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Fitch Ratings Shoots Down Every Republican Talking Point on the Debt Ceiling
Tuesday morning, Fitch ratings warned that using the debt ceiling as a mechanism for fiscal discipline is ineffective and potentially dangerous, “In Fitch’s opinion, the debt ceiling is an ineffective and potentially dangerous mechanism for enforcing fiscal discipline. It does not prevent tax and spending decisions that will incur debt issuance in excess of the ceiling…”
Fitch ratings is global ratings service. Tuesday morning, they joined the head of the U.S. Chamber of Commerce and the Treasury Secretary in warning Republicans that they need to raise the debt ceiling or else. They wrote, “… failure to raise the debt ceiling in a timely manner will prompt a formal review of the U.S. sovereign ratings. A repeat of the August 2011 ‘debt ceiling crisis’ would oblige Fitch to review its current assessment of the reliability and predictability of the institutional policy framework and prospects for reaching agreement on a credible medium-term deficit reduction plan.”
Fitch points out that the Republican strategy of using the debt ceiling as a mechanism for lowering debt is an ineffective and potentially dangerous plan, “In Fitch’s opinion, the debt ceiling is an ineffective and potentially dangerous mechanism for enforcing fiscal discipline. It does not prevent tax and spending decisions that will incur debt issuance in excess of the ceiling while the sanction of not raising the ceiling risks a sovereign default and renders such a threat incredible.”
In other words, Republican talking points on the debt ceiling are absurd. This is not the way to go about tightening your belt because it does nothing but lower your credit rating. This should be obvious, since the debt ceiling represents money Congress already spent, but apparently things need to be spelled out slowly for modern day Republicans. If you don’t pay off your credit card, they jack up the rate and you fall deeper into the hole. That’s the same idea as not raising the debt ceiling.
Refusing to raise the debt ceiling is only going to make things worse, and add more debt, so this Republican threat is obviously not coming from real concern over actual debt.
Republicans keep saying that spending is the problem and so they must get cuts or else. If that is their position, they need to take it up with themselves. Why haven’t they made defense cuts if they’re so worried about spending?
The Washington Post reported a few days ago that the U.S. Chamber of Commerce is calling out the strategy of using the debt ceiling as a hostage. They indicated that the Tom Donahue, President of the U.S. Chamber of Commerce, “called on Republicans to stop using the threat of default to get the spending cuts they want.”
Higher interest rates mean more debt, not less. And that’s not even touching what they would do to the economy, as Republicans are well aware.
Yesterday the New York Times reported on Tim Geithner’s warning to Congressional Republicans threatening to fail to raise the debt ceiling:
He (Geithner, Secretary of the Treasury) also said that Congress could cause “irreparable harm” to the economy by failing to lift the debt ceiling in a timely manner. The country makes about 80 million separate payments a month, to seniors, soldiers, bondholders and thousands of others. Were Congress to fail to raise the ceiling, Treasury would miss an estimated 40 percent of those payments. It might also throw the financial markets into a panic, compounding any economic damage caused by the missed or delayed payments themselves.
Uncertainty is already hurting the economy. “Uncertainty” used to be the hammer Republicans used to get anything they wanted — but now they are standing firm against a global ratings company, the U.S. economy, the U.S. Chamber of Commerce, and the Treasury Secretary. Party of business? Not so much anymore.
Fitch ratings poked a huge hole in Republican talking points by warning that using the debt ceiling as a mechanism for fiscal discipline is ineffective and potentially dangerous. The debt ceiling is NOT AN EFFECTIVE MECHANISM TO PREVENT TAX AND SPENDING DECISIONS.
What possible reason do Republicans have for refusing to pay their bills?
Image: David Parkins for the Economist
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23 Responses to Fitch Ratings Shoots Down Every Republican Talking Point on the Debt Ceiling
RMuse
Jan. 15th, 2013 at 3:46 pm
“What possible reason do Republicans have for refusing to pay their bills?”
Three words; African American President
inez
Jan. 16th, 2013 at 4:49 pm
we all know the repulshricans vowed to get obama out of office during his first term…imagine their shock when he beat mitt hands down. the billions that were spent supporting mittshit has come back to haunt them..now…..what can they do? keep telling the same lie often enough and the non knowledgeable voters fall for their lies. it’s sites like this that educate all subscribersnot only with the facts but, what others think!
djchefron
Jan. 15th, 2013 at 5:01 pm
The Chamber of Commerce?This wouldn’t be the same Chamber of Commerce that warn of socialism?This wouldn’t be the same Chamber of Commerce that funded these loons?So Chamber of Commerce you created this monster,heal your dog.
majii
Jan. 15th, 2013 at 5:46 pm
Yep, these are the same folks, djchefron. According to the Financial Times, even the Koch Bros are against the republicans holding the economy hostage over raising the debt limit. I’m having a lot of fun watching these groups whose members were adamant opponents of the president line up with him against the republicans. I know there are serious implications if the debt limit isn’t increased, but I’m allowing myself this little bit of guilty pleasure. I guess now these groups know that it’s possible for a “dog” to bite the hand that “feeds” it.
www.ft.com/cms/s/0/fdb387...
Paul
Jan. 16th, 2013 at 1:08 am
Good point, djchefron. The U.S. Chamber does fund the loonies, and then stand with the President and AFL-CIO at the White House in support of Infrastructure measures. Still, they’re anti-worker overall.
inez
Jan. 16th, 2013 at 4:50 pm
chamber of horrors is a better name
Shiva (Moderator)
Jan. 15th, 2013 at 6:17 pm
Its pretty obvious, and something we all know. The GOP is doing this on purpose and it wont look good for them or the country
Boehner needs to be led in chains to prison
knight4444
Jan. 16th, 2013 at 12:13 pm
Isn’t it hilarious how republicans become the precious little deficit hawks when democrats are in power but when republicans are commander and chief spending runs wild! theres a reason why republicans spend like drunken sailors when their in charge. Jude Wanniski was a republican economist/ strategist had this brilliant idea on how to destroy the government and crush democrats. It’s called ”the two santa claus theory! ” I strongly suggest my republican friends to research Jude Wanniski before you start typing a response! The more I look at republicans the more they look like traitors!! the party of god and their phony patriotism is unbelievable! Bush jr. wasn’t completely stupid! he put two unpaid wars on our backs ”without putting them in the budget” for a reason! to hamstring the next president hopefully a democrat! republicans are so transparent when you know their playback!!
BodiJohn
Jan. 16th, 2013 at 1:03 pm
Right! What a crock…how about saddling their kids with two wars! Where was the outrage over funding the wars through supplementals…where were the offsets for huge tax cuts…oh, explosive economic growth…right.
The key: spending under Obama as a % of GDP is the lowest since Eisenhower! But, that’s a fact that just doesn’t want to sit still in their alternate universe.
And with the poor and elderly dependent upon Social Security and Medicare/Medicaid…those programs (paid for through payroll taxes by most) are not ‘entitlements’…they are earned over a lifetime and absolutely necessary for survival by 60% of seniors…you want to cut spending- look very closely at the military and have Hagel convene a think tank to determine the present and future role of the military…then, slash outdated programs and weapons systems and think long and hard on the development and manufacturing of new systems that meet the needs of the 21st century.
Obama as a tax and spend liberal is an argument that is not being countered strongly enough by even the liberal media…this is a bogus argument. The key is that the Republicans are trying desperately to define themselves and they cannot find a story that sells to anyone (and trying to run from the Bush legacy will never work- it was just too damned horrific…how sadly telling that GW essentially disappeared during the presidential campaign…note the role that Bill Clinton took!). And they are now handcuffed to the extreme right of their party who are taking them over the cliff. Bad enough just two parties, worse when one of the two, the republicans, are just this side of collectively insane. Bad for democracy.
djchefron
Jan. 16th, 2013 at 1:29 pm
Agree with just about everything you said except one teeny weeny thing:
Where is this liberal media of which you speak of?
BodiJohn
Jan. 16th, 2013 at 1:40 pm
MSNBC as the mother ship…and for me, they are not even close to left enough…but, they do represent as a foil for Fox ‘News’.
candilu
Jan. 15th, 2013 at 7:33 pm
“What possible reason do Republicans have for refusing to pay their bills?”
Why don’t ya know, to teach that socialist-communist-kenyan-anti-american-US consitutional hating-Europe loving-marxis-community organizer that he will FAIL if he attempts to try and save our country!!!
Yep that’ll learn him.
With the Republicans, it has NEVER been about us – and what is for the good of OUR country
djchefron
Jan. 15th, 2013 at 8:10 pm
Great news.The House just approve Sandy Relief aid.49 rethugs voted for the aid and all but 1 who shall be named dummycrat [Tennessee Rep. Jim Cooper]
Why is the great news other than the aid has been approved?Well remember when we were at each others throat over Obama’s perceived cave in on SS?It happen ed again,the orange one breaking the Hastert rule.Which could mean good news on the debt fight.
See limpballs was right.This President is going to break the lockstep mentality of the republicans.All they have is solidarity once that’s gone they have nothing.Thank you tea party.You dweebs were useful after all.
Shiva (Moderator)
Jan. 15th, 2013 at 8:19 pm
Even better
“Northeast lawmakers won a crucial 228-192 House vote, adding tens of billions to a Hurricane Sandy aid package and bringing it closer to the White House’s request last month. The amendment by Rep. Rodney Frelinghuysen (R-N.J.) effectively triples the underlying $17 billion bill and together with prior flood insurance funding would provide close to $60.4 billion in aid. “
charlie
Jan. 15th, 2013 at 8:46 pm
Here’s more of the story:
But an agreement to raise the debt ceiling might not ensure that the nation’s credit rating remains untouched. The raters are also concerned about the country’s long-term fiscal situation, and are pushing Washington to enact a sweeping deficit-reduction plan.
“In the absence of an agreed and credible medium-term deficit reduction plan that would be consistent with sustaining the economic recovery and restoring confidence in the long-run sustainability of U.S. public finances, the current Negative Outlook on the ‘AAA’ rating is likely to be resolved with a downgrade later this year even if another debt ceiling crisis is averted,” Fitch said.
Read more: thehill.com/blogs/on-the-...
djchefron
Jan. 15th, 2013 at 8:58 pm
Ok you and I agree the debt problem must be solved.Now we can do it the way that I agree with, which is more stimulus spending on infrastructure,a new electrical grid and things that put people to work.Who BTW if one has a job he /she supports small business and pay taxes.While also raising revenue on those who have made out like fat rat these past 30 odd years.Or we can cut the social safety net give more tax breaks to the so called makers and enact austerity 3.0 which has been proven not to work.So which one makes sense to you Charlie?
charlie
Jan. 15th, 2013 at 10:46 pm
djchefron
Jan. 15th, 2013 at 11:01 pm
Going back to the Clinton rates was a good start.Capitol gains should go up to at least 30% All financial transactions over a million dollars should have extra 3% added on.Please save the crocodile tears that wall street wont make any trades etc.GTFO Those Mofos would sell their mother out for a dime.I’m no tax expert but I’m quite sure there are countless ways to raise revenue from those who have benefited at the expense of the middle class.And yes its class warfare we didn’t start it we have been losing the battle.NO MORE ITS TIME TO PAY!If you were creating jobs instead of getting tax cuts for shipping jobs overseas you might get a break other than that tough titty
charlie
Jan. 15th, 2013 at 11:40 pm
What about Social Security and Medicare? Do you agree reforms are needed or no? Just curious….
djchefron
Jan. 16th, 2013 at 7:03 am
What about SS and Medicare?Do I think that if you pay into a system all your working life you should take a cut?Hell no.Should there be reforms?Yeah you could start by eliminating the cap and tax all your income.When I say all I mean all.
They say the greatest trick is when the devil convinced people he don’t exist.No the greatest trick is how the rich got low IQ people to fight against their interest and fight for the rich interest.
charlie
Jan. 16th, 2013 at 3:03 pm
Jeff R
Jan. 16th, 2013 at 1:33 am
re: “I can’t say I’m convinced the last stimulus did much good. Economists were all over the place in their assessments of success/failure. Who do you want to hit up for more taxes?”
It was known from the start that the first stimulus was too small and too much composed of tax cuts, which we have known for decades are only 25% to 30% as stimulative than, for example, infrastructure construction. Numerous Nobel winning economists told us that the the stimulus should be at least $1.4 trillion in SPENDING. The best Obama could get passed the rightists (who had decide they were against it BEFORE they ever heard it) was $800 billion of which about 40% was tax cut.
All that said, there are no non-partisan economists that will contend that the stimulus “failed”. They contend over how big or small the beneficial effects were.
As to your tax question. I say EVERYONE whose income is above the poverty line. I am for a 23% tax on ALL income from any source. No deductions, exceptions, or exclusions. The estate tax I would put at about 50%, because as the Founders wrote, allowing the creation of dynastic wealth is a danger to the Republic that must be prevented.
Finally I would put an limit on the amount of total compensation, to a single person, in any form that is “expensible” for tax purposes, of 40 times the wage of the lowest paid “employee” (including part-timers and those employed through contractors. (Note that businesses can still pay all they want, but the taxpayers would no longer subsidize it), which would have several beneficial effects. It would raise tax revenues, it would mitigate against the rising tide of income disparity, and it would encourage full-time employment and rising wages for the lowest paid people in our society. (If your lowest paid worker earns more, the big boss can earn more.
Rudy Gonzales
Jan. 16th, 2013 at 4:04 pm
Some people are smart – TEA-types and some Republicans aren’t! Do not sit on the sidelines and allow the few with the most power and stroke to make decisions that will effect you directly without your input. We must remember that money and power in the hands of fewer and fewer people with stricter less compassion has taken hold in many states and Washington is their next target. Do not sit on the sidelines and allow others to make decisions that will effect you, or your family directly, without your input. Get active in local, state and national politics and keep yourselves informed. We can make a great change in the 2014 Mid-term election!