What Are State and Local Governments to Do?

Vote democrat...

China isn't buying it, and neither should you...

In the wake of the debt-ceiling controversy in Washington – where the politicians postured about fiscal sanity, but then raised the nation's borrowing limit by $2.4 trillion – China's debt rating agency has just downgraded U.S. debt.

The Dagong Global Credit Rating Company, which lowered its rating last November after the Federal Reserve decided to engage in another round of Quantitative Easing (aka money printing), has announced a further downgrade – signaling its heightened doubts over America's long-term ability to repay its debts.

The major Asian credit rating service said its gloomy assessment – much lower than the AAA ratings given by the so-called "big three" Western agencies (Moody's, Fitch, and Standard and Poor's) – was inevitable given the level of market concern generated by Washington politicians' handling of the debt ceiling.

The squabbling between the two political parties on raising the U.S. debt ceiling reflected an irreversible trend on the United States' declining ability to repay its debts," Dagong Chairman Guan Jianzhong told CNN.
"Our downgrade simply reflects reality," Guan said. "Our rating didn't cause China to lose any money – it was the inappropriately high ratings for the U.S. by Western agencies that had led China to make risky investments in U.S. debt."

Warnings are coming from many directions, and those citizens who aren't busily taking protective actions are playing with fire.
Bill Gross, who runs the world's biggest bond fund at Pacific Investment Management Co., said this week the compromise reached by Congress won't make a "significant dent" in the U.S. deficit.
"In addition to an existing nearly $10 trillion of outstanding Treasury debt, the U.S. has a near unfathomable $66 trillion of future liabilities at net present cost," Gross wrote in his latest monthly investment outlook. He's reiterated his prediction of an even weaker dollar, higher inflation, and economic malaise.

Gold has risen over 3% since Congress passed its debt deal on Monday, adding to almost 8% in previous gains over the past month (during a rare summer precious-metals rally). Over the same period, the Dow Jones Industrial Average has dropped nearly 8%, bringing the Dow:gold ratio to its multi-decade low of 7. This important ratio peaked at 42:1 a decade ago, and our long-term target continues to be 2:1 or less (meaning gold may outperform the Dow by a factor of roughly 4 from this point forward).

Make no mistake, the GOP is knows full well that cutting spending will keep the economy in a ditch. The are fully willing to sacrifice the good of the country to remove Obama from office. They already are whining about the debt ceiling bill that they forced upon us, blaming Obama, when the foremost leader of the GOP said he got 98% of what he wanted. He wanted economic destruction. He got it, and now they will shift blame.

Chris, you are correct. 

I might mention that most in the right are dupes for the wealthy.  Grover Norquist, who is largely funded by the billionaires, has a large collection of Rep pledges that there will be no tax increases.  Any increases would, of course, only affect the very rich.  Karl Rove has a similar foundation funded the super-rich, that is successfully convincing the right that there must not be any tax increases, even if they close egregious loopholes. 

Amazingly, the rank and file Rep buys into this, and even wants to raise taxes on the very poor.

This "horrible deal" is manufactured from the whole cloth.  The deal "promises" 2+ trillion in budget cuts, in no specific area.  There is not a single word there to indicate that state and/or local governments will lose funds.  The cuts, if there ever are any (doubtful) will be agreed upon by a bi-partisan board consisting of one half Democrats, one half Republicans.  Anyone who believes any promise from a politician of any stripe, probably also believes the moon is made from green cheese.  The half-and-half board will argue endlessly and do nothing more.