The SIPA

Is Washington really this clueless?

I’m sure some of you immediately clicked on this story and may have been hoping the ‘Shocker” was something else but unfortunately it’s not what you think. I’m merely quoting the words, expressions and outrage from our leaders in Washington after Standard and Poor’s downgraded our debt late Friday. A few weeks ago on Facebook I put up a post on my profile in which I quipped that any debt deal from our Government would be worthless because our credit rating would still be downgraded anyway. One of my neighbors and Golf buddies quickly chimed in sarcastically that this was a “Shocker”. I also advised other members in my circle of trust that the markets will still collapse and that this supposed debt deal was a waste of time and money and that the game was over. I’m puzzled and concerned that top members of this administration are so out of touch with basic economic policies that they are suddenly “troubled and shocked” that rating agencies are downgrading them anyway. Treasury Secretary Geitner even went so far as to say that there was a 2 Trillion dollar accounting error and that S & P showed terrible judgment in downgrading the credit rating of the U.S.

Really Mr. Geiter? That’s the best you can come up with as Treasury Secretary of the United States? Poor judgment is having some drinks and getting behind the wheel of your car, but you and this administration have decided to go on a drinking bender and then get behind the wheel of a school bus filled with kids. I cannot figure out how this administration and its key players can be ‘shocked’ at the downgrade or complain about whether there was a 2 trillion dollar estimate error. Whether the debt is 14 trillion or 16 trillion, in the grand scheme of things, its nothing. Imagine yelling at your spouse that he or she wrote so many checks at the mall that there is now an overdraft of $16,000 and their response is to tell you that you used poor judgment in cancelling all checks and credit cards because the amount was only $14,000. Would this moment give you peace of mind or make you call your divorce lawyer?

Just in case things couldn’t get any worse, our President made sure to come out and sooth markets by telling them that “ It doesn’t mater what our credit rating is by some institution, we are the United States of America and will always be Triple A rated”. Oy Vey. This is real life Mr. President, not a Hollywood West Wing version in which they create some false moment. The market was down around 300 when you started speaking and dropped like a brick the more you talked. When you wake up in the morning and see the stock futures are down hundreds of points because of the downgrade, the last thing investors want to hear is you claiming it doesn’t matter. It does matter and they want the debt shrunk not expanded even more, yet that was the impression you left with all the investors around the world. I was wondering if things could get any worse but once again this administration proved me wrong when our President announced his jobs growth program. Here it is in a nut shell:

1) Extend unemployment for another year

2) Cut payroll taxes

That’s your plan Mr. President? Extend unemployment benefits even further which in turn increases the debt, and then allow even less taxes to be taken in by the government on a month to month basis which will also increase the debt borrowing burden. Payroll tax cuts basically allow you to have less money withheld from your check each week, however by April 15^th of next year you could be faced with a huge tax bill. Imagine each year you have withholdings that each April 15^th result in a refund from the IRS of over $5000 Under this plan, you will have more money in your pocket now but come April 15^th you may owe the IRS $5000. It also means each month the Government would have to offset that loss of monthly revenue by doing what? Borrowing more money to pay its monthly bills. Investors and Credit Agencies do not want to hear this; they want spending cuts and balanced budgets. Regarding extending unemployment yet again, this tells the market that you will continue to print money to garner votes and fall deeper into debt. Please spare us this notion that unemployed people receiving money from the government contribute to the economic health of the country. That’s like giving beer money to hobos because you think it will contribute to the job growth and sales in the tobacco and liquor industry.

The real shocker to me is that a couple guys in Orlando without Ivy League degrees saw all this coming but the best and brightest minds in the world are shocked by the downgrade and the answer to the economic malaise is to increase the debt even more at a time when we are losing our credit rating over our staggering debt level. Shocker!