On Friday, Standard and Poor’s Credit Rating Agency downgraded the USA debt from AAA to AA+,the first such downgrade in the nation’s history.
The main reason the S&P downgraded the American debt is due to the reasonable doubts that President Barack Obama and Congress will not be able to come to a long-term solution regarding the nation’s budget deficit. The credit rating agency is pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement on a debt deal into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics. With the political arena more fragmented now more than ever, doubts on the difficulties of bridging the gulf between political parties over fiscal policy are arising domestically and internationally. Nevertheless, was it not bipartisan efforts that led to the deal and are there not plans for a future bipartisan committee to resolve future reforms?
Yes, but that is where the moments of national rejoice has come to an end. The political arena has begun to use the bipartisan committee as an excuse to kick touch choices down the road so that the bipartisan committee are the ones left with the consequences. For instance, the current deal only calls for the cut of $21 billion of over $3 trillion budget in 2012, clearly marking the ineffectiveness of the current affairs. The bickering and polarization to which the debt deal was produced has only added poison to an already toxic atmosphere. The Democrats, essentially run down by Republicans hard stance on taxes, feel as if they must mirror the tactics of the Tea Party because of the fact that they did work. This has led to Democrats becoming more unyielding on any cuts to entitlement programs like Medicare. On the opposite pole of the clearly fragmented political floor, the Republicans have closed ranks more solidly around a no-tax agenda, emboldened by their past success. Clearly,Congress is more polarized than ever as the filibuster, a tool used by the minority to overrule the majority, which had only been used maybe once in a decade in the past, has in current years been used to block 80% of legislation.
Sadly, in efforts to rally the American support, articles and people of power have made attempts at slandering the downgrade and the credit rating agency, to mark the downgrade as inconsequential. Lawrence Summers,the former Treasury Secretary under Clinton, stated that the downgrade as an attempt by S&P to “play” politics and that their past track record has ben far less than glamorous. In the end, the words or actions do not matter. Even if S&P had not downgraded the debt of America, the antics of the political arena have been enough for anyone to say that America has downgraded itself. After witnessing the circus that the US government entered into for this deal, the international community was sickened. The American nation can ill afford to have its reputation tarnished by further political antics, domestic alienation, and international ridicule. With S&P setting the bar as a big brother for Moody and Fitch, Moody has warned the nation that it is considering downgrading the debt and Fitch is set to finish its overview of the American debt by the end of the month. What can the nation do to counter the growing pressure for reform and spring back from an all time low?
The clear answer would be: to institute actual effective reform! The American nation must expand its infrastructure and institute smart and effective programs towards education, immigration, and energy. These forms of legislation would spur growth and bounce back the clearly faltering markets. Without these forms of reforms, the government will be forced to continue its borrowing, leading to an additional $1.3 trillion in deficit in less than 10 years, making the current debt deal redundant due to its inability to deal with this situation.
“Every dollar uselessly spent on military mechanisms decreases our total strength and, therefore, our security” – President Eisenhower, 34th President of the United States of America
President Eisenhower, one of the 9 presidents to deal with the Soviet Union during the Cold War, was President during M.A.D., Korea, and intervention in the Middle East under the Eisenhower Doctrine. So saying, what would Eisenhower’s stance be on the military spending currently being undertaken? Considering that during the Cold War, the United States faced an ideological war against Socialism in Eastern Europe, proxy wars in Korea and Vietnam, as well as dictators throughout South America, Africa, and the Middle East; the defense budget was still $250 billion less than current spending, at a time when we do not face the same circumstances or direct enemy as the Cold War. Both Eisenhower and Nixon, both President’s being Republicans and “pro-war”, were able to cut the defense budget by 21% for Eisenhower after the Korean War and 27% for Nixon after the Vietnam War. Furthermore, the current defense spending having increased for 13 straight years which is already unprecedented, has only fueled the fears of a double dip recession which have sent the global stock markets crashing. Check out 1989’s blogs on financial situations: Global Integration, The Stock Market, Global Integration #2
In retrospect, rather than increasing expenditures in Iraq, Afghanistan or Libya (where rebels have already resorted to killing each other); a defense spending cut of $1 trillion over 10 years is not impossible, but easily feasible considering the amounts already being spent.