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Moody’s Downgrades Pennsylvania

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With Harrisburg already bankrupt and Scranton on the verge, Moody’s has decided to downgrade the state’s credit rating from Aa1 to Aa2.

Citing unfunded pension liabilities, high debt and slow to moderate growth the rating agency also changed it’s outlook for Pennsylvania from negative to stable.

On the upside, Moody’s says that the Government has improved with “two consecutive timely budgets, significantly reduced reliance on non-recurring resources, and a demonstrated willingness to balance revenue shortfalls early in the fiscal year”

Of the state’s economic outlook they cite “Diverse, broad, and relatively stable economy, with wealth levels slightly above the national average, buttressed by its large health and higher education sectors.”

As for what could lead to further degradation of the state’s credit rating Moody’s says “Further economic deterioration that leads to worse-than-expected revenue performance. Higher-than-budgeted depletion of reserves in the near term or an inability to restore budget stabilization fund over the medium term. Further liquidity decline that results in increased external cash flow borrowing, deferred payments, or other cash management tools, and growth in long-term liabilities, increase in fixed cost pressures, or additional deferral of pension costs.”

Debt and our failing economy

Is the country being led astray once again by those on the Hill that appear to be doing business as usual? The words deficit and downgrade and debt-ceiling almost seem to be synonymous with one another when nothing could be further then the truth. Yet both sides think they are right; they have resorted to high school politics where one side blames the other, name-calling, and denial. And if that is not enough to send you into complete bewilderment, the current Bill, which was just passed, is full of idealism that will surely break the American economy, while setting in motion grave consequences for future generations. Raising the dept limit with out any structural reforms in place will be the primary force in setting the economy in a downward spiral. It is no wonder the average American is confused. So who is right?

Despite all the chaos, misrepresentation, and blame being thrown around on the Hill, and by the media, American’s seem to see the clear picture of what is going on based on current polls. For example, a July 12th Gallup poll showed 42% of Americans oppose raising the debt ceiling. The July 19th Wall Street Journal poll found that 55% of those polled felt raising the debt ceiling would be a major problem. One Gallup Poll found that Americans, by a 42% to 22% margin, want their representatives on the Hill to vote against an increase in the debt ceiling. The President of the United States, as well as some members of the Senate and House, have been reckless with spending from one generation to another, all of which have escaped accountability. Mr. Obama has spent more money during to date then that of Mr. Bush’s entire time in office. According to Karl Rove, “In 20 months, Mr. Obama will add as much debt as Mr. Bush ran up in eight years.”1 Raising the debt limit allows the president to spend more money and further the deficit. To be clear, the deficit is the amount of money we, as a country, are in debt; it is the money we owe to creditors, etc.

While the national debt continues to grow by the seconds, spending cuts continue to be nonexistent. The amount of cuts which would be required to balance the budget well exceed those suggested by congress. A downgrade would impact our AAA rating by Moody’s and S &P. Investors would view our failing economy as too much of a risk to invest in and take their business somewhere else. Whether it happens today, or five years from now, our AAA credit rating will go down if we continue to spend as though the checkbook is virtual black hole with no end in sight. In addition, to make matters worse as the United States becomes a mockery and concern for the rest of the world, institutional and foreign investors, those people or firms who invest large sums of money into securities, real property, and other types of investments, will reconsider investing in the US.

House Minority leader Nancy Pelosi regularly discussed the need for job creation and yet under this administration unemployment is at it highest level. David Axelrod, a political strategist for the president claimed the pork-laden stimulus package has been a success. But Mr. Obama told Americans that if it were passed, unemployment wouldn’t rise above 8%. It is now 10%. The president also said it would create 3.7 million jobs, 90% of which would be in the private sector. By Mr. Obama’s standards, the stimulus failed miserably.2 To create jobs we need to lower corporate taxes to be more competitive with the rest of the world. If we truly want to bring business back to this country and away from places like China and India we would need to look at the Tax code in its entirety.

There were a lot of bills on the table, the Ryan Bill, Cut, Cap, and Balance just to name a few. They were killed in the Senate by Senator Harry Reid. Cut, Cap, and Balance would have addressed the spending issues while putting measures into place to effectively balance our budget. The Connie Mack Penny plan which was discussed, but not something many people heard about, it also dealt with the excessive squandering that goes on in our government. More explicitly it would cut federal spending by one percent for six years, set a cap of 18 percent of gross domestic product in 2018, and reduce the amount of spending over a 10 year period by 7.5 trillion dollars. This plan provides the framework necessary for balancing the budget while maintaining spending regulations for future members of government. This plan has not gotten the attention it needs.

The bottom line is this: We are traveling down a path which is deeply rooted with opposition to our founding fathers and the Constitution of the United States. Both sides need to stop playing politics and address the very serious issues at hand. In addition, those people on the Hill who live with the delusion that they know more then the American people therefore they need to do all the thinking for them, need to wake up! It is about time they realize they were put there by the people, for the people, and they are accountable to the people.

Sources:
[1]Karl Rove.Obama vs. Bush on Spending.Wall Street Journal. January 21, 2010
[2] Ibid