Author’s note: For those who have been following my series on the Cedar Swamp Road Project, this is not part four. Due to the recent downgrade of the U.S. credit rating, I interrupted my series with this post. Part four will appear next week.
This sent the Dow Jones Industrial Average plunging 5.55% on Monday, August 8:
We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade. [“United States of America Long-Term Rating Lowered To 'AA+' Due To Political Risks, Rising Debt Burden; Outlook Negative,” Standardandpoors.com, 5 August 11]
This blemish on the credit rating of the United States of America was a first in Standard & Poor’s history (it rated U.S. credit as “AAA” in 1917).
Over the next several weeks, we will hear the explanations of politicians and pundits ad nauseam. Some will call for more cuts in spending whereas others will claim that we are not spending enough. Democrat Congressman Jerrold Nadler of New York’s 8th Congressional District, for example, stated on July 27, 2011 that the real crisis was not the projected federal budget deficit of $1.5 trillion by the end of this year but an “unemployment crisis.” His solution?
"The way to get out of that unemployment crisis is to spend money on more food stamps and on aid to states and local governments [emphasis added] so they don’t lay off people and on infrastructure so we can be competitive and put people to work and if we did that, unemployment would go down, tax receipts would go up and we’d be well on our way out of this so-called crisis." [“Nadler: ‘We Don’t Have a Deficit Problem Right Now’,” CNSNEWS.com, 27 July 2011]
Regardless of federal budgetary disagreements, Glen Cove residents should ask how the downgrade of the U.S. credit rating affects their city. In I stated that our city is currently “sailing along the precipice” of junk-bond status. Our credit rating is “Baa3.” It is eight levels lower than the recent U.S. downgrade.
Before reality hit them, some members of Congress may have believed that they were good stewards of taxpayers’ dollars who work within their means. Do all members of the Glen Cove City Council believe that they too work within their means despite our city’s poor credit rating?
"In Glen Cove, about a third of our budget goes to paying off our debt. We don't want to raise taxes to pay it down, so we've been very careful with how we allocate our resources. We work within our means.” []
