Moody's warns that the US credit rating could go down a notch (joining the S&P downgrade from last year) if the US fails to take appropriate medium-term action. They write as follows (via Politico):
“If those negotiations lead to specific policies that produce a
stabilization and then downward trend in the ratio of federal debt to
GDP over the medium term, the rating will likely be affirmed and the
outlook returned to stable,” Moody’s said in a statement. “If those
negotiations fail to produce such policies, however, Moody’s would
expect to lower the rating, probably to Aa1.”
In many ways this is not very helpful. One of the key disputes over budget policy is what will do most to help in various time frames. Some want immediate austerity while others prefer short-term growth to assist a medium term solution. Moody's provides a warning to "get busy" but no one knows how they will evaluate various alternatives.
And who elected them, anyway? It is not as if the ratings agencies have a stellar record on such matters.
With this background in mind, there is a pretty easy, one-word solution to the Fiscal Cliff. Let us start with one of the
helpful interactive tools from The New York Times.
The page shows the count of words spoken by each party at the conventions. These simple quantitative measure are often deceptive, but the tool provides key speeches and also something quite clever:
You can insert your own word and discover the count!
I invite readers to try their own words and share the results with us, but you have a tall order if you want to match my suggested word: Compromise.
The mentions were 2-1, and I mean actual count, not a ratio. The notion of progress through compromise is missing in action right now.
And that is the one-word solution. How long must we wait?
Wow. More telling was who (or who didn’t) use the word. Obama only used it once and Chris Christie was the only person to use it the entire RNC.
We all know what happened after S&P downgraded us last year, don’t we? Our “borrowing” costs went down!!! Do you know why?
This is from the Federal Reserve’s website:
As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational. Moreover, there will always be a market for U.S. government debt at home because the U.S. government has the only means of creating risk-free dollar-denominated assets (by virtue of never facing insolvency and paying interest rates over the inflation rate, e.g., TIPS—Treasury Inflation-Protected Securities). Together with the unusually high, but manageable, level of the current debt, these facts imply that the current U.S. government can wait out any short-term economic developments until long-run growth is restored. Further, without an immediate need to drastically reduce the debt, the mechanism between high debt and slow growth loses most of its credibility.
Source: http://www.stlouisfed.org/publications/re/articles/?id=2157
Ah yes, but “compromise” doesn’t sell votes. There is, especially in politics, a big difference between what people say and what they do. (e.g. Ryan’s supposed Randian/Libertarian bent vs his voting record.)
A more telling investigation would be to look at each candidate’s record for instances of compromise.
A surprising slip for the Old Prof, who routinely points out the folly in paying attention to narratives instead of realized outcomes.
Oops – The actual count of the word compromise was actually 7 for the Democrats versus 2 for Republicans. Your reported 2-1 actual count was in fact the rate of the use of the word per 25,000 words (1.7 to 0.7).
Another word that was also quite interesting both in number and context comparing across Democrates and Republicans was “Bush”.
Cheers
“Compromise”. Doesn’t that usually go along with “We will never”?
Terry — Thanks for the correction. I should have read the fine print.
I hope you enjoyed the quest:)
Jeff
Proteus — heh heh — so it seems!
Interesting the things that neither party seems of sufficient interest to mention at all: “Bernanke” “federal reserve” “demographics” “sustainability” “life expectency” “overpopulation” “occupy movement” “globalism” “socialism” “underclass” “gold standard”