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The United States lost its top-notch AAA credit rating from Standard & Poor's on Friday, in a dramatic reversal of fortune for the world's largest economy. S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about growing budget deficits.
S&P stands alone here, as Moody's and Fitch did not downgrade US debt. I think we will see that no one cares what S&P thinks about sovereign debt.
Speaking for me only
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The Bureau of Labor Statistics reported that the United States economy had a net gain of 117,000 jobs, and upwardly revised job reports for May and June. The headline unemployment rate dropped by a tenth to 9.1%. The New York Times front page headline states that US Posts Solid Job Gains Amid Fear. It's story has the more accurate headline US Posts Stronger Job Gains Amid Fear.
Today the talk will be how things are not as bad they seemed. This is the Era of Diminished Expectations. While certainly a +117k jobs number in July is better than the May and June numbers, it is simply not good enough. Indeed, it is a sign, in my estimation of continued economic weakness. But because our expectations have been diminished, a number that would have been worrisome in May, now is cause for relief. This is bad for policy. It leads to government doing nothing about the jobs situation. It is bad politically for the President because people do not vote today on his reelection, or even this November. The President will come out today at 11 and tout this number. Sure, he'll say we have to do better, but he will say we are on the right track. We aren't. More. . .
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The debt ceiling debate, economic reports and Europe's government-debt crisis contribute to Wall Street losses.
Nice going, Congress and President Obama.
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The ink isn't even dry yet on the horrid compromise budget bill which was supposed to shield Medicare beneficiaries, but already there's renewed talk of raising the eligibility age for Medicare, which now likely will happen since Obama has already said it's okay with him. It will probably be one of the first things the gang of 12 congressional henchman will agree on.
The Wall St. Journal today: [More...]
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They passed 60 votes, the Debt Ceiling bill is passed. Dems voting no: Sen. Harkin and Lautenberg. Dems voting yes included Udall, Bennett, Boxer, Feinstein and Franken.
The Senate votes at noon on the debt bill. 60 votes are needed. Obama will speak at 12:15.
You can watch the vote here on C-Span2 and Obama on C-Span.
The White House Fact Sheet on the bill is here.
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Tired of reading bullet points and opinions as to what's in the budget deal? Here's the Congressional link to the text of of the 74 page bill.
Medicare isn't mentioned until page 51. All it says is: [More...]
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Now that the Beltway is satiated with their Debt Ceiling Follies, consider this:
Stocks on Wall Street briefly followed European and Asian financial markets higher Monday, but any relief over the last-minute agreement on a framework in Washington to raise the United States debt limit was short-lived. After a short burst that put the three main Wall Street indexes up more than 1 percent, they turned negative as the reality of the challenges ahead for the recovery caught up with investors.
The dip coincided with the release of new data that showed American manufacturing growing more slowly. [. . .] “Now that the debt-ceiling deal, assuming it passes, has averted an imminent catastrophe, attention can return to the underlying state of the economy,” said Nigel Gault, the IHS Global Insight chief United States economist. “The news there isn’t good.”
(Emphasis supplied.) Which explains why we are cutting government spending of course. Insanity from the VSP.
Speaking for me only
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It's a done deal with Congressional leadership, says Obama.
The "bipartisan" deal will be unveiled tomorrow, in all it's glory (not.) You can still make your voice heard. Harry Reid says:
What did Boehner tell Republicans tonight?
"To pass this settlement, we'll need the support of Democrats and Republicans in both the House and Senate. There is no way either party, in either chamber, can do this alone."
“There is nothing in this framework that violates our principles," Boehner told House Republicans. "It’s all spending cuts."Here's the slideshow of Boehner's presentation.
What did Obama say?
Despite what some in my own party have argued, I believe that we have to make some modest adjustments to programs like Medicare, to make sure they are still around for future generations."You can watch Obama's statement here. The full text of his comments are here. [More...]
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Nancy Pelosi says the Dems are withholding judgment and may or may not support the deal.
"Seeing a Democratic president take taxing the rich off the table and instead push a deal that will lead to Social Security, Medicare, and Medicaid benefit cuts is like entering a bizarre parallel universe--one with horrific consequences for middle-class families.
Via the National Journal: Boehner is holding out for less defense cuts, and Dems are claiming they want to protect Medicare and Social Security: [More...]
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Negotiators told National Journal that progress was made on the toughest remaining issue -- a so-called trigger to ensure that spending cuts of up to $2.4 trillion would, in fact, be instituted by a special committee the debt-ceiling bills in Congress would establish.
Here are the details on the 12 member Joint Commission proposal (Section 301 of H.R.2693.) The Commission must finish its report with spending cut recommendations by Nov. 23. They will be voted on by Dec. 23. No amendments will be allowed. Also, no motions to postpone or move on to other business, no motions for points of order.
Translation: Reid to Republicans:[More...]
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President Obama joined the negotiations this afternoon. Now we can get ready for the deal we all knew was coming. Prediction: The gang of 12 that presides over the second round of cuts which will include cuts to Medicare and Social Security, and probably raising the Medicare eligibility age, will be filibuster-proof and for all intents and purposes, veto-proof given the Republican-dominated House.
In other words, the Democrats are about to sell us out, as we've known for the last two weeks they would.
I could care less about the debt ceiling. I care about the cuts coming less than a year from now that no one will be able to stop. Obama is opening the candy store and letting Republicans eat all they want.
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Now it's on to the Senate where deal-making has begun.
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The stock market is falling quick. I wonder if Republicans and particularly the Tea Partiers in Congress have checked their brokerage accounts today to see what their radical obstruction moves have cost them personally.
Even with my limited grasp of economics, I'm surprised more people aren't focusing on the danger of the second round of cuts, which seem to be a given. They will be made by a congressional commission, and not only don't we don't know the specific details of what they will include, they may be filibuster-proof and for all practical purposes, veto-proof.
By all accounts that I've read, the second round of cuts will include Medicare and Social Security. The writing is on the wall that in addition to losing Medicare for two years when the age is raised to 67 (since Obama doesn't object to that), there will be cuts to social security benefits. And now we can add losses in retirement savings caused by the stock market tanking. [More...]
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While the debt ceiling debacle continues, the fact that the economy is tanking comes into clearer view. Today's reports:
Gross domestic product rose at a 1.3 percent annual rate following a 0.4 percent gain in the prior quarter that was less than previously estimated, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 1.8 percent increase. Household purchases, about 70 percent of the economy, climbed 0.1 percent.
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Look at the chart - AAA S&P rated Australia's 10 year bonds are yielding 4.9%. A- S&P rated Malaysia's 10 year bonds are yielding 3.9%. AA- rated Japan's 10 year bonds, and currently holding a negative watch from S&P, are paying 1.1%. AA- China's 10 year bonds, currently S&P rated stable, are yielding 4.1%.
While as a general matter, the countries S&P has chosen to rate AAA face lower interest rates than countries with lower ratings, there is so much randomness that it is difficult to attribute any cause to S&P ratings. I think no one seems to pay attention to S&P on sovereign debt ratings. More . . .
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