Monday, August 8, 2011

Rick Santelli: If Not For Tea Party, U.S. Would Be Rated BBB

Rick Santelli: If Not For Tea Party, U.S. Would Be Rated BBB


After Standard & Poors downgraded the United States credit rating from AAA to AA+ figuring pointing was the spin of the day on Sunday and then again on Monday as the NYSE plunged over 600 points. Many Democrats, including Vice President Biden, asserted that the Tea Party held the country "hostage" and acted like "terrorists" when drawing the line in the sand and saying they would not increase the debt ceiling unless real deficit reduction was done. At the eleventh hour Congress cobbled together a debt ceiling increase with cuts to base line increases in budgets going forward while establishing a Super Congress to come up with more cuts to the budget.

Before the Tea Party faction of Congress held the debt ceiling debate "hostage" all three rating agency warned that government had spent to much. Notice one thing missing in the warnings by S&P, Moody's and Fitch - not one said that raising revenue was the issue for downgrades and lowering the outlook for the United States. All three rating agencies are unified that they are worried that spending will continue to outpace revenues resulting in more debt accumulation. The trouble is that 60% of our budget comes in the form of entitlement programs, 20% of the budget is military spending, and the final 20% is everything else. Many have pointed to two wars as the crux to our budget woes.

While that is part of it, the bigger aspect of our budget that we need to address is the growing costs of entitlement programs. Now, we cannot change the game for those near the retirement goal. So what do we do? What proposals are out there to cut the base line spending increases from the budget because even though we reduced the budget for next year we didn't actually cut it. All one has to do is go back and read the bill that was passed. It spells out how we may cut future spending increases which have been touted as spending cuts. Do our elected officials think we are that stupid?

Essentially what they are telling us is: Joe the Car Buyer is looking to purchase a new SUV. Joe the Car Buyer has budgeted $50,000 to purchase that new car. Joe the Car Buyer is on XYZ Car Lot and sees that sticker price for that new SUV is $70,000. After talking with the Sales guy and the Sales manager the final offer from XYZ Cars is $60,000. To get Joe the Car Buyer over the finish line the Sales Manager said that Joe the Car Buyer was actually saving $10,000 even though he had only a budget of $50,000. This is essentially how Congress and the Obama Administration is treating us.