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Milton J. Madison - An American Refugee Now Living in China, Where Liberty is Ascending

Federalism, Free Markets and the Liberty To Let One's Mind Wander. I Am Very Worried About the Fate of Liberty in the USA, Where Government is Taking people's Lives ____________________________________________________________________________________________ "Extremism in defense of liberty is no vice. Tolerance in the face of tyranny is no virtue." -Barry Goldwater-

Tuesday, March 16, 2010

Moody's: US Aaa Rtg Would See Pressure On Budget's 10-Yr Projections - WSJ.com

But "federal and general government affordability is growing more vulnerable to any shift in market confidence that would lead to higher interest rates than assumed in these projections," Moody's said.

And the 10-year outlook in the budget shows a continuous rise in the debt to GDP ratio and in the debt affordability ratio. The outlook shows the ratio of interest to revenue deteriorating to around 18%, which was roughly the peak level when interest rates were high in the 1980s.

"If such a trajectory were to materialize, there would at some point be downward pressure on the Aaa rating of the federal government," Moody's said.

The rating agency said that the difference between now and the 1980s was that then, monetary policy, rather than the size of the debt, caused the high debt affordability ratio.
From Moody's: US Aaa Rtg Would See Pressure On Budget's 10-Yr Projections - WSJ.com">here. With the increasing government meddling in almost every aspect of the American economy, the landscape has changed from an economy that is based on innovation and making & delivering things that people want to an economy that is based on doing what the government mandates that it wants. This will inevitably lower the actual wealth creation relative to an economy that has no government mandates and this will lower the trajectory of GDP growth. As GDP growth underperforms, the tax revenues derived from this this will also underperform.

Its the slippery slope of socialism. As things slip, then government thinks that it needs to fill the increasing numbers of gaps that form with the same type of intervention. Intervention begets more intervention, this costs more and causes more slippage. Eventually, the whole things break like what has happened in Greece and Californian, and what will eventually happen in other European countries and US states. These countries and states will be unable to meet the obligations and promises that they have made.


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