Spending is endangering our credit rating

Jack Kelly:

When Moody's, the bond rating agency, threatened to downgrade the creditworthiness of the U.S. government if the ceiling on the national debt isn't raised by Aug. 2, the threat was reported on the evening news on CBS and NBC, and on the front pages of many newspapers.

But journalists paid less attention when Moody's and Standard & Poor's said they would downgrade U.S. bonds if federal debt isn't cut by $4 trillion over the next 10 years.

If our credit rating is downgraded, the Treasury department will have to pay a higher rate of interest to sell its bonds, ballooning the deficit. Americans will have to pay more for home and auto loans, since the interest rates on them is tied to what Treasury pays.

Raising the debt ceiling would permit Treasury to borrow more money, thus avoiding default in the short term. But borrowing more makes the risk of default greater in the long run.

The long run isn't very far off. Standard & Poor's said Monday it will downgrade U.S. Treasuries in 90 days if a deal to reduce the debt by $4 trillion isn't made by then.

Here's why Standard & Poor's is worried. In 2001, the national debt was $5.95 trillion. It's $14.34 trillion now, a 141 percent increase in just 10 years.

When debt exceeds 90 percent of GDP, economic growth is reduced one to two percentage points, economists Kenneth Rogoff and Carmen Reinhart have estimated. A percentage point decline means 1 million fewer jobs, according to the president's Council of Economic Advisers.

Debt is now about 95 percent of GDP and going higher. The Treasury Department announced last week the budget deficit for this fiscal year will be larger than last year's $1.29 trillion.

So you'd think President Barack Obama would be as worried as are the bond rating agencies, but the evidence suggests otherwise.

Mr. Obama presented in January a budget the Congressional Budget Office estimated would add $9.5 trillion over 10 years to our current $13.4 trillion national debt. It was so frivolous not a single Democrat in the Senate voted for it.

In a speech at George Washington University April 13, the president said he'd revised his budget to reduce spending by $4 trillion over 12 years. But he provided no details.

Journalists have reported Mr. Obama's claim he offered $1.7 trillion in spending cuts during closed door negotiations with Republicans, but, again, the president has provided no details.

The president isn't alone in fiscal delinquency. Senate Democrats haven't presented a budget in more than two years, even though the law requires the majority party to do so each year.

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Obama continues to be irresponsible. He still is bitterly clinging to Obamacare and his high speed rails to bankruptcy. Those two items should be the first to be cut if rational thinking were involved in this dispute. He is trying to save those bad investments by increasing taxes on job creators. He is still resisting prudent energy development which could increase domestic oil and gas production and revenues to the government at the same time and is instead pushing for punitive taxes on the major oil and gas companies that will make them less competitive and will cut jobs. He is still living in a liberal fantasy land.