Admittedly, we, as a country, need to get past this debt-ceiling crisis and, consequently, it has consumed the news cycle. But, the proposed solutions focus mainly on two elements of the problem, while the rating agencies seem to be looking at the bigger picture. Whether Republican or Democrat, the plans address only cutting spending or raising taxes, and the $14 trillion number is too large to meet in the middle—even if we did both. Long term, what Moody’s and Standard and Poor’s are looking for is a plan moving forward that will fix the future.
So, how’d we get here? The over-simplified answer is basically the same way any household account gets into trouble: too much spending and not enough income. Both sides of the debate seem willing to cut some spending. President Obama apparently thinks the only way to increase revenue is by raising taxes.
It is universally accepted that the bad economy, with its resulting unemployment and lack of consumer spending have cut into the funds that typically fill the federal coffers in a robust economy—even Research In Motion, the maker of the Blackberry, is laying off 2000 employees, and GE (GE Chief Executive Jeffrey Immelt, serves as a top adviser to the Obama administration on job creation) is moving its X-Ray headquarters to China and investing $2 billion there. With more people unemployed, there is less income, and therefore less income tax to fund the federal programs.
Despite the bad numbers, the administration’s policies continue to discourage a true revenue increase while the President continues to support raising taxes.
New Time 11:20 AM PT: Get the Market Movements in Advance: William's Edge Webinar for Wednesday April 23rd, 2014 | John Ransom
New Time 11:20 AM PT: Get the Market Movements in Advance: William's Edge Webinar for Tuesday April 22nd, 2014 | John Ransom