Aside from the politics of this (I don't really feel like letting this lead into a discussion of partisanship) (even though this is in the politics section, shh), watching the market tumble today is a little scary to say the least. Here's some major points:

-S&P downgraded the US Debt Rating from AAA (the highest) to AA+, citing that our debt is only going to increase and there's a negative outlook.

-S&P also downgraded Fannie Mae and Freddie Mac to AA+ as well. It is said that any agencies with close ties to the federal government will also be downgraded, just as the two aforementioned mortgagees were. Who knows if that will affect mortgage interest rates.

-S&P actually made a $2.1 trillion error, but said it was immaterial. We are dealing with a lot of money for $2.1 TRILLION dollars to be immaterial. That part is pretty scary. "2.1 trillion dollars, no big deal!"

-Asia markets have also dropped. China actually has a lot of their money in US bonds, so they could be affected. China holds approximately 8% of our debt, at around $1.2 trillion.

-US Treasury rates actually dropped today, which says to me that investors still see it as being creditworthy and not really bothered by the downgrade.

-Moody and others who participate in rating bonds are standing by their AAA ratings, but with words of caution


The economic outlook is looking a bit scary. We obviously need to stop spending and tax rates have been at their lowest of all time, and are the lowest amongst the other economic powers in the world. Anyone with any economics knowledge knows that government spending and taxes make the largest impact on the economy (and if you didn't know that, you do now ) and cutting spending and raising taxes seems counter-intuitive at this point, but something has got to give because we can't forever keep running such a large deficit.

We're in a big mess.

Again, please don't bring partisanship politics into this, that is something I'm sick of seeing being beat to death. Everyone involved has failed this country big time and we don't need to argue about it.

craig t nelson could fix it. the real craig t nelson. not my axolotl.

that being said, i know you dont want to pass blame, everyone is to blame. but i still feel the tea party held a gun to the head of obama, and he and congress blinked first. poor leadership on his half.

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how do you discuss the national economy and debt without partisan politics?

"our economy is bad, we need to have more money and less debt!"?

I just don't want this becoming, "it's the GOP's fault." "It's Obama's fault." "It's the Dems' fault." "It's the Tea Party's fault."

I think we all know that every party has something we can blame them for. It's fine to discuss your views on the economy and what you think should happen, I just don't want the annoying discussion of pointing fingers.

raise taxes to the top 5%
cut military spending 75%
end tax loopholes for large corporations.
maybe make isreal more responsible for themselves.

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The S&P is one of three credit rating agencies that gave their stamp of approval to subprime mortgages, allowing $3.2 trillion in loans to homeowners with bad credit between 2002 and 2007, which is one of the factors that got us into this mess in the first place.

The credit rating agencies have lost all credibility. Who are they to judge the worthiness of U.S. credit? In spite of the S&P downgrade U.S. treasury bonds are still the safe-haven gold standard for investors around the world.

Of course, all wealth is a shared illusion.

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th' only knower of th' cosmic mysteries alive at this time

The problem with the whole issue of raising taxes is that it won't have much impact on the debt compared to what's being spent. I've heard a lot about "tax loopholes" but haven't seen any in depth explanation of these. I'm sure there can be a more effective corporate tax structure, but I want to hear more than typical talking points from somebody before I can form a reliable opinion. There is a myriad of non-tax paying organizations that probably don't need the benefit (so-called non-profits, universities, churches, etc), I just want to see more from an accountant on the matter than a politician.

As for personal taxes I did a little math based on 55% of our 310 million citizens being taxpayers. Forget about the 14 trillion we're in debt right now, but let's focus on the 10-12 more trillion of debt we're about to take on over the next ten years. To compensate for that every taxpayer in the country would have to fork over about six thousand more each year. Some people demand the upper level of taxpayers to pay more. The top 10% of taxpayers would have to pay an extra 59k per year, the top 5% would have to pay about 118k more, and the top 1% of taxpayers would have to pay 590k more each year to cover a one trillion spending deficit. I think we can all agree that those figures are astonishingly high to lay at the feet of "the rich".

Tax raises that even Democrats think are fair would amount to a very small drop in the bucket toward the debt problem. The overbearing main problem in the whole equation is spending, and anything should be on the table to curb it toward a balanced budget. That means entitlements, military...anything, but even if there is consensus on spending cuts, gridlock will occur due to what programs get cut in what order. Knowing this I don't blame any one party, and I don't blame S&P for a kick in the teeth that this country/gov't deserve. I actually think Putin was right with the general sentiment of his "parasite" comments a few days ago. This country has been going headfirst into major debt with no sense of responsibility for either it's own fiscal future or that of the world market.

I am of the opinion that they should have held the line and not raised the debt ceiling. Sure, it would be a helluva mess, but would have been the kick in the balls our government needs to actually take this seriously. What did they agree on? Oh yeah, huge deficits for the next 10 years, and that's if the economy actually grows. Doesn't look to promising on that front. The "cuts" are always back loaded, and never materialize. Huge spending now, phantom cuts later. Just about every sleazy politician, left or right, who goes to Washington is complicit. They are incapable, in my opinion, of reigning in the out of control federal spending. Because when the chips are down, 99% of them are just going to turn it into a partisan attack that they hope will help their party in the next election. So without raising the debt ceiling, you force their dirty hands.

Changes need to be made to entitlements. End of story. There are a few out there who are putting forth ideas, but they get hammered and shouted down for it. We may have avoided a nasty mess with this deal, but this downgrade is only the beginning. And if we continue on this path, what's at the end isn't just a nasty mess, but will likely be total collapse, perhaps globally. Ugly won't begin to describe it.

Ham

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Do you believe yet?

Given the facts that the top 1% of earners pay 38% of total tax revenue and the top 5% account for 58% of tax revenue, I find the "our tax code isn't progressive enough" argument a tad bit silly.

Want to close the budget gap?
Throw out the tax code and implement the flat tax, then add a small VAT to dip into the black and gray market economies.

That would probably do it without even ending one of our numerous wars (which would also help).

Our tax code has become nothing more than a vehicle to punish and reward whoever the best lobbyist says to.

Oh, and Barney Frank needs to STFU...trying to blame Freddie and Fanny downgrade on anything other than his own incompetence is disgraceful....that man knew the score 10 years ago.

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Hold my beer and watch this...

Look at all the unwarranted volatility in the world's stock markets. This is the result of testosterone poisoning.

Men are simply too emotional for high finance. Male investors make 45% more trades than their female counter parts, indicating their flighty and volatile natures. They are more likely to take risks, think they know more than they do, and are more susceptible to peer pressure than female traders.

Yep.

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th' only knower of th' cosmic mysteries alive at this time

Unwarranted?
I've been around the block a few times and this is a legitimately volatile economic time.
Asshat politicians prove once again they don't mind playing chicken with our future (both sides).
The US housing market is still can't recover 3 years after bust...with a glut of inventory waiting in the wings to soften whatever growth may happen.
9.x% national unemployment has become the accepted norm.
Unions and municipalities battling each other like dogs for scraps.

The comforting part is we're not the ones in immediate trouble.
If Spain and Italy fall over, Germany isn't big enough to play savior like they have so far with Greece and Ireland.

But yeah, unwarranted speculation...we need more women to guide the global economy with a steady hand


Thank Cthulhu, we're saved.

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Hold my beer and watch this...

A big problem with our politicians right now is that they're all voting to ensure they're re-elected, rather than voting to do something right. I understand it's important to keep the promises you make, but it should be understood that things change. I'm not sure anyone at this point would argue with changing things if it produced real results. I think I remember Pat (DF) saying that the military spends frivolously to ensure they don't get budget cuts. That is horribly annoying to me.

As a future CPA specializing in tax and for the sake of me getting a job, let's keep the tax code complex.

The biggest issue is that American economy does not work without a middle class. There is no blue-collar middle class anymore. There is a shrinking white collar middle class, the rich, and the people that are struggling to make it.

Yup, you're right. There are many arguable ways to gets our debt handled but what is unacceptable is that our government isn't having a serious discussion about severely cutting military operations around the world. The cost/benefit of funding the type of war we're fighting against a terrorist style enemy (in my opinion) is somewhere between financially damaging and fucking criminal. Expensive campaigns with a murky goals and little chalked in the gains category seems to be pretty similar to Tom Hanks sunk into The Money Pit. GTFO and stop hemorrhaging money (and blood) into the desert.

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I disagree on the flat tax, but agree on this point.

What are your arguments against flat tax?

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Agreed. Don't want to get into the whole homeland security debate, but spend that on national defense within our borders. As for oil, we can drill that here.

The Fed announced today that they'll keep interest rates low through 2013 due to economic fragility.

1. With a flat tax/no deduction system, there are no tax advantages for property ownership, IRA contributions, and or even medical insurance. That provides zero incentive to buy a home, or invest in one's own retirement. From a medical insurance perspective, there becomes less incentive for an employer to offer insurance as a benefit, since there is no financial benefit.

(Remember, most of the same people who advocate for a flat tax also advocate for the death of Social Security. Therefore people are left to their own devices to pay for their retirement, and not getting tax benefits for contributing means that by percentage, more lower to middle class income must be diverted, and taken out of the economy, to do so.)

2. Non-taxable dividends. Under a flat tax system, only income from work is taxed. Income from financial products (ie dividends, capital gains, etc) is not. This provides a disproportionate benefit to the rich because they have the money to invest in such instruments, whereas the lower/middle class income brackets does not.

Flat tax is not the answer. Decreased spending, and removing the vast majority of corporate tax loopholes, is. The lowered spending and additional tax revenues created by closing loopholes is more than enough to put the country on the right path.

I agree with this, but hot spots aside, why do we still have so many troops in friendly countries in this day and age? This paradigm needs to change. At the risk of oversimplifying things, I don’t know how many troops we have in Germany or Japan or any other friendly countries, but it’s got to be way too many. Yeah, it bugs me that it costs us more to support troops thousands of miles away from home compared to if they were stationed here in the US. What really bugs me is that if we brought these troops back home, they would be buying their houses, cars, and stuff here in the US, where we need this kind of help for the economy. Bringing the troops home would reduce our cost per soldier, and provide some stimulus to the economy.

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This time, like all times, is a very good one, if we but know what to do with it.
--Emerson