D’oh! Stupid S&P Downgrade
There’s an early episode of The Simpsons where Homer, vexed by a flashing “check engine” light on his vehicle dashboard, “fixes” the problem by laying a strip of electrical tape over the light. To his mind, if there’s no warning, there’s no problem.
The same mentality is on display by President Barack Obama, Treasury Secretary Tim Geithner, and leftist commentators in the press and blogosphere. Labeling the recent S&P reduction in the federal government’s credit rating “the Tea Party downgrade,” big spenders everywhere are blaming America’s stuttering economic engine on those citizens raising alarm.
The argument is comical. Tea Party supportive Congressional Republicans objected to putting trillions more on the nation’s credit card. The Left argues such calls for fiscal discipline somehow caused the credit rating downgrade – not decades of unrestrained spending with no plan to close the deficit or pay down the debt. They speak as if reductions in spending weren’t even an option, as if the only choice before Washington were to keep borrowing or default.
Monday, President Obama declared, “We always have been and always will be a triple A country” in spite of our credit rating. This is indicative of the same fraudulent “everyone gets a trophy” worldview which has informed the Left’s policy prescriptions for decades and brought us to where we’re at. Never mind that man behind the curtain. The clothes are visible to all but the impure.
As is so often the case, it is instructive to compare the federal situation to a household budget.
In a recent Facebook post [financial counselor Dave] Ramsey wrote, “If the US Government were a family & their household income was $55,000 per year, they’d actually be spending $96,500-$41,500 more than they made! That means they’re spending 175% of their annual income! So, in 2011 they’d add $41,500 of debt to their current credit card debt of $366,000!”
Consider what would happen to your personal credit rating if your household were so ran. It would be justly abysmal. Would you then find comfort in your spouse asserting that “we’re an 800 family” despite a 300 FICO score?
President Obama is propagating such a delusion, taping over the check engine light. The markets didn’t buy it, and neither should you.
Unfortunately, the markets are buying slight of hand from the Federal Reserve. In an act described as “unprecedented” and a sort of “backdoor quantitative easing,” the Fed is holding interest rates at an artificial low. This too is taping over the check engine light, and will not solve the real problem. It will only exasperate the coming inescapable correction. Guns, gold, and storable food remain well advised.
The proceeding was part of a weekly newsletter from Minnesota’s North Star Tea Party Patriots, The Patriot’s Perspective. Check out the rest of the issue and subscribe for free here.