From Europe to the USA and beyond: Sovereign Debt, Falling Credit Rtings, Public Spending and Austerity Measures

There is increasing scrutiny and debate surrounding the of levels of public spending and sovereign debt on both sides of the Atlantic. We have had threads previously which dealt with aspects of this problem but I thought it would be good to bring it altogether in one place to try to create an overall picture.

Hence, if anyone has any views on the impact of these issues in Europe, The USA and pretty much anywhere else affected, has read any relevant news articles or any relevant SG threads, it would be great if you would post links to them here.

First the USA...

Now Europe...

My awareness of this issue is limited to the USA and Europe so my apologies for not speaking about other countries but if anyone has any information relating to other countries that would be great.

Sovereign debt is not unique to Western Europe or the USA. Other countries also borrow money and we don't hear so much about that in the news. Western Europe and the USA have generally had quite an easy life of it as far as sovereign debt goes. They have been able to borrow whenever they felt like it and could generally expect to have good credit ratings and to have the money lent to them at low interest rates. It might even be argued that we have been arrogant and complacent acting as if the world owes us a living.

The ability of Western Europe and the USA to borrow and borrow and keep on borrowing at low interest rates and the sheer unthinkableness of a default by these countries were taken as virtually axiomatic principles. Now these axioms are being challenged and lenders, governments and voters are all struggling to comes to terms with it.

Wow Waldo, thanks for the opus, I think you've managed to put almost everything into perspective. I got this queasy feeling when I read there was increased trading in CDS's on Treasury securities (understandably so with the Republicans forcing this foolish game of chicken and the default deadline looming). I know it's a form of investment insurance and that there are no surprises as to when the hammer is going to fall, but I can't shake this sick feeling that someone stands to benefit and has an interest in seeing that the default actually occurs. Politically, it's insane and I think the Republicans know they may have bit off more than they can chew, still they seem to be getting their way by making unreasonable demands of limiting long term debt through spending reductions alone (they seem to forget that they only control the House and that the solution is going to have to cut both ways). Alas, they are playing with fire and I'm afraid everyone is about to get burned.

I'm only just getting into the European articles you've linked to, but some austerity measures actually seem reasonable (like Portugal), that the U.S. isn't considering some similar measures is shows just how far off our rocker we are when it comes to dealing with this crisis.

The republicans are used to the democrats caving in every time. They know that the other side will cave in the interest of not having the whole system fall apart.

Source

"Blessed are you poor, for yours is the kingdom of God."
"Do not lay up for yourselves treasures on earth."
"Go, sell what you have, and give to the poor."
"It is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God."

The miracle of loaves and fishes, sharing is body and blood, sacrificing himself for the sins of mankind...

Jesus was a bleeding heart Socialist.

Rangel is just egging conservatives on to put their money where their morals are. They won't.

These are all the programs that the new Republican House has proposed cutting.

Corporation for Public Broadcasting Subsidy. $445 million annual savings.

Save America's Treasures Program. $25 million annual savings.

International Fund for Ireland. $17 million annual savings.

Legal Services Corporation. $420 million annual savings.

National Endowment for the Arts. $167.5 million annual savings.

National Endowment for the Humanities. $167.5 million annual savings.

Hope VI Program. $250 million annual savings.

Amtrak Subsidies. $1.565 billion annual savings.

Eliminate duplicative education programs. H.R. 2274 (in last Congress), authored by Rep. McKeon, eliminates 68 at a savings of $1.3 billion annually.

U.S. Trade Development Agency. $55 million annual savings.

Woodrow Wilson Center Subsidy. $20 million annual savings.

Cut in half funding for congressional printing and binding. $47 million annual savings.

John C. Stennis Center Subsidy. $430,000 annual savings.

Community Development Fund. $4.5 billion annual savings.

Heritage Area Grants and Statutory Aid. $24 million annual savings.

Cut Federal Travel Budget in Half. $7.5 billion annual savings.

Trim Federal Vehicle Budget by 20%. $600 million annual savings.

Essential Air Service. $150 million annual savings.

Technology Innovation Program. $70 million annual savings.

Manufacturing Extension Partnership (MEP) Program. $125 million annual savings.

Department of Energy Grants to States for Weatherization. $530 million annual savings.

Beach Replenishment. $95 million annual savings.

New Starts Transit. $2 billion annual savings.

Exchange Programs for Alaska Natives, Native Hawaiians, and Their Historical Trading Partners in Massachusetts . $9 million annual savings. What the hell is this anyway…?

Intercity and High Speed Rail Grants. $2.5 billion annual savings.

Title X Family Planning. $318 million annual savings.

Appalachian Regional Commission. $76 million annual savings.

Economic Development Administration. $293 million annual savings.

Programs under the National and Community Services Act. $1.15 billion annual savings.

Applied Research at Department of Energy. $1.27 billion annual savings.

FreedomCAR and Fuel Partnership. $200 million annual savings.

Energy Star Program. $52 million annual savings.

Economic Assistance to Egypt . $250 million annually.

U.S. Agency for International Development. $1.39 billion annual savings.

General Assistance to District of Columbia . $210 million annual savings.

Subsidy for Washington Metropolitan Area Transit Authority. $150 million annual savings.

Presidential Campaign Fund. $775 million savings over ten years.

No funding for federal office space acquisition. $864 million annual savings.

End prohibitions on competitive sourcing of government services. Repeal the Davis-Bacon Act. More than $1 billion annually.

IRS Direct Deposit: Require the IRS to deposit fees for services it offers (such as processing payment plans for taxpayers) to the Treasury, instead of allowing payments to remain as part of its budget. $1.8 billion savings over ten years.

Require collection of unpaid taxes by federal employees. $1 billion total savings. WHAT THE HELL…!

Prohibit taxpayer funded union activities by federal employees. $1.2 billion savings over ten years.

Sell excess federal properties the government does not make use of. $15 billion total savings.

Eliminate Mohair Subsidies. $1 million annual savings.

Eliminate taxpayer subsidies to the United Nations Intergovernmental Panel on Climate Change. $12.5 million annual savings.

Eliminate Market Access Program. $200 million annual savings.

USDA Sugar Program. $14 million annual savings.

Subsidy to Organization for Economic Co-operation and Development (OECD).$93 million annual savings.

Eliminate the National Organic Certification Cost-Share Program. $56.2 million annual savings.

Eliminate fund for Obamacare administrative costs. $900 million savings.

Ready to Learn TV Program. $27 million savings.

Eliminate death gratuity for Members of Congress.

HUD Ph.D. Program.

Deficit Reduction Check-Off Act

TOTAL SAVINGS: $2.5 Trillion over Ten Years

"My question is ", what is all this crap doing in the budget in the first place?

Is there anything listed here you cannot do without?

Still don't see the end of the useless tax cuts for the rich (they've had them for years and spent that time shipping jobs overseas) or a cut in the subsidies for oil companies. Or cuts for needless military waste spending. Until those show up, the GOP cannot be taken seriously.

Legal Services Corporation provides legal aid services to those who otherwise couldn't afford it...3/4 of their clients are women.

NEH provides grants for research and education.

It's my understand that the Community Development Fund helps with local job creation and things within communities such as affordable housing.

Technology Innovation Program...self explanatory me thinks

Intercity and High Speed Rail Grants are great. Anyone who uses a subway knows its importance and the rail system within all of North America is extremely dated and needs fixing. And considering all the cargo that is shipped via rail (let alone people) it would be a huge blow to the economy if this were to fail.

I'm unclear as to what your problem with the Davis-Bacon Act is. You don't like decent wages being paid to workers?

Ready to Learn TV Program...ya, I hate education programs to

And I would say that every nation needs a nation broadcaster. I don't believe that private broadcasters can be trusted 100% nor do I necessarily believe public broadcasters can be trusted 100%


I found 8 things, and I was just skimming


I noticed I didn't see any plans to cut Senators and/or Members of Congress' wages or personal expense accounts in there. If their willing to eliminate Mohair Subsidies for $1 million in annual savings, then I'm sure amongst themselves they could cut at least that.

Oral Roberts, I hope you're keeping warm.

WMATA subsidy doesn't even begin to cover what the DC Metro needs. Anyone who has lived or worked in DC can tell you that (unless they are riding in limos to work). Furthermore, while everyone in the US should visit DC, those that do, rely on the metro system and buses to get them around. While metro fees have gone up, it's still not enough to cover it's operating costs thanks in part to 1.5 million commuters working in and around DC.

Here are 345 pages of places to start making cuts and being fiscally responsible, rather than the partisan pissing up a rope bullshit both sides seem to be content on playing.
US GAO March 2011 Report

Title X is the only existing federal grant program that is completely devoted to providing comprehensive family planning and other related preventive health services to individuals. Title X is legally designed to prioritize the needs of individuals from low-income families and/or uninsured people (including those who are not eligible for Medicaid) who might not otherwise have access to these health care services.

Democrats want to raise a trillion dollars in new revenue by cutting out tax loopholes that don't have the slightest thing to do with 95% of the population.

Republicans want to trim little million dollar arts and humanities endowments that provide millions of people with a chance at bettering life and culture for themselves and others.

Democrats want to cut subsidies for oil companies, subsidies the companies themselves claimed to not need when oil was somewhere around $30/barrel, which would save billions every year.

Republicans want to cut funding for research and new technology, saving millions of dollars over a decade.

Who's being serious in this scenario?

Amid the vacuum of the government shutdown in Minnesota, St Paul's local economy is showing signs of collapse. Shops that depend on government staff for business are having to cut operating hours and lay off workers, the longer the shut down persists, the more worried business owners are they aren't going to be able to pay their rent or keep the lights on. Is this a sign of things to come on a national scale if Congress doesn't get beyond the deficit ceiling impasse?

With the national economy already on fragile legs and discouraging numbers of unemployed, why in the would would Republicans continue to put the entire world economy at risk? The most immediate thing that comes to mind: Obama. The GOP leadership has already made if very clear that ousting Obama is their number one priority, the economy be damned.

Its so cynical its almost evil. And all of these austerity measures that take away valuable services to the people that are already hurting from when the rich people of this country decided to ruin the financial system.

If things keep going the way they are, to me it just spells the beginning of the end of Capitalism. A worthwhile experiment but ultimately unsustainable, and inevitably heading towards a class war between the haves and the royally fucked over.

I'm with you on that, the longer Congress fails to address the issues that are effecting future generations (or the greed among the current ruling body), the more likely the entire system is going to be turned inside out. I'm not sure I want to see and experience a period of anarchy in a country as armed and insane as ours, but I'd imagine the US as we know it will cease to exist. Maybe I'm wrong about that last part, I hope that cooler heads prevail and that realistic solutions will ensure the longevity of the union.

I'd argue that we're already seeing such violence. Groups like the Minuteman Project are superficially based on racism, but that racism is fueled by economic factors. (They would likely be racist no matter the economic conditions, but economic conditions create violent racists.)

More left-leaning violence is not out of the question, but it won't be as clearly identifiable as such. People aren't going to riot because Congress did or didn't do this or that; they're going to riot because they can't afford rent and food and medical care. That their inability to afford things can be attributed to local and federal mismanagement will, I think, be largely lost in the noise.

Markets volatile on fears eurozone debts may spread

Ireland's rating cut to junk

Notice how the "socialist" Scandanavian countries dont seem to be having any trouble weathering the financial crisis?

What we can learn from Scandinavia

Yes, the Capitalist global economy has gone to shit. I guess all the anti-globalization protesters in Seattle were on to something.

So, I might have missed it (sooooo much info), but who does everyone owe money to? Why can't we just shuffle and call it even-stevens if we owe money to the same people who owe us?

All of these sound important to me. I'm sure some of the other ones are as well but I'm not familiar with them. Also, a lot of those cuts are for fucking pennies as far as the national budget is concerned. It looks like the Republicans are going after education, arts, unions and sustainable energy. Go fucking figure.

Getting unpaid taxes from federal employees? Sure. Good plan. How about getting the unpaid taxes from Exxon? Which do you think would be a bigger number?

Let's ask Senator Carl Motherfucking Lievin (can't say that enough) :

Okay, that's actually for offshore tax havens, not just Exxon, but still. Hm, how much does eyelike's compaints add up to?

Man, I'm not sure, but that seems like a lot less than 100 billion.

It's like the Republican solutions aren't honest attempts at fixing anything. Weird. They always seemed so Fiscally Responsible.

One of the issues is that the debt itself is valuable in a few different ways. If the US government gives you an IOU for $1, you can use that to borrow $2 or more. Since the government has IOUs worth several trillion, there are hundreds of trillions of dollars' worth of derivatives floating around. Those derivatives depend on the debt being concluded in one of several specific ways (paid off on time or going into default, basically). If we throw in a new way of resolving debt, those derivatives change value very suddenly. The most likely result of that would be a global financial crash that would vastly dwarf the housing bubble.

Hee, "vastly dwarf".