I have not read the FT story, so not clear what they say, but these reports you cite really smell.

Of course, this downgrading is not at all unreasonable. Several years ago they downgraded Japanese debt, and the Japanese have been accumulating dollars like mad ever since, the fools...

As for general grounds to downrate, how about the implicit intention of the Bush administration to dishonor the social security trust fund debt (not that it would really be up to them)? Of course if only this debt is dishonored it is still not clear why Moody's should be concerned about SS spending - in fact default on SS obligations would would make it easier for the government to honor the publicly-held debt.

Skeptonomist,

actually, the effect of the default on the SS bonds on the creditworthiness of other bonds is a political question. WE should absolutely demand that if there is any default on SS bonds that there be at least a comparable default on publicly held bonds. In other words, if Congress decides to write off 30 percent of the debt held in the trust fund, then all bonds get repaid at a 70 percent rate.

We can have a political hanging for any politician who argues otherwise.

The key reason not to worry excessively about increasing medical costs is that anyone who begins their working career at $50,000 should at the end of their 40 year career be earning $100,000 in constant dollars if they are still doing the exact same thing -- due to economic growth.

My old Teamster Buddies at 804 seem to have kept up with growth over the 38 years since I left. They had just won a $95 increase from $640/wk over three years. Recently their defined pension has been raised from $3300/mo to $3600/mo -- more then the wage was then. That's the way it is supposed to work, anyway.

Meantime, medical costs are not climbing for the same reason oil is climbing. Medical doctors' incomes have actually taken a substantial hit since 1995. Does anyone object to the end of Alzheimer's -- hopefully in 6 to 8 years -- or stem cell research ending cancer. How many SUVs can we drive at one time anyway?

BTW, the car that costs $25,000 today would have cost $40-45,000 if they built it 30 years ago, so eventually you will get a flying SUV for the same money, anyway.

I don't know why Moody's felt compelled to pile on here. My suspicion is that the combined forces of the economic right are simply desperate at this point. They understand that time is just running out on the Phony Crisis.

Alf Landon based much of his campaign in 1936 to running against Social Security and the Republican Party never really gave up. It is quite interesting to read the introduction to the 1983 Cato Journal Social Security issue. The language just drips with bitterness, you can sense a feeling of 'We got THIS close' to killing the program, and a renewed determination to not let the next chance to go by.
http://www.cato.org/pubs/journal/cj3n2/cj3n2.html

Despite the rhetoric to the contrary, the Social Security Amendments of 1983 did little more than give us a brief respite from the
task of redesigning Social Security so that it will meet the needs of our citizens in a way that is consistent with our financial capacity to satisfy those needs, We should not be surprised, therefore, when the Social Security issue becomes prominent again in the months ahead.
—A. Haeworth Rohertson (Sept 1983)

Well months turned to years, the economy grew more than expected, then a couple of guys wrote a book. By the time the privatizers' time came it was already past. But God love them they are gamers, if it requires enlisting a credit rating agency with troubles of its own to throw a Hail Mary why not give it a go?

Lee. A Arnold forwarded to me a powerpoint presentation put on by AEI or someone last summer on the theme "Are Social Security projections too pessimistic". Not surprisingly they concluded "No". Interestingly enough while they tackled Productivity and certain other metrics they skipped Real GDP. Which falls in line with my suspicion that the substitution of Productivity for Real GDP in column one of Principal Economic Assumptions (Table V.B1) and the relegation of the latter to Additional Economic Assumptions (Table V.B2) in the 2001 Report was not just an innocent change in formatting. Real GDP is reported and worse understood by business writers, at some point those ultimate rates simply got embarrassing.

Nobody out there is willing to defend 2.2% Real GDP for 2013 and years after. For one thing it makes hash out of tax cut claims to create long term growth. Could the US fall into multi-year near recession growth levels? Well I guess. Could growth stay at those levels for the next 75 years? Well only if your name is spelled 'Roubini', but for the sake of argument lets say 'Yes'. Is that your best guess at a median prediction? Which of course is the weakness of Intermediate Cost to begin with, sure it could happen, it just is too pessimistic to be a credible median. Over the last two and a half years I have been dialing my optimism level down but I would still put the median projection over the next five years about 80% of the distance between Intermediate and Low Cost, where this would put Depletion I don't know, certainly at a time when it will not be a particular concern for me, as it is I am not booking events for 2041

I think this is a really big deal.

This is the first look we are having at what will end up being the right wings end game of its strategy for gutting the New Deal. The right wingers in government constantly are undermining the fiscal viability of government on the tax side (Grover Norquest strategy) not because they think they will eventually actually cut spending (which it has always puzzled me since I thought it was always unlikely that they would be able to) but because it will give their ideological brothers in business, who of course are not holding positions where they need to face the voters, then excuse to force a certain political result which will absolve the politicians from being the bad guys.

You maybe familiar with the fact the Cleveland defaulted on financial obligations while Dennis Kucinich (whom I can not stand) was mayor, but my understanding is that the part of the back story was that the business community never could stand the idea that Cleveland ran its own power grid and for a long time felt it should be the in private hands of the Cleveland Illuminating Company. When the mayorship of Cleveland switched from the Republican establishment mayor Ralph Perk to Kucinich the banks that held the cities paper tried to force the sale of the public power grid to CEI and Kucinich called the banks bluff, except they pulled the trigger and called a default to teach Dennis a lesson (when he was replaced by the Republican George Voinovich the banks then struck a deal, but Public Power was off the table at that point due to a referendum vote). Did the banks fabricate the financial difficulties of the city? No. Did they pounce when a Democrat was in office and try to force one particular result that was driven by the ideology of the upper management of the banks that held the cities paper? Yes, they did (and backed off when an establishment Republican beat Kucinich).

For the record I am in no way a “tin-foil” hat type person. When Hillary years ago said there was a vast right wing conspiracy I knew she was not correct, it was just a bunch of people are pulling in the same direction (similarly I don’t think the 04 election was stole in Ohio). But I think this is how they are going to try and gut the New Deal. Do I think that all the right-wingers got in a room and decided this was what they were going to do when Regan was president? No of course not, just like there was never any grand strategy session that a bunch of people would focus on Vince Foster and the Rose law firm billing records.

But all the same it’s the same net result.

Dean, seriously the people at TAP really should have someone look into a story on this. I bet if you look closer at local stories (like my Cleveland story) you are going to see that the business community, when it has the opportunity to put the financial screws to a government entity, use it as an opportunity to push a specific anti New Deal/anti-government/ideological type solution. And now Moody’s is playing the same game.

and it is probably worthwhile to remind people that the social security "deficit" amounts to less than a dollar per week raise in the tax each year from 2016 to 2036....a time when average pay will be increasing by ten dollars per week.

then it is necessary to point out that social security has nothing to do with "government debt" beyond the fact that social security is currently lending money TO the government, and that after 2016 it will be necessary for the government to pay that money BACK.

the projected tax raise is really a needed increase in "savings"... what the people put away to pay for their own longer life in retirement.

it's a "tax" because that is the only way the government can insure it against inflation. but the "insurance" is simply the pay as you go with wage indexing structure of SS that assures that the money that is needed for current benefits will come in in current dollars.

is there some reason why the highly paid and smarter than the rest of us people who design web sites and anti spam software can't design a captch that isn't gotcha?

the current design destroys what you have written and forces you to wait while the whole page, including graphics reloads... not even because you copied the characters wrong but because (my gues) the character window has expired without being refreshed.

now there is a way to avoid having your comment sent into outer darkness... but in general the whole captcha experience is a drag.

The same thing happened to Cdn rating in 1994/1995 - and it turned out that in fact government had invited Moody's to produce a critical rating to assist in pushing policy reform. Ratings agencies services are purchased from the *seller* (in a massive conflict of interest) and I would not be surprised if this was the case here. Of course, as last summer shows, ratings agencies are not always the best arbiter of tranparency, truth or value, so perhaps their prognostications on medicare and social security should be taken with a liberal dose of...