PRESIDENT OBAMA: Everybody should say one of the most valuable things we have is America's credit worthiness. This is not something we should even come close to fooling around with. So when I read people saying, no, this wouldn't be a big deal, we should test it out. Let's take default out for a spin and see how it rides.[..] More here...
NEW YORK — Egan-Jones, an independent credit-research firm, downgraded its rating on U.S. government debt to AA- from AA on Friday, citing the Federal Reserve’s plans to try to stimulate the economy.
The credit rating agency said the Fed’s plans to buy mortgage bonds will likely hurt the economy more than help it.
The plan will weaken the value of the dollar and push up prices for oil and other commodities, Egan-Jones said. That would leave less for consumers to spend on other things.
But at the same time, Egan-Jones warned that the federal government’s borrowing costs are likely to slowly rise as the global economy recovers.
On Thursday, the Fed said it would buy $40 billion of mortgage bonds a month to help the economic recovery.
It’s the second time the Haverford, Pa. shop has downgraded U.S. government debt in five months. In April, Egan-Jones lowered its rating on the U.S. to AA from AA+. It stripped the U.S. of a top AAA rating in July 2011. Read more here...
(Bloomberg) — The U.S., lacking a plan to contain $1 trillion deficits, faces the prospect of another rating cut in six to 24 months depending on the outcome of November elections, according to John Chambers of Standard & Poor’s.
America has had an AA+ rating with a negative outlook since Aug. 5 when the New York-based unit of McGraw-Hill Cos. stripped the nation of its AAA ranking for the first time, citing the government’s failure to agree on a path to reduce deficits. The U.S. has a one-in-three chance of another downgrade, Chamber said today during an S&P sponsored Webcast.
“What the U.S. needs is not so much a short-term fiscal tightening, but it has to have a credible medium-term fiscal plan,” said Chambers, managing director of sovereign ratings. “That is going to have to say something about entitlements, and that is probably going to have to say something about revenues.”
Bond investors ignored the downgrade, driving Treasury yields to the lowest levels in history, amid concern the U.S. economy was stalling and as Europe’s debt crisis intensified. Treasuries have returned 3.9 percent since the rating cut and gained 9.8 percent last year, the debt’s best performance since 2008, according to Bank of America Merrill Lynch index data.
“I don’t think anything is going to happen between now and the election in November,” Chambers said.
Keep on reading…
In an analyst note, BofA/ML Ethan S. Harris drops a bit of a bombshell prediction:
We expect a moderate slowdown in the beginning of next year, as two small policy shocks — anotherdebt downgrade and fiscal tightening — hit the economy. The “not-so-super” Deficit Commission is very unlikely to come up with a credible deficit-reduction plan. The committee is more divided than the overall Congress. Since the fall-back plan is sharp cuts in discretionary spending, the whole point of the Committee is to put taxes and entitlements on the table. However, all the Republican members have signed the Norquist “no taxes” pledge and with taxes off the table it is hard to imagine the liberal Democrats on the Committee agreeing to significant entitlement cuts. The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan. Hence, we expect at least one credit downgrade in late November or early December when the super Committee crashes.
(The Hill) — Liberals are growing frustrated with President Obama’s soft response to the Tea Party after fractious negotiations over the debt limit led to the loss of nation’s AAA credit rating on Friday.
Republicans and Democrats have unleashed fusillades of attack against each other in the wake of the announcement but Obama has stayed quiet, frustrating his party’s base.
“It’s hard to see how we avoid a Tea-Party recession if the president who has the biggest megaphone in the country is not willing to speak clearly on the issue,” Justin Ruben, executive director of MoveOn.org, told The Hill in a Saturday afternoon interview.
Ruben said Obama should never have allowed Tea-Party lawmakers in the House to treat a debt-limit extension as a concession to Democrats given the nation’s entire economy depended on it.
By accepting the threat of a national default as politically valid, Obama put himself at a major disadvantage in the talks, he said.
“It’s a terrible deal that will destroy jobs and big part of reason is because president accepted the premise that it was okay to hold economy hostage,” Ruben said. “Instead of saying, ‘this is outrageous’ and ‘You will not threaten the full faith and credit of the U.S.,’ and telling America what the Republicans are doing, he sat down and said, ‘let’s bargain’ and tried to show he was more reasonable.”
A top Pakistani Taliban commander took credit for yesterday’s failed car bomb attack in New York City....
All indications are the tape is legitimate. YouTube has pulled the video and shut down the Tehreek-e-Taliban Pakistan News Channel since this article was published.
More than 15 million taxpayers could unexpectedly owe taxes when they file their federal returns next spring because the government was too generous with their new Making Work Pay tax credit.
Taxpayers are at risk if they have more than one job, are married and both spouses work, or receive Social Security benefits while also earning taxable wages, according to a report Monday by the Treasury Department's inspector general for tax administration....
WASHINGTON (AP) -- Millions of Americans enjoying their small windfall from President Barack Obama's "Making Work Pay" tax credit are in for an unpleasant surprise next spring.
The government is going to want some of that money back.
The tax credit is supposed to provide up to $400 to individuals and $800 to married couples as part of the massive economic recovery package enacted in February. Most workers started receiving the credit through small increases in their paychecks in the past month.
But new tax withholding tables issued by the IRS could cause millions of taxpayers to get hundreds of dollars more than they are entitled to under the credit, money that will have to be repaid at tax time.
At-risk taxpayers include a broad swath of the public: married couples in which both spouses work; workers with more than one job; retirees who have federal income taxes withheld from their pension payments and Social Security recipients with jobs that provide taxable income.
The Internal Revenue Service acknowledges problems with the withholding tables but has done little to warn average taxpayers.
"They need to get the Goodyear blimp out there on this," said Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants.
