Want To Solve Deficit Spending? Spend Less Than You Take In

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(Fred Weinberg/The Penny Press) – So the boys at Standard and Poor’s downgraded the United States’ debt anyway.

While that, in and of itself, is not a shocker—especially to anybody who could fog a mirror and/or count to 100—the fact is that it is about time we took a close look at Standard and Poor’s and did a reality check.

First, S&P is a division of the McGraw Hill Company.

It is a private business which, like me, can say whatever the hell it wants to say about anything.

The difference is that when I screw up, it costs me.

When S&P screws up, their executives get bonuses. Why? Well, by Federal law, S&P can rate a financial instrument high enough for a bank to buy it and when a bank does buy an S&P AAA rated instrument, it is considered tier 1 capital.

Let’s put it another way. Let’s say that I, operating way out here in rural Nevada, gather up a million dollars from investors. I then go out and find five homeless and jobless people and lend them each, $200,000 to buy a house. Then, I go to S&P and tell them I have a million dollar bond issue I would like them to rate. They look at my mortgages, overlook the fact that I lent a million dollars to five people who, however nice they may be, have no job, no track record in owning and paying for a house and not enough money to make the first payment and say, what the hell, the houses will go up in value. They stamp the bond AAA, I write them a big check for their services, and, just like that, I can not only sell it to a big bank for what I have in it but, if it turns out that the bond is a failure, there is no liability on their part. The only people out any money are the shareholders of the bank, or, if enough of the bank's investments are bad, the taxpayers.

It could never happen, you say?

If you were to say that, you have a very short memory. That’s exactly what they did in 2005 through 2008 which is why the economy crashed and they got paid well for it. By the people who put those deals together.

Getting back to S&P’s “downgrade” of the United States’ debt, while it should bring a smile to the face of any tea party supporter, we should point out that only the market can “downgrade” our debt.

Even out here in rural Nevada, we can ask (and answer) the questions the geniuses from New York asked.

Is the USA on an unsustainable debt path?

Of course it is. A homeless person with a fifth grade education in economics could tell you that.

But the reality is that if the United States cannot pay its bills, neither will anybody else because what really backs our money is our productivity.

The corn we can grow in a year. The energy that we can produce. The iPods we can invent. The smartphones we can create. In short, the economic engine which roars to life when a nation of inventors goes to work.

Standard and Poor’s can apply a series of formulas to our debt and make a grand pronouncement, but the only people who can really downgrade our debt are the people who buy it. And the reality is that if the US catches a cold, the rest of the world gets pneumonia.

I have a real problem with a bunch of whores telling us that their business would be so much better if we gave them softer beds in which to practice their profession.

Quoting Mike Huckabee, “The United States of America is the best looking puppy in a bad litter. There is a problem economically across the world, but can you think of any place you’d rather be?”

This is still the only nation on the face of the earth that people sneak IN to.

The so-called downgrade is nothing more than an irritating speedbump which should probably be handled by the justice department discovering that he statute of limitations has not yet run out on S&P’s fraudulent ratings which caused the financial meltdown.

But the problem which ultimately needs to be solved is the level of debt we have accumulated by simply not wanting to change the way we do business in Washington and the 50 state capitals.

We, here in rural Nevada, know how to solve the problem.

You simply spend less than you take in.

Do that and we’ll be just fine. If you don’t want to work that hard, than explaining what happened and what things were like in the late 1970’s during Jimmy Carter’s administration is probably a waste of time, too.

Although I would observe to any Democrat who falls into that category, that Ronald Reagan was elected as a response to Jimmy Carter’s economics policies.

Am I typing loud enough?