Moody's says tax cut deal risks U.S. credit rating (tax package is a disaster for US finances)

[Cali_Democrat]

Whooda thunk it? Republican tax policies increase the deficit! Well knock me over with a feather!

Moody's says tax cut deal risks U.S. credit rating
By Erik Wasson - 12/13/10 04:34 PM ET

Moody's Investors Service said in a Monday report that the tax-cut deal hammered out between President Obama and congressional Republicans jeopardizes the Aaa credit rating enjoyed by U.S. Treasury bonds. The package could add $900 billion to the national debt, if it is made permanent, and this increases the chances the U.S. would one day default on its debt.

"From a credit perspective, the negative effects on government finance are likely to outweigh the positive effects of higher economic growth. Unless there are offsetting measures, the package will be credit negative for the US and increase the likelihood of a negative outlook on the US government’s Aaa rating during the next two years," Moody's analyst Steven Hess writes.


Hess writes that the higher economic growth from the tax cuts and unemployment benefits might be substantial, but the effect of the growth on budget deficits will be less than the effect of the foregone revenue and increased spending.

He notes that the Congressional Budget Office has found that the package would raise the ratio of debt-to-gross domestic product from 61.6 percent to 68.5 percent by 2012.

Read more at link....http://thehill.com/blogs/on-the-money/budget/133441-moodys-says-tax-cut-deal-risks-us-credit-rating

Like I said in another post, the resulting deficit from extending the tax cuts for the rich will be hung around Obama's neck....http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=433&topic_id=544299&mesg_id=544299

The Republicans will make this Obama's deficit and if the US defaults, Obama will be blamed.

[mtnsnake]

1. No kidding. We're flirting with a total collapse by extending Bush's tax plan

[ProSense]

2. Here's what's missing from that report

<...>

“Higher economic growth should have a positive effect on government revenues and reduce payments related to unemployment,” Hess wrote. “However, the magnitude of this positive effect will be considerably less than the forgone revenue and increased benefit expenditure.”

There also is a risk that the tax-cut extension may be renewed during the presidential-election year of 2012, which might generate a “considerable increase in deficit and debt levels” unless there are offsetting provisions, he wrote.

link

[Hello_Kitty]

13. That doesn't really contradict the point of the OP. eom

[Hawkeye-X]

3. It will *NEVER* pass the House.

Pelosi better start letting amendments go nuts on them - removing the tax cut for the rich, and replaced with a tax raise of 50% to the RICH.

I want to see it dead.

I'd rather pay more in taxes than to lose the 2% SS payroll holiday (fat chance - it's permanent if passed)

[Cali_Democrat]

4. More detailed info....

http://www.cnbc.com/id/40641123

[sasha031]

6. that's why I keep asking, why are they doing this?

[BlueIris]

5. Unsustainable.

This is my major problem with it. Creates more problems than it solves.

[doc03]

7. I just sent my local Tea Party an e-mail asking them

if they feel like they have been had when the Republicans they got elected already added $900 billion to the debt when they haven't even took office yet. Or was that whole outrage over the debt just the talking points they received from Fox News? I am anxious for their answer.

[Milo_Bloom]

8. What is funny is that this is pretty much the BEST outlook for the tax package!

[GinaMaria]

9. Here's more from Moody

This goes back to the first Stimulus package but the data should still drive the decision.

If we are truly focused on stimulating the economy, we need to look at spending (specifically 4 types/areas)

http://www.economy.com/mark-zandi/documents/assissing-t ...

Check Table 1 on page 4

Fiscal Economic Bang for the Buck
One year $ change in real GDP for a given $ reduction in federal tax revenue or increase
in spending

Tax Cuts
Non-refundable lump-sum tax rebate 1.02
Refundable lump-sum tax rebate 1.26

Temporary tax cuts
payroll tax holiday 1.29
Across the board tax cut 1.03
Accelerated depreciation 0.27

Permanent tax cuts
Extend alternative minimum tax patch 0.48
Make Bush income tax cuts permanent 0.29
Make dividend and capital gains tax cuts permanent 0.37
Cut in corporate tax rate 0.30

Spending Increases
Extending UI benefits 1.64
Temporary increase in food stamps 1.73
General aid to state governments 1.36
Increased infrastructure spending 1.59

The biggest bang for our buck is in Spending increases. UI benefits return 1.64 dollars for every dollar spent. Food stamps 1.73

Permanent tax cuts? yeild less than gets paid out. That's the losing strategy.

[Cali_Democrat]

10. Thanks for that info. n/t

[Name removed]

11. Deleted message

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[xchrom]

12. i hate the tax deal -- but moody's should be put out of business -- and maybe some of them perp walk