U.S. Credit Will Be Downgraded Again—Deservedly
On any given day, tens of millions flock to the beach for the sun, sand and surf. Yet because there have been 50 cases over the last decade of people digging deep holes in the sand and then getting trapped in cave-ins (including one in the last week), there is a renewed call to ban digging holes at the beach. Some towns have already done so (Myrtle Beach), and some are close to following suit (Los Angeles). It’s such a “serious risk” that the L.A. lifeguard division chief, when asked by a reporter what advice he would give parents who are heading to the beach, replied, “Don’t let your kids dig holes.”
Talk about burying your head in the sand. Fifty cases out of millions is insignificant. We’re talking about creating laws to ban an activity that had negative results for only 50 out of literally billions of beach trips.
Given that this warped mentality is now the norm, it’s no surprise that America just got handed a horrendously bad debt ceiling deal by Congress—one that will only exacerbate the problem—yet is already being celebrated as a necessary step and part of the “solution.”
Nothing could be farther from the truth.
So what do passing ridiculous laws and debt-raising deals have in common? Both ignore the real problems, with bury-your-head-in-the-sand thinking. Bad decisions are rationalized in a paternalistic, group-think way, accomplishing nothing but providing the decision-makers with a false sense of feeling good.
It’s bad enough that we now make laws to “protect” idiots who want to dig six-foot-deep holes side by side and try to tunnel between them. But laws intended to prevent stupidity never work. So why don’t we instead focus on the real problems that we have, instead of passing do-nothing regulations that only hinder law-abiding folks using common sense? Because it’s the easy way out.
Welcome to the MO of the United States Congress.
Let’s look past the rhetoric and ponder the real implications of the debt deal recently passed by Congress and heralded as absolutely “necessary” to save America:
1) If virtually everyone in Washington agreed that the high national debt was a bad thing, then how could those same folks turn around and raise it? It’s like locking an alcoholic in a liquor store for a week and expecting sobriety. If the debt was admittedly the problem, then raising it, by definition, would only make the problem worse. Go figure.
2) How can Congress be expected to solve the nation’s educational failures when its own basic math skills are suspect? So to cut two trillion in spending, the solution is to add two trillion to the debt? Hmmm. Granted, columnists are not that smart, but that one just doesn’t seem to add up.
3) A number of Republican congressmen voted for the debt deal “so that the small businessman wouldn’t be hurt” and to avoid a credit-rating downgrade. Now, they get the worst of both worlds. As any high-schooler could have told you, the downgrade was coming, since the cuts weren’t nearly substantial enough. So now faith in America takes a huge hit, interest rates and inflation will rise, and the markets will continue to free-fall. Yep, those things really serve the interests of small business.
4) Who exactly is going to buy the additional trillions in debt? Sure, there will be foreign nations, investors and fund managers, but there simply isn’t enough money out there to buy that much debt. And don’t look to China to buy a whopping share of the new debt, since they aren’t exactly thrilled with the way things are going. They are nervously watching their current U.S. debt holdings, and don’t want to be holding a worthless bag of goods as the value of the dollar continues to plummet. The Chinese may be a lot of things, but being imprudent with their own money is not one of them. They were cutting back on buying U.S. Treasuries well before this current fiasco.
5) Most significantly, does anyone really have any idea what a trillion is, let alone two, or 17, for that matter? No, not even the brightest astrophysicists. It is an incomprehensible number. So to give the debt increase some perspective, we have just given ourselves the green light to borrow more than twice the entire economic output of Texas, currently the most productive state in the nation in terms of attracting residents and businesses and beating the recession. For that matter, the debt increase is greater that the gross domestic product of all but four countries—just the increase!
The truth of the matter is that America’s credit rating should have been downgraded quite some time ago, so it is a mathematical certainty that it will be downgraded again in the relatively near future. And regarding the argument that raising the debt was necessary to avoid default, that’s Washintgton-speak, plain and simple. There were numerous ways to pay the nation’s bills while not raising the debt ceiling. Don’t get hypnotized by the “complexities” foisted upon us by a Congress—both parties—with an insatiable appetite to spend. They could have fixed the problem. They chose not to.
And the beauty of it all, at least from Congress’s perspective, is that they got what they wanted: more money to spend now, and down-the-road reductions that can, and absolutely will, be ignored by future Congresses.
So what happens? Given our unprecedented situation, no one really knows for sure, but none of it will be good, and the pain level will be huge.
The West is experiencing its financial bankruptcy in large part because of its spiritual bankruptcy, and until that changes, don’t expect things to “get back to normal” anytime soon.
But there is one measure of preparedness that will undoubtedly come in handy as the economic storm worsens: When at your foreign-owned service station, learn to ask for your Middle Eastern-derived gasoline in Chinese.
Chris Freind is an independent columnist, television commentator, and investigative reporter who operates his own news bureau, FreindlyFireZone.com. Readers of his column, “Freindly Fire,” hail from six continents, thirty countries and all 50 states. His work has been referenced in numerous publications including the Wall Street Journal, National Review Online, foreign newspapers, and in Dick Morris’ recent bestseller Catastrophe. Freind also serves as a frequent guest commentator on talk radio and state/national television, most notably on FOX Philadelphia. He can be reached at [email protected]