Tag Archives: government debt

IL: Pols’ credit rating could be downgraded to “junk”

Source: ABC News

“Illinois is on track to become the first U.S. state to have its credit rating downgraded to ‘junk’ status, which would deepen its multibillion-dollar deficit and cost taxpayers more for years to come. S&P Global Ratings has warned the agency will likely lower Illinois’ creditworthiness to below investment grade if feuding lawmakers fail to agree on a state budget for a third straight year, increasing the amount the state will have to pay to borrow money for things such as building roads or refinancing existing debt.” (06/24/17)


Dare to dream of a world without endless debt ceiling hikes

Jesse Hathaway

Source: Heartland Institute
by Jesse Hathaway

“The debt limit was created by the Second Liberty Bond Act of 1917, a law partially freeing the executive branch from congressional oversight on debt policy. Between 1917 and today, the federal government’s credit limit has been extended — largely without question or care — at least 78 times. It’s time to start caring. Refusing to extend the government’s debt limit for once would not trigger Doomsday, but instead would force the federal government to actually think about what it’s spending instead of just continuing to light taxpayer money on fire.” (06/21/17)


Puerto Rico bankruptcy storm heading for mainland America

Source: Heartland Institute
by Jesse Hathaway

“The Financial Oversight and Management Board for Puerto Rico, a federal board tasked with managing the island commonwealth’s course out of fiscal emergency, declared failure on May 3, filing paperwork to begin court proceedings restructuring the government debt. Territory government agencies, such as the Puerto Rico Electric Power Authority, are likely to follow the government into bankruptcy court, leaving investors to potentially lose as much as 65 percent of their original investments. In 2015, Puerto Rico Gov. García Padilla warned of an impending ‘death spiral’ if territory lawmakers did not make pro-growth reforms. They did not, and Padilla’s warning has come to pass. Puerto Rico is circling the drain, financially speaking, but it’s not too late for mainland lawmakers to learn from the island’s mistakes.” (06/12/17)


Can a new Homestead Act solve the debt crisis?

Source: Heartland Institute
by Barry Poulson and John Merrifield

“Federal asset sales made to pay down the national debt was not part of Trump’s budget proposal, but during his presidential campaign, candidate Trump promised a ‘deal’ to sell mineral rights and use the proceeds to pay down the debt. He argued this ‘deal’ could make America energy independent. In our research, we find that this kind of sale of federal assets is a necessary to solve the debt crisis. We propose the sale of a broader range of federal assets that are now underutilized. For instance, Congress could pass a new Homestead Act, thereby selling federal land, real estate, and mineral rights.” (06/09/17)


Democrats weigh using debt ceiling debate to thwart GOP tax cuts

Source: Bloomberg

“Congressional Democrats might abandon their calls for raising the nation’s debt limit without any conditions, with House and Senate party leaders now discussing whether to use their leverage to try to prevent Republicans from enacting tax cuts for wealthy Americans. House Minority Leader Nancy Pelosi signaled the shift Friday, telling reporters that ‘we’re not there to raise the debt ceiling to throw a few crumbs to the middle class’ and provide big cuts for the wealthy. It’s unclear how this would work in practice, but Democratic aides in both chambers said they are discussing possible strategies to tie the debt ceiling to blocking tax cuts. Such an approach would be a significant change for Democrats, who have spent the past eight years arguing that debt ceiling increases should be free from conditions, and could further complicate efforts to raise the government’s borrowing authority when the current limit is reached later this year.” [editor’s note: Whatever the motive, anything that gets in the way of a debt ceiling increase is good news – TLK] (06/03/17)


Trump’s budget is a special kind of stupid

Source: Niskanen Center
by Karl Smith

That President Donald Trump’s budget is problematic is something that most economists agree with. There are, however, some prominent voices of dissent. George Mason University economist Tyler Cowen, for example, suggests that the budget is not as problematic as you might think. According to Cowen, ‘the spending cuts are probably not needed. It would suffice to cut taxes only, and allow the economy to grow out of an even-greater budget deficit.’ … To properly make the comparison between growth rates and borrowing rates, we need to adjust for inflation in the same way. Cowen’s argument arguably holds if we measure borrowing rates in nominal terms. Trump budget projections, however, are about real economic growth rates — which means that we should be comparing them to real borrowing rates.” (05/30/17)


Fiscal conservatism is dead — on both sides of the pond

Source: Cato Institute
by Ryan Bourne

The launches of the Conservative manifesto and Donald Trump’s first budget could not have been more different in tone. Theresa May’s offering was cautious, with minor tweaks to policy to reflect concerns about intergenerational fairness. The Donald, on the other hand, is promising a revolution, slashing a host of government programmes to protect old-age entitlements and expand the military, while also cutting taxes. But one trend unites both the Republican President and the Tory leader: conservatives on both sides of the Atlantic seem much less concerned with budget deficits than they were seven years ago.” [editor’s note: Seven years ago? The last time American conservatives even PRETENDED to want to balance the federal budget was in the 1990s. And yes, they were just pretending even then – TLK] (05/29/17)


Early renewal of debt theatrics blindsides Congress

Source: Politico

“President Donald Trump’s top economic aides are urging Capitol Hill leaders to raise the debt ceiling by the end of July. And Congress is totally unprepared to do so. Lawmakers in both parties thought they’d have until the fall to act, and had planned to roll the always-difficult vote into a broader spending package that could be more easily swallowed. That strategy may now have to be tossed aside with the debt limit deadline approaching faster than expected. The White House request raises the prospect of a bruising fight over the debt limit — not just between Republicans and Democrats but within both parties. The GOP is torn over whether to combine spending cuts with the debt ceiling lift, and Senate Democrats are already signaling they may push for their own concessions since their votes are going to be needed to avoid a devastating government default.” (05/30/17)


Moody’s downgrades China, warns of fading financial strength as debt mounts

Source: Reuters

“Moody’s Investors Service downgraded China’s credit ratings on Wednesday for the first time in nearly 30 years, saying it expects the financial strength of the economy will erode in coming years as growth slows and debt continues to rise. The one-notch downgrade in long-term local and foreign currency issuer ratings, to A1 from Aa3, comes as the Chinese government grapples with the challenges of rising financial risks stemming from years of credit-fueled stimulus. … While the downgrade is likely to modestly increase the cost of borrowing for the Chinese government and its state-owned enterprises (SOEs), it remains comfortably within the investment grade rating range. World stocks inched lower after the move, though Shanghai’s main index .SSEC recouped early losses to end marginally higher.” (05/24/17)


The return of the naive supply-sider

Source: National Review
by Kevin D Williamson

President Donald J. Trump has produced a very silly budget proposal. Thankfully, presidential budget proposals have all the effect of a mouse passing gas in a hurricane — Congress, not the president, actually appropriates funds and writes the tax code. Presidential budget proposals are not received as actual fiscal blueprints but as statements of priorities, and so we must conclude that President Trump’s top priority is refusing to deal with reality.” (05/24/17)