Why We Are Broke
Description: Judge's take on the downgrade
- Duration 4:45
- Date Aug 8, 2011
Description: Judge's take on the downgrade
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Does the government work for us -- -- we work for the government.
For the first time in American history the credit of the federal government has been downgraded.
Tonight the pain that comes from telling the truth.
Last Friday evening one of the companies that rates the creditworthiness of the federal government.
Gave a very candid opinion of the government's finances.
And the howling and finger pointing has yet to cease.
Standard and Poor's -- 100 year old company that gives opinions to investors on the safety and soundness of public and private debt.
Downgraded the credit worthiness of the federal government from triple A to double A plus that as a reduction from the top rating to the next rating down.
S&P as it is now and is one of a handful of companies that rates debt the other companies kept the -- at their triple -- rating.
But the government what have you believe that S and p.'s decision to lower the credit rating was political thought it was time to hurt the president.
-- this hurts the president's severely there is no evidence whatsoever to support the argument that the timing was political.
You see the senior people in the Treasury Department including apparently Treasury Secretary Tim Geithner himself.
Spent the last week negotiating with the credit agencies.
And articulating their position as to why the federal government is actually a safe place to park any extra cash.
The treasury was given every opportunity to make whatever argument it wanted and it apparently did so.
The timing was based not on politics but on legislation the congress -- just enacted and the president I just signed the debt deal.
You know the one that lets him -- 2.4 trillion dollars and the next sixteen months and which promises to reduce.
The rate of increase in spending but not to cut spending itself.
That became law last Monday a week ago today.
And the negotiations.
With S&P began in earnest the next day.
In fact S&P would have issued its opinion earlier since it was convinced that the debt deal the president.
And senator Reid and speaker Boehner had negotiated would pass the congress before it actually did pass.
But S&P didn't wanna be perceived as entering the political fray but lowering the government's credit rating during the debate over the debt deal itself.
However before the -- deal was a done deal but credit rating agency told the Treasury Department that it was looking for for shredding yen.
In cuts in the amount of spending in the next few years.
And that a two trillion reduction in the rate of increase in the government spending just wouldn't do it.
It is the job of these rating agencies to advise investors where to put their money.
If the agencies make a political rather than an economic judgment no one will believe them in the future and no one will pay them for their advice.
So why did S&P reduce the credit rating of the federal government for the first time in history.
The answer is easy.
The feds spend a trillion a year on defense a trillion a year on entitlements and nearly half a trillion a year on interest payments on their debt.
That's 2.5 trillion before we even get to paying for the rest of the government.
The Fed's collect only 2.2 trillion a year in revenue.
Now that simply cannot last.
The debt deal just signed into law actually -- that gap who would not evaluate as negative.
But credit worthiness of any entity that repeatedly spent more money -- it took -- the borrowed astronomical amounts every week just to keep the door open.
And one the bar when those borrowed monies were due to be returned borrowed more money so -- to pay back the loans.
President George W.
Bush added two trillion to the government's debt in eight years as president.
And President Obama will have added more than 6000000000000.
And four years and all this was done with broad bipartisan.
But the events of the past two weeks have demonstrated that this president has no understanding.
Of the problems of debt and the big government party in Washington shares is ignorance.
The debt deal enacted last week was so bad.
But the government's AAA rating which survived two world wars and the Great Depression could not survive it.
Only the Tea Party and those faithful to sound money and a government that stays within the confines of the constitution.
Can get us out of this mess.
And that will require a president who will upset not extend the status quo and who return the government to first principles.
Don't spend more than you take again.
Don't do more than the constitution authorizes.
Don't fight wars and aren't necessary for our freedom.
And for heaven's sake get rid of the Federal Reserve.
From the Arctic defending freedom every --