An $850B gamble? Credit agencies and debt talks

It's been another day in Washington, D.C., and there is still no deal in the debt ceiling crisis. As the clock continues to tick to that August 2nd deadline, no meetings are scheduled between the president and congressional leaders this weekend.

Still, top senators from both sides are said to be discussing modifications to a plan to raise the debt limit.

At the same time, the nation's credit rating could be threatened, even if a deal is passed.

CBS News correspondent Whit Johnson reports that credit rating agencies are putting the Treasury Department under the gun as they decide whether to strip the U.S. of its coveted triple-A credit status.

Obama addresses debt as Congress confers
The great debt debate: Point/counterpoint
Entitlement programs still on table in debt deal

On Thursday, Standard and Poor's agency threatened to consider the issue within the next 90 days, saying there's a 50 percent chance they could drop America's credit rating.

On Wednesday, Moody's Investors Service placed the U.S. bond rating "on review for possible downgrade".

"I am getting more and more worried about not raising the debt ceiling. This is approaching the unprecedented," said Mark Zandi.

Talks between credit rating agencies and the federal government are not necessarily unusual says the chief Washington correspondent for Bloomberg TV, Peter Cook.

"At the end of the day, it's their name on these ratings, their reputation. They have to make the judgment call that they believe is right," Cook says.

What worries the Treasury is any change in the gold-plated credit rating that would spike interest rates on U.S. debt. Just a half of a percentage point increase on the $14 trillion debt would cost taxpayers roughly $850 billion over the next decade.

Low-risk investors like those who run pension and retirement funds would be forced to dump U.S. bonds - a massive hit to America's reputation as a rock solid investment.

"They have to have something triple-A rated. If it's not triple a rated, they can't hold it. They have to sell those treasuries," Cook says.

This mounting pressure from the credit agencies is another reality check for Democrats and Republicans struggling to find common ground.

"If we go into next week and we haven't seen any action by the president and Congress, I think financial markets are going to grow increasingly un-restful," says Mark Zandi, chief economist at Moody's Analytics.

President Obama gave Congressional leaders a deadline of Saturday to come up with deficit reduction plans that could actually pass. So far, there is no indication of an agreement.

[-Skirt-]

by democracy5 July 17, 2011 1:41 PM EDT
-Skirt-, taxes on Capital Gains have NOTHING to do with tax on your Income. People who profit from Capital Gains do nothing to WORK for their profits, yet they are only taxed at 15%, while Income Taxes in all brackets are higher. Where's the fairness in that?
______________
sheesh.

I pay taxes on income.
I invest what's left.
I earn a profit and now you want 24% of my profit from income i invested? OK... fine. Quit calling it 15% and I'll pay your filthy 24%.

Then please... don't take anymore. please...

[-Skirt-]

Slo,

I would, but i live in calif... better ain't better...

[-Skirt-]

Beautiful in may ways but the politics are in the "outer limits" or "twilight zone" or "idiocracy" or...

[-Skirt-]

I looked at the tax chart for the wealthiest Americans.

http://politics.gather.com/viewArticle.action?articleId=281474977623449

It appears that the two periods of ultra low taxes on the wealthy proceeded a boom/bust cycle... a bubble if you will. Followed by high taxes and wars.

This makes the average tax rate of 50% (the Reagan years) look like freakin' genius.

Are you a freakin' Reagan fan? (lol... rhetorical question... don't answer)

[-Skirt-]

by curse914 July 17, 2011 11:42 AM EDT
Was IKE a "Commie" then, Skirt?
____________

IF you are correct about the tax rate of the late 50's, THEN the system was Marxist... and Ike was neither a commie nor a fascist.

It's a straw man fallacy you are creating.

[curse914]

Return the Capital Gains Tax to what is was under IKE, a true fiscal conservative. 91 percent, not a paltry 15 percent.

[-Skirt-]

confiscate 91% of my profit? Where is the incentive to be productive?

Why do I get a mere 9% of my hard work? Is this fair?

How did high taxes work for the British Empire? Wasn't a country formed on a distant continent trying to rid is citizens of unfairly high taxes?

Why has that great country started down the road that killed other great empires?

I don't get it!

[curse914]

Ok, I guess IKE was a Commie with is redistributing of wealth.

[-Skirt-]

Underfunded entitlements are are a bane to solvency. the 47% of Americans who do not pay taxes do not want to ever pay anything. They want someone else to pay for them. (and someone will say it is the rich that don't pay ...bla bla blahhh... i can't hear you)

A flat tax system would curb the dope sick feeling for this addiction to the handouts.

When did it become "American" to be so dependent on gov't?
When did self reliance lose its chic?

The lefties-libs want austerity for the assertive, productive, "rich", and handouts for everyone else.

This is untenable and all of us need to be productive and pay our share, all of us, not some of us...

[curse914]

Sure, it is the lazy people who borrowed from SS to fund the bloated government budget (oh and they wrote that budget). Yes it was the lazy people who collapsed the financial sector and started two unfunded wars. Never mind the ambition level that would be necessary to fashion such massive ponzi schemes, but yes, it must be the indigent, the naked and the hungry who put us into this mess just like they caused the first Great Depression.

You have to pay into the system and the amount you pay in is reflected in the check your receive.


http://www.ssa.gov/pubs/10035.html

How do you qualify for retirement benefits?

When you work and pay Social Security taxes, you earn "credits" toward Social Security benefits.

The number of credits you need to get retirement benefits depends on when you were born. If you were born in 1929 or later, you need 40 credits (10 years of work).

If you stop working before you have enough credits to qualify for benefits, the credits will remain on your Social Security record. If you return to work later on, you can add more credits so that you qualify. No retirement benefits can be paid until you have the required number of credits.
How much will your retirement benefit be?

Your benefit payment is based on how much you earned during your working career. Higher lifetime earnings result in higher benefits. If there were some years when you did not work or had low earnings, your benefit amount may be lower than if you had worked steadily."

[-Skirt-]

You know how I feel about the B-S the Wall Street elite got away with. My point is generic.

Our leaders (legislators, Judiciary, and executive branch of gov't) were complicit in the charade that the middle class of our assets.

Forming an unfair tax system to compensate for the wealthy Wall Street raiders who wrecked the financial system (with gov't collusion) is NOT the answer...

[curse914]

Capital Gains Tax: Ike's Time vs. Our Time

It is considered to be almost the gospel today that capital gains should be taxed at a far lower rate than earned income. Today the maximum capital gains tax rate is a whopping 15% on assets that have been held for at least a year since purchase. This is why the middle class, who are dependant on earned income, effectively pay taxes at a higher rate than do the wealthy.

In Ike's day, capital gains were not treated differently from earned income, so the rich paid 91% tax on capital gains. From 91% to 15% - another reason why it's good to be rich!

Note that in 1955, in the middle of Ike's presidency, the typical (median) family paid less than 20% in all taxes [2]. By 2003, the total of all taxes paid by a typical family had more than doubled, to almost 40% of income.

So in Ike's day, the rich paid a lot of taxes, the middle-class paid a little taxes, and somehow it all worked out.

But Did Ike Want To Tax The Rich?

You might be curious as to whether Ike actually wanted such a high tax rate on the Rich, or was somehow forced into it by, say, a Democratically-controlled Congress. It turns out that when Ike ascended to the Presidency, both houses of Congress were indeed controlled by a single party - the Republican party. Republicans controlled the Presidency, the House, and the Senate - they could have done anything they wanted. And some in Congress did pressure Ike to roll back taxes on the rich, but he held the line, saying:

"We cannot afford to reduce taxes, reduce income,until we have in sight a program of expenditure that shows that the factors of income and outgo will be balanced."

(Read the article here, if you do not like it is on a left leaning, prove these numbers are incorrect or keep your piehole shut)

http://blueworksbetter.com/EisenhowerFlamingLiberal

Tax rates on the wealthy are obscenely low during a time when we are fighting _unfunded_ wars ostensibly on their behalf and bailing them out of financial sector malevolence; think about it.

[-Skirt-]

capital gains tax if 15% fed + 9% for State. A quarter of your profits are gone... and redistributed.

It's the same rules for everyone. If I have a long term profit of 5,000 or 5,000,000, the rate is the same.

Bottom line is that the rich still pay more taxes than anyone else. This is a truth.

[curse914]

Was IKE a "Commie" then, Skirt?

[forumcomments]

The resolution to this issue is simple. Agree to increase the debt ceiling for a limited time and include a balanced budget amendment for each state to vote on within a year.

[-Skirt-]

Not that simple... Once the ceiling is increased it can never go down. "limited time" is impossible.

[bmallen3]

years of living on credit cards caused these problems. Individuals bought homes they could not afford, cities and states issued bonds for operational costs, the feds bought every vote they could with entitlements in an effort to build the great society. This was all a fraud financed by borrowed money and now we are paying for it. Years of the Socialist experiment in America have shown government is the problem and always has been. It is time to put a strangle hold on those who want to continue to spend us into oblivion.

[lucifersshadow]

Just in case you have not figured it out yet, the reason Obama is pushing so hard for this is so he can be re-elected. He does not want the axe to fall before election time. The republicans could care less. Obama had his chance, and he decided to send more troops into battle, spend more money when we could least afford it. That is not good judgement. I do not particularly care to see a republican in office, but I do not want Obama there either, he had his chance to start cutting spending, and blew it. Our military is not going to do us a bit of good if our economy tanks. They need to start pulling troops out now, not tomorrow, not a month from now, now! We cannot afford to police the world. Ten years of borrowing money to do so, and what have we got in return? Washington has been fooling itself for a long time, and reality is starting to catch up with them.

[Michael_Sexton]

that's what you get folks. America spent decades earning the right to be called second rate financially