Standard & Poor’s put the U.S. government on notice that it risks losing its AAA credit rating unless policy makers agree on a plan by 2013 to reduce budget deficits and the national debt.
“If an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns,” New York-based S&P said today in a report that maintained its top rating on U.S. long-term debt while lowering the outlook to “negative” for the first time.
S&P said there’s a one-in-three chance that the rating might be cut within two years and that its “baseline assumption” is that Congress and the Obama administration will come to terms on a plan to reduce record deficits. Treasuries and the dollar rebounded from early losses following the statement, while stocks declined. Moody’s Investor Service, which has a stable outlook on U.S. debt, today said the U.S. budget debate is “positive” for the country’s credit.
Such a vague rating revision by a monopoly institution in an industry that has been monopolized through government intervention (as explained before here) has no direct, tangible effects to any real person who works in a real job in the real world.
Its effect is largely of opinion making nature. It would seem to me that it surely provides federal government bureaucrats with a welcome justification to default on less binding obligations for the sake of protecting their higher priority items, now that there is no more ability to inflate their way out of this mess, as I outlined in The Government’s Insolvency.
In addition, and to what degree remains to be seen, it paves the road for the inevitable tax increases that taxpayers will be subjected to in order to fund excesses, wars, bailouts, and special interest favors from the past. The final brick in the exploitation of younger generations by older and politically connected ones through debt slavery is an ongoing increase in the public’s tax burden, as I explained in What’s the Problem With Government Budget Deficits?:
As I explained, the ultimate damage caused by public budget deficits occurs at that point in time when taxpayers are forced to restrict their consumption and unjustly bear the cost of malinvestments from the past.
Ironically, when you look at the political stage, all you will hear in regards to “solutions” to deficits in the end, will for the most part be tax hikes. These are not solutions. They are the ultimate manifestation of the very problem at hand. They are, in fact, the precise opposite of a solution. Keep this in mind whenever you hear politicians talk about deficit solutions. Raising taxes to reduce deficits is absolutely and 100% an admission that one has completely failed to solve this deficit problem, and in fact laid the final brick that was missing in the very process of the public’s depredation via deficit spending.
This may explain why in response to today’s statement Treasury yields actually declined, although it remains to be seen if this trend will continue over the next months.
In order to get a feel for the level of budget cutting that the political class is willing to settle for, watch this clip:
Long story short: The willingness to truly attack the budget deficit in any substantial manner is of course nil, as you would expect. (I’m not saying that that means that budget cuts won’t happen at some point out of plain necessity, only that an increase in taxation will most certainly be explored as a buffer and to the extent the sheeple buy its necessity and play along.)
If President Obama keeps spending like this, and really wants to cut the deficit in half by 2013, he will at one point be faced with no other choice but to raise taxes on all Americans, rich, middle class, and poor. This is of course nothing new.
The administration and Congress will probably try to postpone higher taxes until after the election and try more covert means of stepping up their extortion racket, such as smuggling tax increases into other bills, or cracking down through more audits and stricter enforcement.
As the public debt interest begins eating away more and more of the public purse, the regime of debt and tax slavery will be coming to full fruition.
(We may even see the US lapse back in to the Great Depression 2.0’s general downward move via another recession before the end of the year. That would indeed be a deplorable spectacle to watch to see Democrats be the ones trying to deny that we’re in a recession this time while Republicans will be very keen on pointing out all that’s wrong with America these days, all in all, basically a complete reversal of the last election. As a curious and intelligent individual watching such a spectacle you would really need to try hard to deny the futility, nay destructiveness, of political action.)
One way or another, the ride is over. That abstract “future” that people have always been talking about when complaining about government budget deficits, that future is no longer future, it is here and now. And it’s happening on a global scale.
How far the ruling classes will be able to take it and how much longer this can go on is basically up to this generation’s willingness to bring about true change and its intellectual curiosity to understand what this actually means. True change would be peace and freedom for all, on other words voluntaryism. We do now have the means of communication and the unique opportunity to make that change happen.
It’s either that or more of the same. Don’t settle for the latter.