Sunday, August 7, 2011
Uncle Sam: My credit rating was downgraded this week. That has never happened to me before. I thought I might need some help fixing that.
C: I had no idea you might be in any kind of financial trouble. You must be getting behind in paying your bills, right?
US: Nothing like that. I always pay all of my bills promptly. There is zero danger--ZERO--that the United States of America will not be able to pay its bills.
C: Well then, maybe you've been extravagant lately with your expenses. Are you taking a lot of fancy vacations, buying a lot of meals out, things like that?
US: Nothing out of the ordinary. If anything, I've been cutting back on that kind of spending. We did spend a few hundred billion to build infrastructure and try to get employment back up, though.
C: But that kind of spending should be making your financial picture stronger.
US: I think so. In fact most of my economic advisers have been telling me we should be making even bigger investments in infrastructure.
C: Then it must be that your income has taken a hit.
US: That is true, my revenues are down quite a bit due to the recession, but I could easily get them back up if I wanted to by changing a few depreciation schedules and grabbing some oil company windfall profits. And I have had no trouble whatsoever borrowing whatever I need to pay all my obligations, at ridiculously low interest rates to boot.
C: So maybe your debt has just gotten too high?
US: The US debt is fairly high in relation to GDP right now, but it was a lot higher during World War II, and nobody lowered my credit rating back then.
C: Hmm. This is hard to figure out. Who was it that lowered your credit rating?
C: You mean those same bozos who were telling everyone a couple of years ago that all those mortgage-backed securities were perfectly safe. Now they're questioning the credit of the United States of America?
US: One and the same.
C: What reasons did they give?
US: I think it has something to do with our political stalemate in Washington. We just went through a bruising battle in Congress to raise the debt ceiling.
C: Isn't there a big showdown every time the government raises the debt ceiling, and Congress always votes to raise it at the last minute?
US: That is true, but this year was worse because a lot of the new members of Congress were demanding that we enact a plan to reduce the deficit over the next ten years.
C: That seems very unreasonable. So I guess you weren't able to get a plan in place.
US: No, we actually did pass a bill. It wasn't to everyone's liking, but it did make a start in dealing with long term deficits.
C: So you did something completely unprecedented to deal with long term deficits, something that has never been necessary in the past to get an increase in the debt limit, and they still downgraded you?
US: It seems that what we did wasn't good enough for them.
C: So maybe you need to cut back on your spending even more.
US: A lot of people say that, but whenever I ask people what they want to cut, they can hardly come up with anything.
C: So then you need to raise taxes.
US: Well duh. Look at the history of the last thirty years. Every time we cut taxes, the deficit skyrockets out of control. In the 90's we raised taxes just a smidge, hardly enough to notice, and all of a sudden the deficit disappeared.
C: So you know what to do then. Just get the economy moving again, and then raise enough revenue to get rid of the deficit. And don't pay any attention to these idiots at S&P.
US: Sounds very obvious, doesn't it?