U.S. stock futures were sharply lower Sunday evening, and equities markets globally were expected to be volatile over the near term. The U.S. stock market is expected to open in negative territory this morning following an unprecedented downgrade of the United States’ sovereign credit rating by Standard & Poor’s (S&P). S&P noted that the downgrade was heavily contributed to by the Republican insistence on no new tax revenues as part of the budget deficit plan. To prevent a further downgrade S&P would like to see a BALANCED approach to deficit reduction that combines spending cuts with “revenue-raising measures” is the only acceptable and fair way of reducing the deficit.
S&P notes: “if the recommendations of the Congressional Joint Select Committee on Deficit Reduction–independently or coupled with other initiatives, such as the lapsing of the 2001 and 2003 tax cuts for high earners–lead to fiscal consolidation measures beyond the minimum mandated, and we believe they are likely to slow the deterioration of the government’s debt dynamics, the long-term rating could stabilize at ‘AA+’.”
This writer hopes that the GOP establishment, unlike their extreme fringe Tea party, will take S&Ps recommendation and compromise on tax revenues to prevent any further economic damage to the savings and 401ks of the average American. You cannot proclaim that you want to significantly reduce the national debt solely through budget cuts and refuse to recognize that revenue increases via taxation (whether it be eliminating corporate tax breaks or allowing the Bush era “temporary” reductions to expire) is also an essential component to the overall solution.
Most Americans remain perplexed why anyone would follow an ideology that doesn’t question why wealthy CEOs receive tax breaks on condos and corporate jets but questions why we must extend unemployment benefits to the poor and middle class struggling to find work; an ideology that doesn’t question why General Electric only paid 7% in corporate taxes last year but questions why we give free healthcare to woman; an ideology that doesn’t question why Exxon Mobil, the largest U.S corporation by market capitalization, operates over 30 of its 122 foreign subsidiaries in tax havens — jurisdictions with little or no income tax, but questions why we are funding the EPA to protect the environment for our children and grandchildren: an ideology that has been benefitting the wealthiest Americans and big corporations for years at the expense of the poor and middle class who barely remain with their head above water.
The Tea Party members aside, hopefully there are some rational Republicans in Congress that are willing to compromise on tax revenue as part of the budget per Standard and Poor’s recommendations. Otherwise it only confirms one thing – they want the economy and the American worker further weakened in hopes that high unemployment and/or another recession will be their ticket to the White House. The problem with that plan is that it would be political suicide for the Republican Party. They will ultimately destroy the country completely and the blame will be put squarely on their shoulders as it was for the stalled budget talks.