American Debt Downgraded. Sad.

It was bound to happen: putting politics and economics in the same post.  Forgive me if you’ve already tuned out.  For the three of you who are still reading, here goes.

Yesterday marked a first in American economics.  Standard and Poors has downgraded American foreign debt from “AAA” to “holy crap, this country’s debt is approaching more than 100% of its yearly GDP… I wonder if we’ll ever get paid back!”  If this isn’t a huge shoe dropping, I don’t know what is.  It should be a huge wakeup call to politicians and citizens everywhere that the world will not simply stand idly by while we consume all of its resources and, with a wink and a nod, promise to pay them back from our future economic growth.

I enjoy watching the Suze Orman show.  I like her advice and I like the way she draws links between the person’s interpersonal and sociological behavior to their financial information (even when that link is sometimes a little shaky).  But what is most entertaining is to see the people who call in with $10,000, $50,000, $100,000 of credit card debt and think nothing of it.  They spend thousands of dollars more per month than they bring in.  Who are these people and in what reality can they feel good about that?  How long can they think that this will not catch up with them, and aren’t they completely disheartened to see a monthly statement arriving that gets exponentially larger and larger?

After you watch this show for a while, you begin to understand why our politicians handle government expenses similarly – if we are a government by the people and for the people, then this is just another way our representatives are reflecting the population.  That we feel no shame in this is a sad, sad thing.  That we can’t seem to apply simple financial sense to the problem is even worse.

Suze tells people to stand in the truth of their financial situation.  Often she can show them a way out of their personal debt just by restructuring their expenses; by getting rid of the eating out, hair appointments, land lines, and nearly every ‘subscription’ and recurring expense they can do without.  Sometimes she also has to tell the individual that they need to find a new job, an additional job, or some other way to make more money since they simply do not make enough money to meet even their basic needs.

Our government is definitely in camp #2.  They need to stand in the truth of the situation.  We spend too much, and we dont’ make enough money.  We’ve gone on a decade-long tear of tax cutting while also expanding government expenses like crazy.  The solution isn’t one thing, it’s every thing.  We aren’t going to cut a couple of military programs and reduce the number of reports the government issues annually and solve the problems.  We aren’t going to restructure Social Security and be done.  We aren’t going to solve it by only changing our expenses and not addressing the revenue side as well.  We can’t continue to give new tax breaks to gain popularity, ignoring the huge debt we have accrued and the deficit we perpetuate.

Taxes are going to have to go up, and expenses are going to have to come down.

Every financial advisor warns retirement savers of this reality – that some time in the future taxes in America will have to way higher – yet no politician is willing to entertain that eventuality.

It’s already happening.  In Texas, while the state continues to promise rock bottom income taxes to corporations and individuals, it is raising the state portion of every traffic ticket written in this state, even while the police sit around in 100 degree temperatures in their SUVs guzzling $4/gallon gas.  We are quickly moving to our police force being a tax collection force for those unfortunate enough to be caught in their crosshairs. The state also continues to jack around with silly fees like the “Welcome to Texas” fee you are assessed when you register any vehicle in Texas for the first time.  Gas tax or additional tolling will be next, mark my words.  Even though Good Hair Perry has promised property tax breaks, my property taxes have risen every year since I’ve lived here.

Sure, we don’t have an income tax here, but you pay… oh you pay.  So, look.  I want a government that’s fair, honest, and open.  If we need $ to pay for crap, then raise the money through the front door, not through pulling me over for going 5mph over the limit.

2 thoughts on “American Debt Downgraded. Sad.”

  1. Standard and Poors did not change the US Treasury securities debt rating. It is AAA and remains AAA.

    They issued an advisory that indicates they may reduce the debt rating at some time in the next two years.

    Not in any way the same thing.

    To be clear, this is not “American foreign debt” either – the securities in question are US Treasury bonds. They are purchased by people all over the world, but they are not exactly foreign debt.

    – Mark

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