HI-TRANSFER

One of the side-effects of the lengthy debt ceiling debate and downgrade coverage was the exhaustive and widely publicized focus on the country’s ugly mounting debt load as well as the key factors and trends that will drive the burden dramatically higher in coming years.



It should come as no surprise that the populace is disgusted given the whopping numbers and extraordinary rate of change… total government debt was a $10 trillion in late 2008 when all the hubbub was made about needing to add an additional digit on to the Durst debt clock in New York’s Times Square.



A mere two and a half years later and Washington DC pushes the economy to the brink bargaining over an increase in the debt ceiling allowing for the current $14.3 trillion in gross government debt.



That’s a massive increase of $4.3 trillion (a 43% increase) in just about 35 months or an average increase of $123 billion per month or roughly $4.1 billion per day.



And it’s not as if we are experiencing robust growth in the economy that could work to, in a sense, mitigate the mounting debt, our economic growth has been abysmal at best with GDP increasing ever so weakly.



So, the debt is simply piling up as policy junkies in Washington DC and elsewhere continue to push their failed Keynesian experiments in a supposed attempt to “boost aggregate demand” and address the high unemployment rate.



Given that these fraudulent policy schemes and boondoggles provided very little benefit and came at the cost of a downgrade to our sovereign credit rating, it is now time for Washington DC to do a complete about face and begin implementing major austerity.



In fact, given the specter of further downgrades as soon as this November by S&P and the looming possibility that Fitch and Moody’s may soon slash their assessments of U.S. sovereign debt, an effective approach to austerity is truly mandatory.



Ignore the policy junkies and their scare tactics, their archaic methods have been tried and failed.



The only way forward is to end all the preposterous policy action, clean up the government balance sheet, and let the chips of reality fall where they may.

Let’s take a moment to handicap the president’s remarkable press conference from earlier today.



First, citing Warren Buffett’s absurd notion that he would rate the U.S. government “quadruple-A” was nothing more than a silly gimmick… Of course Buffett, who is deeply invested in all things U.S. (rails, insurance, brick and mortar), would like to maintain a positive outlook on the U.S. but this is hardly a thoughtful or meaningful or even coherent assessment of our long term outlook.



OBAMA: “Last week, we reached an agreement that will make historic cuts in defense and domestic spending. But, there’s not much further that we can cut in either of those categories. What we need to do now is combine those spending cuts with two additional steps. Tax reform that will ask those who can afford it to pay their fair share and modest adjustment to healthcare programs like Medicare.”



Here is a nearly perfect example of Obama either missing the severity of the situation or so ideologically rigid that he cannot see beyond his fraudulent tax and spend policy “solutions”.



There are not only plenty of domestic (and likely defense) cuts that can be made (food stamps, long term unemployment benefits, section-8 housing, government worker pensions, etc. etc.), these cuts are mandatory.



This is what the downgrade is all about. Classic social safety net programs cannot be protected or restructured they need to be dismantled.



This is what “austerity” means… serious real deal cuts and a rollback of fraudulent policy tools that we can no longer afford.



OBAMA: “Specifically, we should extend the payroll tax cut as soon as possible so that workers have more money in their paycheck next year and businesses have more customers next year. We should continue to make sure that if you are one of the millions of Americans who’s out there looking for a job, you can get the unemployment insurance that your tax dollars contributed to. … In fact, if Congress fails to extend the payroll tax cut and unemployment benefits that I have called for, it could mean one million fewer jobs and half a percent less growth. … We should also help companies that want to repair our roads and bridges and airports, so that thousands of construction workers that have been without a job the last few years can get a paycheck again. That will also help to spur economic growth.”



Again, the president appears to be compelled to pair an absurd and un-fundable policy tool with the obvious and sound benefit of extending the payroll tax cut.



Recipients receiving unemployment benefits for longer than the current 99 weeks have largely long surpassed the amount they paid into the system.



As I have noted before, unemployment insurance was NEVER intended to be an endless stipend and by perpetuating the idea that Congress can just continuously extend the benefits, the president is demonstrating that he has no idea of the severity of our current debt situation.



OBAMA: “I know we’re going through a tough time right now. We have been going through a tough time for the last two and a half years, I know a lot of people are worried about the future, but… here’s what I also know. There will always be economic factors that we can’t control; Earthquakes, spikes in oil prices, slowdowns in other parts of the world. But how we respond to those test, that’s entirely up to us. Markets will rise and fall but this is the United States of America. No matter what some agency may say, we’ve always been and always will be a triple-A country.”



This is probably the most pathetic statement of all… We always will be a “triple-A” country?



Guess what… no matter what fantasy the president or those in Washington DC want to believe in, we are NO LONGER a triple-A rated country.



Worse yet, the specter of additional downgrades loom in the near future and with the “leadership” on display in this press conference you can bet our sovereign debt rating is going lower.