S&P Downgrade of U.S. Debt Crisis Mocked by The Atlantic

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I really think most Lefties are idiots. James Fallows of The Atlantic magazine argues that the S&P ratings people are know-nothings and that the gub'ment (say in your best Michigan Militia accent) can just print money to inflate its way out of debt. Oh, that would be good for the capital markets and the world. You've got to read this lunacy.

The Atlantic website collected comments. Here is one: "'They did what?'" exclaimed James Galbraith, a professor of economics at the University of Texas in Austin, who formerly served as executive director of the Congressional Joint Economic Committee. 'This is remarkable! It certainly will confirm the suspicions of those who have questioned S&P's competence after its performance on the mortgage debacle.'"

The blog post continues: "Since the US prints its own currency (or actually just issues electronic payments to create new money) whenever it needs it, as Galbraith puts it, "As long as there is diesel fuel to power up the back-up generators that run the government's computers, they will have the money to back their own bonds."

Inflation isn't good for the economy obviously. The Atlantic fails to mention that federal spending and debt could/will crowd out private investment and lower living standards in the process. We'll either become tax slaves or have a revolution. Consider that the Peter G. Peterson Foundation puts the net present value of the gub'ment's explicit future promises/obligations at an astoudning $61.9trillion. That's some serious bread.

Here is a better description of reality by Michael Tanner of the Cato Institute, a Libertarian think tank:

"The U.S. government is about to exceed its statutory debt limit of $14.3 trillion. But that actually underestimates the size of the fiscal time bomb that this country is facing. If one considers the unfunded liabilities of programs such as Medicare and Social Security, the true national debt could run as high as $119.5 trillion.

Moreover, to focus solely on debt is to treat a symptom rather than the underlying disease. We face a debt crisis not because taxes are too low but because government is too big. If there is no change to current policies, by 2050 federal government spending will exceed 42 percent of GDP.

Adding in state and local spending, government at all levels will consume nearly 60 percent of everything produced in this country. Whether financed through debt or taxes, government that large would be a crushing burden to our economy and our liberties.

Driving this massive increase in the size and cost of government are so-called "entitlement programs," in particular Social Security, Medicare, and Medicaid. Indeed, by 2050, those three programs alone will consume 18.4 percent of GDP. If one assumes that revenues return to and stay at their traditional 18 percent of GDP, then those three programs alone will consume all federal revenues. Therefore any serious attempt to balance the federal budget and reduce our growing national debt must include a plan to reform entitlements.

It may well be politically convenient to continue ducking entitlement reform. But doing so will condemn our children and our grandchildren to a world of mounting debt and higher taxes."

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