Congress, Obama Must Take S&P Warning Seriously

Thursday, 21 Apr 2011 07:00 AM

By Jacob Wolinsky

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On Monday morning, the citizens of the United States of America received the best economic news in many years.

Standard & Poor’s, which has a AAA rating on U.S. government debt, announced that its U.S. debt outlook was negative. This shook the stock market, sending down stock futures, U.S. Treasurys, the dollar and gold.

According to S&P, there is a one-in-three chance that the United States will lose the highly coveted AAA rating within the two years.

How can this possibly be good news?

The S&P’s actions were only a formality. Everyone knows that the U.S. debt load has become unsustainable.

The projected path of the federal deficit is frightening to even someone who does not know anything about economics, if they merely looked at a chart of it.

However, few thought any of the rating agencies, which are given a virtual government-controlled monopoly in their business, would have the audacity to “downgrade” the debt of their own company.

It is commendable that the S&P had the courage to do this and I would not be surprised if the government had put pressure on them not to do this.

It is very interesting time considering the following fact. Earlier this month, Representative Paul Ryan, R-Wis., and President Barack Obama both released plans that called for trillions of dollars in cutting and taxes to reduce U.S. government debt.

Both plans seem unrealistic and President Obama’s plan was completely lacking in detailing. S&P might have been warning them that the government better get its act together or the U.S. government will lose its ability to sell more Treasurys to the Federal Reserve and the Chinese forever.

Since the administration and Congress both are hesitant to cut popular programs or raise any taxes, S&P gave them the warning that they had better do it soon or it will be too late.

This is why I think the news that came out earlier this week was good.

Our parties on both sides are not taking the federal deficit seriously, although, it seems the GOP is starting to get more serious about it.

The great citizens of this country are clearly concerned about the rising U.S. debt. About 70 percent of Americans think “the deficit is a major problem that must be solved now.”

However, the government seems to be on a spending binge akin to a rich teenager with their parent’s credit card.

S&P, acting in place of the generous parents (the U.S. taxpayers), has just sent a warning to the irresponsible teenager (Congress) that it better stop swiping the card without a thought about how to pay it back.

Painful cuts for popular programs will be necessary; but here is one person who is hoping everyone finally wakes up and realizes the party is over, and it is time to rein in our massive debt load.

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