You would think that Bush's borrowing for the war and corporate welfare through defense contracting would be a bigger threat to our bond rating.
Since we seem to usually run a deficit, this means we would have to pay more interest on our debt, and have a harder time getting it.
This is also exactly the scam the World Bank and IMF play on the Third World: destroy your social services or we won't help you with your debt.
They used this scam to crush the life out of three of the great democratic victories of the last few decades: the end of Apartheid in South Africa, when Solidarity took over Poland, and the collapse of the Soviet Union.
In each case, following these financial mavens advice lowered the standard of living in the countries involved, and even their life expectancies.
As the author implies here, there really is such a thing as economic terrorism.
On January 10 Moody's, in concert with the other main bond rating firm, Standard and Poor's, gave the United States its top AAA credit rating. The terrorist blackmail threat came in the form of a demand by Moody's that the U.S. government "reform" Social Security and Medicare:
"In the very long term, the rating could come under pressure if reform of Medicare and Social Security is not carried out as these two programs are the largest threats to the long-term financial health of the United States and to the government's Aaa rating."***
Moody's runs a protection game. It issue credit ratings, (in 2007 no less than 39 percent of the global credit rating market by revenue, according to Bloomberg) based on public data and private information made available by those clients that have "voluntarily" retained their services. The price of not volunteering can be high. As vividly described by Alec Klein in his excellent 2004 series in the Washington Post on the credit-rating giants, the giant German insurance corporation Hannover declined repeated Moody's offers to rate its credit, at a time when the latter was trying to extend its reach in the European Community. Moody's promptly issued an unsolicited and adverse rating, then--just like a small time mobster after hurling a brick through the window of a liquor store--went back to Hannover and reissued its invitation to offer protection-by-rating. Hannover's top man said he wouldn't surrender to blackmail and so between 2001 and 2003 Moody's steadily reduced Hannover rating all the way down to Junk. This cost Hannover a great deal of money in paying the higher risk premiums on money it borrowed.
By contrast Enron handled relations with Moody's with ermine gloves. All the way through 2000 until a few days before Enron filed for Chapter 11, Moody's, like S&P, declined to lower the boom by demoting bonds issued by Enron company to below-investment grade. Banks with huge sums at stake allegedly pressured Moody's to keep quiet, even though Moody's had privileged access to Enron's internal financial operations.
***
Right now the US deficit is around $200 billion, 1.5 percent of GDP, not large and presenting no danger in itself to U.S. financial soundness. But as Pollin adds, if Moody's analysts want to discuss causes of fiscal laxity,
"why not look at the Iraq war? The Defense budget for 2006 was $617 billion. That is 4.8 percent of a $13 trillion GDP. Before the Iraq war, the defense budget was about 3.0 percent of GDP. So Iraq alone is costing between $150 - 200 billion annually, about 1.5 percent of GDP.. And what has that war achieved? Social security and medicare combined were about $900 billion in 2006. Why assume we first have to attack our minimal welfare state, and leave the imperial budget intact? "
In fact it's almost entirely Medicare, not Social Security, that accounts for the projected rising costs in our shrivelled welfare state.
The culprit here is not the swelling ranks of older people but the insurance and drug companies' grip on our health system. Conversion to single-payer would mean huge savings. The U.S. pays around 14 per cent of its gross domestic product for health care, twice what other advanced industrial countries pay. Shift to single payer and quit shoving money--4.8 per cent of GDP--down the imperial sink-hole and there's no fiscal crisis of any sort, short or long term for Moody's or anyone else to fret about. And in the even shorter term, if Moody's sees fiscal crisis looming, why don't its overpaid executives for once put the national interest first and call for a tax hike on the rich? Bob Pollin tells me that just going back to Clinton, as opposed to Bush-2, on taxes for those making over $200,000 a year, would generate $60 billion a year. Do this and end the war in Iraq and you wipe out the deficit at a stroke.
http://counterpunch.com/cockburn02162008.html">FULL TEXT
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