attitude of this administration to continue expansion of government regulation, a noticeable positive growth in GDP is highly unlikely.


This S&P downgrade is a shot fired over the bow that is the ship America. It is a warning to say “get your financial house in order.” In the past, we have had the ability to either offer our debt to investors or to auction our debt on the global market to generate the “borrowed capital” necessary to continue operating at the current spending levels of government. With downgrades in the credit standing, the monitoring agencies are evaluating two aspects of the government financial situation. One is our desire to pay which is well stated in that our government is required by current law to pay our debts. Two is our ability to pay and is very key to the formula. As our government continues to spend, 43 cents out of every dollar spent is now “borrowed capital”. Our national debt as a result of a 1.5 trillion dollar annual spending deficit is piling up at an alarming rate. There is nothing to indicate that this is a temporary condition and no indication that any effort is being made to reduce the accumulated debt. Although it is the law that we pay our debts, when we run out of money and cannot borrow anymore, then the old rule of thumb that you cannot get blood out of a turnip comes into play. We default on the debts owed to other countries and we also default on the debt owed to American investors which comes from retirement and pension accounts, 401K’s, etc. Essentially, while we are going broke as a government, we are taking the American worker/taxpayer down with the ship.


We have too many elected officials in Washington today who believe “big government” is the answer to every that challenges our country. They actually want the taxpayers and citizens to look to the government for all their needs. The Obama Administration has already grown the size of the federal government by a factor of 17% in just over three years. Government is like water, it will occupy whatever space you place it into. Obama appoints more and more czars to micro-manage more and more aspects of our lives. These czars answer to no one but him and earn large government salaries along with creating sizeable staffs to carry out their bidding. The EPA has been in a growth mode from the day of its inception and it continues to grow with no real check on what is realistic in terms of our environment and the controls and regulations placed on it.


As our credit runs into downgrade, the costs of debt service increases and on a sizeable factor which in turn leads to more shortfall in our ability to pay and calls for more taxes on the citizens to cover the debt load. Enduring that situation would be acceptable if there was an on-going effort to truly reduce spending and thus decrease the national debt. There is no such effort and likely never will be until it is too late. As credit is downgraded, other countries and investors want greater paybacks for their risks because their risks are higher. Eventually, the risks outstrip the return and all effort to take any risks drops to zero…a place at which there is no available money to borrow. At that point, if you pay your bills as directed by law, then all you can do is print money…not good for the value of money and eventually will cause it to be worthless to the public. We are on that path at present with no plan on the books to get off of it thanks to the efforts of our elected officials to simply kick the can down the road to the next generation.


America, as a public, should be outraged that those we have elected to office have put us into this situation we currently face. The politicians point to the pressures of entitlement legislation such as Social Security and Medicare. They ignore the fact that these two programs took in 70 billion more dollars in 2010 than they spent even in light of the estimated over 90 billion dollars of fraud inherent in the Medicare Program. Our government threw that 70 billion dollar surplus into the general fund and spent it as a function of “discretionary spending”. This is reckless and irresponsible to say the least and it is the primary reason both of these programs are projected to be “insolvent” by 2025.


The fact of the matter is that Washington wants Americans to ignore that it spends over 600 billion dollars a year in “discretionary spending”. This figure matches the annual defense budget almost dollar for dollar yet Washington could not find 29 billion dollars to pay our debt service out of this 600 billion dollars. They couldn’t find it because no one wanted to see any cuts in the pork-barrel and earmark spending which they had put in place no matter how ridiculous or wasteful it may be. The easy route is to continue borrow money, continue to spend, and eventually place higher and higher tax burdens on the American public. That is the only solution Washington can come up with as there is no such thing in Washington as “enough money” and never will be.


The President will speak today and he will blame the right and the Tea Party for these woes. He will attempt to wash the White House’s efforts in the recent debt ceiling as a lily pure effort to reduce America’s problems. He will call this situation everything but what it really it and he will identify every possible cause but the real one…runaway, rampant, out of control spending by an over-bloated federal government. This is predictable even without a press release beforehand.


America is not in the best position but we are still in a position to turn this situation into something positive. This situation is awaking a sleeping sector of our population who for so long has simply gone along with everything the government has fed us to justify all the social good and dreamy work that is being done with money that we, as a nation, do not have and likely never will. We are waking to the truth and we don’t like what we see or hear. It is truly a time for hope and change….hope and change that will take us far, far away from the direction in which we are currently headed as a nation.


God Bless America!




© Copyright WBrown2011. All Rights Reserved.


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Comments 22 comments

lbidd54 profile image

lbidd54 5 years ago from The beautiful Jersey Shore

GREAT hub!

The American people are awakening and, the ones I am associated with, are furious.

Just plain common sense dictates very basic principles that must be followed to have a positive outcome and, sadly,common sense has been long abandoned.


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@Ibidd54...Thank you! I hope this wakes a lot of folks up to our dire situation. We cannot go on doing things this way and not face some terrible consequences...Washington knows it too but they are thumbing their nose at us. WB


WhatBigJohnThinks profile image

WhatBigJohnThinks 5 years ago

Well stated. The belief in this country has always been a pastey white blur of contentment. A "don't worry they will take care of it" attitude that has lost its vibrant luster. Americans can no longer ignore what politicianss do with OUR money. Its time for them to stand up and be counted. Citizens of this once great nation need to realize that once we hit 100% GDP there will no debt ceiling to raise. Years of complacency are over.


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@WhatBigJohnThinks....Thank you and thank you for those great comments...right on! WB


Pamela99 profile image

Pamela99 5 years ago from United States

Outstanding hub! I hope you are right and this mess wakes up people so they will pay attention to what is going on in our nation. Obama has always blamed someone else for every single one of his mistakes and he simply does not have a plan or his plan is one that will take us further down the drain. Rated up and awesome!


Loves To Read profile image

Loves To Read 5 years ago

Well written hub Wayne. Sadly all our Governments are out of control with their spending. It is a sad thing to see the minority that governs our great countries drag the majority of the people into financial ruin. Yet that is exactly what they are doing. I hope that many will sit up and take notice of what is really going on.

God Bless


breakfastpop profile image

breakfastpop 5 years ago

If Washington doesn't get the message now, they will never get it. I find it impossible to believe that the blame game is still alive and well. Have they all lost their minds? Up useful and awesome.


drbj profile image

drbj 5 years ago from south Florida

Of course, Obummy will BLAME everyone else for the problems he and his minions and czars have created. He has no other course. How else to explain the disastrous lack of leadership, strength and vision on his part!


dallas93444 profile image

dallas93444 5 years ago from Bakersfield, CA

Basic idea: budget, spend less than money coming in... perhaps "save" money! What novel ideas... so foreign to our government. Great hub!


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@Pamela99...I think with the direction Obama is headed in and the class envy he is espousing, we could very well be following in the footsteps of the riots of London. He is bringing a whole new context to the phrase "Hope and Change." WB

@Loves To Read...Amen to that, we are in one fine pickle thanks to those we trusted our future to. WB

@breakfastpop...The only talents either side of the aisle has is spending money and assigning blame...or and maybe stepping in front of the mike for a photo op or to claim hero status. WB

@drbj...It was Bush's fault...Bush really messed up what could have been the ideal presidency....that danged W! He made Obummy spend all this money and do all the things he has done. Bush even hid Obama's transcritps and his birth certificate so good that only Dick Cheney knows where it is and Obama has no idea where Dick Cheney is! LOL! WB

@dallas93444...One thing is for sure, there is no such thing as "enough money" for a government that is not operating a balanced budget. They will take and spend and take and spend as long as we will allow it. WB


The Frog Prince profile image

The Frog Prince 5 years ago from Arlington, TX

Wayne - Check out the latest Rasmussen poll. 69% of those polled said that the federal government is not governing with the consent of the people. Only 17% said that they are.

The lights are shining right on the rats and they are running scared. They so desperately want to be re-elected that it stinks.

The Frog


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@The Frog Prince...Well, I hope that the very least they will be given a sound trouncing in 2012. A fool could not have created any more problems in this 31 month timeframe. Of course, Congress must be cleaned out if we are achieve any significant change. WB


H P Roychoudhury profile image

H P Roychoudhury 5 years ago from Guwahati, India

CREDIBILITY rests directly or indirectly with every citizen of America.


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@H P Roychoudhury...Very true, we, as voters and citizens, are ultimately account for the situations we create and the outcome of all of it. If we are to remain a credibile country then our citizens must take our future welfare seriously and make wise decisions at the polls. Thanks HP...WB


CMerritt profile image

CMerritt 5 years ago from Pendleton, Indiana

This may sound completely foolish and somewhat naive, BUT, I think we are on the verge of a defining moment in Amerian History. I keep thinking back when Carter was in office and how "depressed" and gloomy things were. Then came Reagan, a man with a plan and conviction to sell it. I'm not sure who it will be that steps up to the plate, but I do know, that the REAL working class of Americans are ready to wake up from this very bad dream. Obama has merely played the role of Carter and reminded us what exactly bad policies and poor leadership will do to a country.

Wayne you have briliantly summed up the root causes of the downturn...and for what it is worth, I have a sense of REAL hope and change for our future.

Maybe it has taken this kind of turmoil to slap enough Amerians into reality to actual do what is best for this country.

Wayne I, (as always) enjoyed reading this hub.


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@CMerritt...Chris, I sure you are right. We do need an emerging leader from any side of the aisle to take the reins and lead us in the proper direction toward fiscal responsibility. While Romney is a strong candidate in name recognition, I am not sure he is that person. I firmly believe that Mike Huckabee could be that man but I doubt that we will see him back in the political arena. Rick Perry has the stomach and the leadership skills for it if he decides to run. I don't think you are naive to believe what you state. A recent Rassmussen Poll indicates that 69% of the Americans do not think the country is being governed in the best interest of its people...only about 14% approved. If that majority goes to the polls with the same intentions, we can change America. We just have to get them there. Thanks for the great comments and the kind words, Chris. WB


Pollyannalana profile image

Pollyannalana 5 years ago from US

I know I sound like a broken record but I don't see why Obama does not have to answer for the 600 million for border patrol. What a joke there, does anyone really believe that? Then there were trillions; and no I don't remember how many of them Hillary was taking to Mexico and she and their leader were to clean up the drug running with that. Another joke and I am not laughing. Why does no one have to answer for anything? The only reason Obama took Hillary on is because her and Bill are pros at this and they have certainly never had to answer for anything, as serious as much of it was. Right under the rug. I am not sure our country is going to make it through this one.


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@Pollyannalana...You have to sound like a broken record in the political arena before most people get it. George Soros owns Obama lock stock and barrel. Soros had a heavy amount of stock in Hilary...maybe Bill too and he was pushing her hard for the job. Then he found himself a fool that had no luggage and no background that could be proven...what a perfect choice for president. Those who would shrug their shoulders at the suggestion that Obama has much to hide have given little thought to the fact that our government's system of checking a man's qualification of birth and citizen are obviously not in place. They are just as solidly in effect as is the Magna Cum Laude status of Obama as an honor grad of Harvard Law...what a joke. They actually want you and I to believe that this man is an honor graduate of Harvard Law yet holds nothing but distain for the Constitution and the Rule of Law. A man who was so passionate about the law that graduated with honors from one of the top laws schools in the country, almost never practiced, and then gave up his law license for reasons unknown. How high does the evidence have to pile up before we question the motives of this pretender to the throne. He is everything Soros could have dreamed of in his wildest dreams in terms of tearing America apart. He has no conscience, no sympathy, no patriotism, and likely no heart. Where we are as a country today is no accident and even a damn fool could not have led us there. This man is on a mission to tear this country apart and he owes no allegiance to anyone other than Soros who has likely promised him the moon when the deed is done. I hear speculation here on the hub of fears of Bachmann and Rick Perry....please...Perry could make every mistake in the political world and never accomplish the damage of this poser. WB


Naomi's Banner 5 years ago

You are absolutely right. We have done exactly what our founding fathers left England to get away from. We have grown our government so big and lined their pockets with so much that we are now taxing our taxes. We the people need to show take our stance and stop the madness. Take back our government, stop the outrageous taxing, and refuse to allow them to further increase our debt by spending on useless pork etc.


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@Naomi's Banner...I am so moved when others like yourself grab the gauntlet and run with it. You get it? So few really do get it but you do! According to a recent Rassemussen Poll, 69% if Americans do not believe the "Will of the People" is being carried out. When that happens, tyranny is the only result. We do not want to go there but Obama does. WB


Pollyannalana profile image

Pollyannalana 5 years ago from US

From what I see here at hubs many cannot see through the man but really I think it is just a deeper problem of hanging onto a party. Americans might just need to throw out both of them, there is no time for more of the same and game after game. Lobbyists should be outlawed like yesterday! We really do need to clean house. They have all set themselves up as gods and they don't have enough sense or loyalty for the real America and it's true meaning. Please tell me why Republicans have let a man in not even a citizen of this country? Does he have something on them? It drives me crazy and nothing makes sense.

Polly


Wayne Brown profile image

Wayne Brown 5 years ago from Texas Author

@Pollyannalana...You have hit the nail on the head. Many of these people are hanging on to what they believe is the "party of their forefathers", the party of "family tradition". The Democratic Party died somewhere shortly after the civil rights movements in the south. It is the socialist party now, plain and simple yet the hardcore democrats or want-to-be-democrats will allow anyone to tell them anything as long as it is dressed in the democratic party suit. Common sense and logic total are thrown out the door in exchange for "group think". It is amazing how the most sinister of politicians can put on the party mask and gain the support without thought. It is amazing that there is no concern among this party that our government totally failed in doing its job in checking the qualifications of Obama to occupy the office of President. Never mind that he just might not qualify...he deserves to have the job even though the rules have been broken...he is the messiah who has come to rescue America from the evil grip of capitalism and they continue this banter until one day the look up and the only thing left to say is "all hail the king" for tyranny will be the order of the day. Thanks much. WB

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