President Barack Obama would veto a House Republican proposal to impose mandatory budget cuts and set caps for government spending in order to raise the federal debt limit, the administration said in a statement.
S&P made clear that if whatever the Congress and White House come up with does not result in at least $4 trillion in actual reduced deficits over the next 10 years – not games, not scams, not “creative accounting” but actual reductions they will downgrade the credit rating on the US.
Incidentally, that’s not enough; it’s only a reduction of about 25% in the deficit from the last three years’ levels, and with medical spending forecast to rise rapidly and dramatically within the next handful of years, a $400 billion/year cut off “baseline” won’t do jack.
In order for this to result in a sustainable budget circumstance GDP would have to be growing for the entire ten year and beyond period at roughly 8% annually. That is not going to happen – that sort of “requirement” is pure magical thinking unmatched by reality at any time we have growth figures from (going back to the 1950s.) Since 1990 the average has been 4.86% and since 2000 4.16%. Expecting double that is idiotic.
S&P, to be blunt, is giving the government a pass – they’re not requiring sustainable deficits, but rather just enough slowing in the trajectory that we’ll manage to kick the can down the road for another five to ten years.
Yet our President has said he won’t even sign that, say something that fixes the problem.
Go ahead S&P, issue the downgrade this afternoon.
We’ve earned it.