As worthless and wrong as the ratings agencies have been, they still can have an enormous impact on financing debt. The US is about to experience this in the very near future. If spending needs to come down any more, it has to include ending the military involvement around the world. It's destroying the budget. Taxes are also going to have to increase. Nobody likes to pay more but it's going to be necessary.
What remains a mystery is why Obama and the Democrats are not asking about the jobs and increased tax revenue that tax cuts were supposed to deliver. We've had the GOP plan for nearly a decade and it's obvious that it is not working. What's so hard about asking for results? If the pampered political class wants to keep asking for shared sacrifice, let's see some shared sacrifice.
In the mean time brace yourself for more economic pain. Credit downgrade ahead?
Market analysts and investors increasingly say yes. The outcome won't be quite as scary as a default, but financial markets would still take a blow. Mortgage rates could rise. States and cities, already strapped, could find it more difficult to borrow. Stocks could lose their gains for the year.
"At this point, we're more concerned about the risk of a downgrade than a default," said Terry Belton, global head of fixed income strategy at JPMorgan Chase. In a conference call with reporters Tuesday, Belton said the loss of the country's AAA rating may rattle markets, but it's "better than missing an interest payment."
