In a series of expected additional press releases, the Standard & Poor’s credit rating agency is expanding its downgrade of debt securities tied to the now-lower-rated sovereign debt of the United States, including Israeli bonds, Fannie Mae and Freddie Mac, and “pre-funded” municipal bonds. Other credits tied closely to U.S. sovereign debt are also expected to be downgraded shortly, with only a few exceptions. Most municipal bond issues are not pre-funded with U.S. Treasury securities, and so they aren’t likely to be affected, especially as they rely on local and regional sources of revenues, with little reliance on the federal government to back them up. And, at the moment at least, S&P continues to rate 13 states as AAA. These downgrades have set off a firestorm of protest, mostly from the White House and the Treasury Department. Secretary Timothy Geithner angrily expressed his views to NBC/CNBC News:
If a $14.3 trillion national debt sounds like a staggering sum, economist Lawrence Kotlikoff's estimate of the nation's real long-term indebtedness might bowl you over. Kotlikoff, who was a senior economist on President Reagan's Council of Economic Advisers, calculates the debt at $211 trillion. "We have all these unofficial debts that are massive compared to the official debt," Kotlikoff, a professor at Boston University, said on the weekend edition of National Public Radio's All Things Considered. "If you add up all the promises that have been made for spending obligations, including defense expenditures," Kotlikoff said, "and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That's the fiscal gap. That's our true indebtedness."
Former Federal Reserve Bank Chairman Alan Greenspan came up with a novel way to claim the U.S. government would never default on debt: print the difference. Greenspan told NBC's "Meet the Press" August 7, in response to a question about the recent downgrade in the U.S. bond rating by Standard and Poor's: This is not an issue of credit rating. The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default. Analysts ask, Zimbabwe-like inflation of the dollar is not default? They say that Greenspan won't find that argument very persuasive to bond-holders, who won't be able to buy anything with their bonds when they come due.
On Friday, Standard & Poor's kept its word and downgraded the U.S. credit rating for the first time in history — from AAA to AA+. The action came because the debt bill passed last week is not considered stringent enough to stabilize the debt crisis. Treasury Secretary Tim Geithner has already railed against the credit agency, saying it has shown “terrible judgment” in its decision, but some are using the rating downgrade to call for Geithner’s resignation, a move that Geithner had already been considering. At the behest of President Obama, however, Geithner has decided to stay for now. “Secretary Geithner has let the president know that he plans to stay on in his position at Treasury," Jenni LeCompte, assistant secretary for public affairs, said in a statement today in Washington. "He looks forward to the important work ahead on the challenges facing our great country." Bloomberg reports:
For over 10 years Ohio judge James DeWeese has fought for his constitutionally guaranteed right to display the Ten Commandments in his courtroom. And during that entire time he has been thwarted by a series of federal court rulings fueled by manipulative arguments of the American Civil Liberties Union (ACLU). Now, with the help of the conservative American Center for Law and Justice (ACLJ), Judge DeWeese will try to take his case to the U.S. Supreme Court. As reported by The New American, it all began back in 2000 when the ACLU successfully sued for the removal of a display DeWeese had placed in his courtroom that included both the Declaration of Independence and the Ten Commandments. Reported The New American last February: “DeWeese followed up in 2006 by again posting the Ten Commandments, but re-titling them ‘Philosophies of Law in Conflict’ and referring to them as a set of ‘moral absolutes’ which he compared to a series of ‘moral relatives,’ such as, ‘The universe is self-existent and not created,’ and, ‘Ethics depend on the person and the situation.’”
Sixteen nations, all of them sources of illegal aliens who cross Mexico’s border into the United States, have filed briefs concurring with the U.S. Justice Department’s lawsuit against Alabama to block the enforcement of the state’s newly passed immigration law. The briefs claim the law, HB 56, impedes the relations between the United States and those nations, the Montgomery Advertiser reports. Along with the Justice Department’s attack on Alabama, another challenge to the law came from the usual coalition of open-borders advocates, including Mobile's Roman Catholic archbishop, who has used the issue to press the case that tough immigration laws are inherently racist. A federal judge has consolidated the lawsuits.
The eyes of the nation are on Wisconsin again as voters head to the polls to decide the fate of eight state Senators — six Republicans and two Democrats — in a series of historic recall elections. And the stakes are enormous. Analysts are touting the looming showdown as everything from a “referendum” on the policies of Wisconsin Gov. Scott Walker to an “indicator” of President Obama’s chances of victory in 2012. Control of the Senate could go to Democrats if they manage to unseat three or more of the Republican Senators being targeted.
Now that the Tea Party has not only demonstrated its power to force the Republican Party to begin acting like a true party for less government, it has also shown that it has staying power. The elections of 2010 were just the beginning of the Tea Party’s ascent to power in Washington, and the liberals are running scared. And when they run scared they begin calling names. In a two-hour, closed-door Democrat Caucus meeting, Rep. Mike Doyle of Pennsylvania angrily said, “We have negotiated with terrorists. This small group of terrorists have made it impossible to spend any money.” Vice-President Biden agreed: “They have acted like terrorists.” Biden later denied that he had said that, but after Politico published the remarks, spokeswoman Kendra Barkoff said: “The word was used by several members of Congress.”
A high-ranking Mexican drug trafficker with the powerful Sinaloa cartel made a series of explosive allegations in a federal court filing, arguing that he had an agreement with top U.S. officials allowing his criminal empire to obtain American weapons from the federal government while shipping tons of cocaine and heroin across the border. According to court documents, U.S. agents even helped the cartel elude Mexican and American investigators in exchange for information on rival drug groups. The claims were made by Jesus Vicente “El Vicentillo” Zambada-Niebla, who was arrested by the Mexican military in 2009 and extradited to the U.S. for trial on federal drug-trafficking charges. Prosecutors accused him of serving as the “logistical coordinator” for the Sinaloa cartel. He responded earlier this year by invoking a “public authority” defense — essentially arguing that since he was working for the U.S. government under an agreement, he cannot be prosecuted.
Now that the politicians have delivered an anti-debt deal that adds an estimated $8 trillion to the current $14.5 trillion federal debt over the next 10 years, President Obama is getting ready to head off on a pro-jobs bus tour of the Midwest. With more than 2.5 million additional Americans without jobs since he moved into the White House, President Obama would do better on jobs if he cancelled the bus, saved the gas, and just stayed put in the Oval Office to work on reversing the policies he’s promoted that have only made things worse, starting with ObamaCare. Freshman in Economics-101 learn that price hikes reduce demand. That applies to how many steaks we buy and to how many workers are added to payrolls by employers.