The Project to Restore America
Moody's Threatens To Downgrade America's AAA Rating
By Scott S. Powell
Wednesday, September 26, 2012
Scott Powell is senior fellow at Discovery Institute in Seattle and managing partner at RemingtonRand LLC.
Standard and Poor's cut the United States' AAA-rating last year, and now the second shoe is about to drop.
Moody's recently announced it would downgrade our AAA credit rating by the end of the year if President Obama can't adopt a plan in conjunction with Congress to cut the U.S. debt-to-GDP ratio. That ratio now exceeds 100% and imposes a burden and risk on future generations.
In July 2008 candidate Obama declared the $4 trillion in debt racked up during Bush's eight years "irresponsible" and "unpatriotic." After getting elected, Obama publicly said in February 2009, "I'm pledging to cut the deficit we inherited by half by the end of my first term in office."
Subsequently, Obama walked back and supported policies that drove four straight years of record deficits, averaging over $1.25 trillion a year — 63% higher than the worst single-year deficit of any previous administration. While GDP output has hardly budged and fewer Americans work today than at the beginning of the Obama administration, the national debt has grown by 51% — from $10.6 trillion to $16 trillion.
Out-of-control spending and debt, plus the declining creditworthiness of the U.S., are vital issues facing voters in November. This is the view of Mike Mullen, former chairman of the Joint Chiefs of Staff, a military man with a keen sense of history. "Our national debt," he has said, "is our biggest national security threat."
Historians have often compared the U.S. to the Roman Republic. In the first century B.C., Cicero warned: "The budget should be balanced, public debt should be reduced and the treasury should be rebuilt . . . lest Rome fall."
A century later the "fiddling while Rome burns" Emperor Nero declared, "Let us tax and tax again … and see to it that no one retains wealth." Within two generations many Roman cities became insolvent, prompting Emperor Hadrian to adopt bailouts through "centralized revenue sharing."
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