China says US already defaulted, Congress yawns and continues gaming

Posted on June 13, 2011


The leading Chinese rating agency, Dagong Global Credit Rating Co. Ltd., says that while the U.S. Congress and most of America was distracted by Weinergate or the Kardashian’s latest fashion statement or some other asinine tidbit of non-news, the federal government has already defaulted on its debt.

“In our opinion, the United States has already been defaulting,” Guan Jianzhong, president of Dagong Global Credit Rating Co. Ltd., the only Chinese agency that gives sovereign ratings, was quoted by the Global Times. “Washington has already defaulted on its loans by allowing the dollar to weaken against other currencies — eroding the wealth of creditors including China.”

Last month, Dagong Global downgraded the United Kingdom’s credit rating – raking the nation’s already desperate austerity-ravaged economy – and has already cut the United States’ credit rating twice in the past year.

Ratings agency Moody’s warned on Thursday that it would consider cutting the United States’ coveted top-notch credit rating, if the White House and Congress do not make progress by mid-July in talks to raise the U.S. debt limit. Moody’s warning increases pressure on Barack Obama and John Boehner to stop futzing around and strike a deal soon, or risk another devastating gut-punch to the global financial markets.

The US government will literally run out of money – both cash and credit – on August 2nd unless Congress increases the federal borrowing limit beyond the current $14.2 trillion debt.

So what all this means, boiled down to the molds that make the brass tacks, is that the United States Congress – consistently since 1980 – has not only spent like an entire fleet of drunken sailors, but they gave themselves the authority to continually increase their own credit limit, and then continually spent beyond that.

This isn’t a “Republicans versus Democrats” issue because *BOTH* parties have controlled Congress and flagrantly abused their spending and credit privileges. Anyone who claims that the current debt crisis is “Obama’s fault” or has only happened since Democrats took office in 2007 is ignorant of both facts, U.S. federal financial history, and reality.

A statutory limit has restricted total federal debt since 1917 when Congress passed the Second Liberty Bond Act of 1917. The 1919 Victory Liberty Bond Act raised the maximum allowable federal debt to $43 billion, almost twice the $25.5 Billion in actual federal debt at the end of 1919.

The debt ceiling was raised to accommodate accumulating costs for World War II in each year from 1941 through 1945, when it was set at $300 billion.15 After World War II ended, the debt limit was reduced to $275 billion. Because the Korean War was mostly financed by higher taxes rather than by increased debt, the limit remained at $275 billion until 1954. After 1954, the debt limit was reduced twice and increased seven times, until March 1962 when it again reached its post-WWII level of $300 billion. Since March 1962, Congress has enacted 69 separate measures that have altered the limit on federal debt up to the $486 Billion it remained at until October 2000.

During fiscal years 1998 to 2001, the government ran surpluses (despite what the far right vehemently denies), federal debt held by intergovernmental accounts grew by $855 billion and debt held by the public FELL by almost $450 billion. Since 2001, however, debt held by the public grew continually due to persistent and substantial budget deficits, while debt held in government accounts also continued to skyrocket.

Congress has raised the debt limit seven times since 2001: June 2002, May 2003, November 2004, April 2005, March 2006, September 2007 and December 2009 – raising the federal debt from $5.95 Trillion to $12.17 Trillion.

And now we’re sitting at $14.3 Trillion, and looking for another bump on the credit card limit.

But you don’t have to take my word for the accuracy of those dates and figures. It’s all documented very clearly and non-partisanly in the Congressional Research Service’s report, “The Debt Limit: History and Recent Increases.”

And for those pointing the blame finger solely at Obama and the Democrats for the current debt meltdown, need I remind you of which political party was in control of the White House, the U.S. Senate and the U.S. House of Representatives from 2001 to 2007?

Where did the largest increment of federal debt come from?  You can argue about Medicare and Social Security all you want from now until Saint Swithin’s Day, but the fact of the matter is that the wars in Iraq and Afghanistan were never funded on record and never included in the federal budget throughout George W. Bush’s administration. The $2.86 Trillion spent (needlessly) in Iraq and Afghanistan were kept off the books … and subsequently (and quite conveniently) never made known to the general public until Barack Obama officially included the already-spent funding in his 2009 budget report.

So, if you’re keeping a modern-day debt increased partisan scorecard, that’s five debt ceiling increases for Republicans, and two for Democrats.

Republicans refuse to consider tax increases as part of any deal, while Democrats oppose the idea of cutting popular vote-getters like Medicare. Both sides claim the other is the wrench in the machine.

But that blame finger – and all the phony posturing and proselytizing that goes with it – is what’s exacerbating and prolonging our problem. The two-faced charlatans in Washington are so busy trying to convince you they weren’t responsible for your 401k vanishing – so you’ll re-elect them – that literally NOTHING substantial, meaningful or effective is being done about this very real, very damaging and very looming financial crisis that’s going to hit you, me and the mom-and-pop stores *FAR* harder than it will hit the millionaires and billionaires in Washington whom you’ve entrusted to manage it for you.