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SoftBonds -> RE: President Hopeless Change strikes again (4/7/2012 10:53:31 AM)
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Hmm, what is the purpose of a credit rating? I think it is related to the belief of the rating agency as to the ability of the nation/company to repay it's debts.
This in turn is based on the Asset/Liability ratio, and the Revenue/Expense ratio.
Now, lets look at the liabilities recently added to the balance sheet, and the cause. VA care for soldiers sent to Iraq/Afganistan, 2 trillion dollars. Other future costs of Iraq/Afganistan, 1 trillion dollars. Debt run up during Bush's term, 3 trillion dollars, after adjusting for inflation. Debt run up by Obama, about 5 trillion dollars, adjusted for inflation.
So far it looks like about a 50/50 split, but...
Income/expense ratio:
Bush tax cuts, cost so far 1 trillion over 10 years, so about 100 billion a year.
Increases in military spending, 400 billion a year (including increased debt on previous spending, aka the cost of the wars).
So Bush cost us half a trillion dollars in spending/revenue deficit that is expected to continue indefinitely (unless you think the Bush tax cuts will be allowed to expire). Of course, that means that 1.5 trillion of the debt run up by Obama so far is actually Bush's debt. It also means that a nation that only pulls in about 2 trillion a year is spending well over 3 trillion.
Now, if you had a company that raised expenses by 20% while reducing revenue 5%, that was already running at a loss before those changes, but was not running a 50% loss, wouldn't you lower their credit rating?
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