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Southern Homes of the Carolinas
I just wanted to share some good news about me! I am now currently working for Southern Homes of the Carolinas. I am very excited to begin my new endeavor! If you are looking for a new home or want to sell yours OR if you know of anyone who is looking for an experienced, full time realtor, please have them contact me. I would love to help you.
Tuesday, January 8, 2013
Fiscal Cliff
WITH U.S. FISCAL PROBLEMS UNRESOLVED, TREASURED AAA RATING MAY FALL OFF CLIFF
The United States looks increasingly likely to lose its gold-plated AAA credit rating in the next few months amid warnings by Wall Street rating agencies that last week’s $650 billion “fiscal cliff” deal did not go far enough to reduce $1 trillion deficits and stabilize the debt.
Moody’s Investors Service, in particular, warned last week that more stringent spending cuts or tax increases will be needed in the next round of budget negotiations if the U.S. is to avoid a second major downgrade of its rating — one that would definitively kick the nation out of the exclusive club of AAA-rated nations.
The U.S. was knocked down a notch from AAA by Standard & Poor’s Corp. after the 2011 fight over the debt limit, but it has continued to claim AAA status because its rating was not changed at that time by Moody’s or Fitch Ratings, Wall Street’s other two top credit agencies.
That may change unless President Obama and congressional Republicans overcome deep divisions over taxes and spending in the next few weeks.
Republicans are citing the warning from Moody’s in demanding that the White House agree to substantial cuts in spending and reforms for Medicare, Medicaid, Social Security and other entitlement programs — the biggest drivers of the budget deficit — as a condition of securing an increase in the nation’s $16.4 trillion debt limit.
But the White House has shown little inclination to accept their terms while some liberal Democrats have become downright dismissive of the credit agencies, arguing that S&P’s August 2011 downgrade did not raise the Treasury’s borrowing costs and — with investors continuing to flock to Treasurys as a safe haven in turbulent global markets — conditions have never been better for the government to keep borrowing.
Despite the indifference in some parts of Washington, analysts say this time could be different and that a second downgrade by Moody’s or Fitch has the potential to cause significant market turmoil and damage the country’s privileged financial status, which includes the lowest government borrowing rates in the world and the many prerogatives that go with printing the world’s main reserve currency, the U.S. dollar.
Economic analysts say that, once lost, it would be difficult for the U.S. to regain its top rating, and the move would confirm in the eyes of much of the world that the U.S. is slowly sliding into second-tier economic status.
“The next step is a very serious cliff that involves the credit rating of the U.S. It doesn’t get more serious than that, and one hopes that will cause some to be more responsible than they might otherwise be,” said David Kelleher, president of Better Markets Inc. and a former Senate Democratic aide.
“Unfortunately, the last debate over the debt ceiling in 2011 doesn’t give much hope.”
The downgrade in August 2011 provoked a major drop in consumer and business confidence and prompted a dizzying drop of more than 600 points in the Dow Jones industrial average the day it happened. But the impact proved to be transient, with most losses recouped within a matter of weeks or months, leading many in Washington to question whether another downgrade will have any lasting significance or effect.
“Plus, there are too many saying they are going to hold the credit rating of the U.S. hostage to their policy preferences,” Mr. Kelleher said. “If politicians aren’t careful, they could actually make everything much worse.”
Some in Congress — mostly Republicans — agree that Washington should be worried about the next downgrade.
“America cannot afford for Moody’s alarm to fall on deaf ears,” said Rep. Tim Huelskamp, Kansas Republican. “In 2011, Washington was given ample notice that America’s stellar credit rating was on thin ice, but Washington passed on the opportunity to deliver a solution. Unfortunately for America, the so-called fiscal cliff legislation was another last-minute deal instead of a real solution. There were consequences for inaction last time, and clearly there will be consequences this time around as well.”
But skepticism that Washington will rise to the occasion also is plentiful. Liberal groups such as the Economic Policy Institute, a labor-backed think-tank, argue that there is little need to cut the deficit with Treasury’s 10-year borrowing rates at all-time lows of less than 2 percent. They say the U.S. should take advantage of such low rates and increase spending on infrastructure, unemployment benefits and other economic stimulus programs.
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