Debt Tsunami Causes Fitch To Downgrade America’s Credit Rating

 

Fitch ratings announced that it has downgraded the credit rating of the U.S. government from AAA to AA+  Every American is going to pay for Washington’s irresponsibility though higher taxes and higher interest rates. 

Fitch’s announcement of their rating change highlights the massive amount of borrowing by the Biden Administration in addition to the decades of fiscal irresponsibility and governance failures in Washington and many state capitals. 

In Fitch's view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025. The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management. In addition, the government lacks a medium-term fiscal framework, unlike most peers, and has a complex budgeting process. These factors, along with several economic shocks as well as tax cuts and new spending initiatives, have contributed to successive debt increases over the last decade. Additionally, there has been only limited progress in tackling medium-term challenges related to rising social security and Medicare costs due to an aging population.

Fitch projects that Biden’s spending will blow the top off U.S. debt levels.  Interest on the debt will consume 10 percent of all government spending by 2025.  Interest rates are going to be higher making it even more difficult on young Americans afford a home. 

Fitch forecasts a [general government] deficit of 6.6% of GDP in 2024 and a further widening to 6.9% of GDP in 2025. The larger deficits will be driven by weak 2024 GDP growth, a higher interest burden and wider state and local government deficits of 1.2% of GDP in 2024-2025 (in line with the historical 20-year average). The interest-to-revenue ratio is expected to reach 10% by 2025 (compared to 2.8% for the 'AA' median and 1% for the 'AAA' median) due to the higher debt level as well as sustained higher interest rates compared with pre-pandemic levels.

The response from the Biden administration has been predictable.  Hit the snooze alarm and spend, spend, spend. 

S&P downgraded the U.S. in 2011 and China’s Chengxin International Credit Rating service downgraded the U.S. in May of this year. 

Canada’s Conservatives Are Attracting Gen Z Voters. What Can Republicans Learn from Them?

The Republican party lags far behind the Democrats in attracting young voters.  What is the Canadian Conservative Party doing right and the Republican Party doing wrong? 

Polling data from Canada shows that the Conservative Party has a significant lead among Gen Zs and Millennials over Justin Trudeau’s ruling Liberal Party. 

A June 2023 Ipsos poll puts Pierre Poilievre’s Conservatives at 37 percent overall compared top 32 percent for the Liberal Party. 

Importantly, Conservatives are ahead among Canadians of every generation. 

Conservatives have an 18 point lead over the Liberal Party among Gen Z and a 1 point lead among Millennials. 

This is enough for a huge swing in Canadian politics.  Like the United States, Canada has a first past-the-post electoral system control requires only winning the most seats, not a majority of the overall vote since Canada has a multiparty system.  Trudeau’s ruling Liberals only got 33 percent in the last Canadian federal election but that was sufficient to form a governing coalition.   

Contrast that with the United States.  Sixty-five percent of voters 30 and younger voted for the Democrats in 2022, up from 62 percent in 2020. 

Young voters were the key to the Democrats maintaining control of the U.S. Senate in 2022.  Were it not for younger voters, Republicans would now control both houses of Congress. 

Young people are fed up with Joe Biden, Nancy Pelosi and the relics governing our country.  A New York Times survey found that only one percent of 18 to 29 year-olds strongly approve of the job that Joe Biden’s been doing.  That’s one percent. 

Yet the Republican Party badly trails among younger voters and has no identifiable plans or strategy for outreach to twenty- and thirty-somethings. 

For a glimpse at what Canadian Conservatives are doing right, here’s Jordan Peterson’s interview with Pierre Poilievre

Lesson 1: Communicate.  Notice how clearly and calmly Poilievre speaks.  Contrast that with Joe Biden’s mumblings or Kamala Harris’s word salads.  Bureaucratic speak and empty talking point won’t do it.  Younger voters want leaders that communicate in language the average person can understand. 

Lesson 2: Have principles.  Poilievre’s statement on the importance of the free market is more forthright than anything that’s come from a Republican politician since Ronald Reagan.  The Republican Party needs candidates that can speak to free market economics or other conservative ideals with the same passion as Mr. Poilievre. 

Lesson 3: Be for change.  Poilievre clearly contrasts the Conservative agenda with the of the ruling Liberals.  Young Americans are looking for change too.  Surveys show that more than 90 percent of young Americans are either angry or frustrated with the federal government. 

Lesson 4: Have an agenda for younger voters.  Notice how Poilievre talks about housing costs and job opportunity—two issues of core concern for younger voters.  being against won’t do it.  The Republican Party needs an agenda that speaks specifically to the concerns of twenty- and thirty-year-old Americans. 

Republican politicians and operatives should look to Canada as a model on how to broaden the base by brining younger voters into the coalition.  If not, Republicans will find itself in the political wilderness, unable to win elections or influence the future direction of the 

China’s Youth Unemployment Problem Provides More Evidence That Socialism Doesn’t Work

 

Karl Marx wrote that communism would solve the unemployment problem created by capitalism.  Evidence from China shows he had it backwards.

In 1847 Marx wrote: 

“Big industry constantly requires a reserve army of unemployed workers for times of overproduction. The main purpose of the bourgeois in relation to the worker is, of course, to have the commodity labour as cheaply as possible, which is only possible when the supply of this commodity is as large as possible in relation to the demand for it, i.e., when the overpopulation is the greatest.”

But does his critique of capitalism hold? 

China provides a natural experiment.  Were Marx correct that socialism solves the unemployment problem then we’d expect to see little or no unemployment in China. 

China is the world largest communist regime.  The Chinese Communist Party has been in power for 74 years.  Surely they must have gotten it right by now. 

Well, not so much.

The figure below contains the unemployment rate for young Chinese (between 16 and 24).  Their reported unemployment rate is almost 20 percent.  And since the Chinese government often fudges its figures, the actual youth unemployment rate may well be far higher. 

 

Compare that to the United States.  Youth unemployment in the United States never got above 20 percent.

 

This comparison show that socialism, even when practiced in its most extreme form (communism), doesn’t solve the unemployment problem.  In fact, it makes it worse.

The figure below contains average unemployment rates among young people between the ages of 20 and 34 for the advanced countries of the world (OECD member countries) over the past ten years.

The chart clearly shows that unemployment rates are lower in countries with economies that are closer to the capitalist economic model (more economic freedom) than those with larger public sectors and more regulation (less economic freedom).

 

Bottom line: socialism fails young people wherever its been tried.  And that’s a fact.   

 

America’s Core Problem: Those with The Least Pride in the USA Control All its Major Institutions

 

Gallup recently asked about pride in America.  The results show a large gap between the parties with Republicans having much more pride in America than Democrats.  So isn’t it a problem that the people with the least pride in the USA control all of our major institutions?  You bet it is. 

The fundamental rule of management is that you want the people at the top to be dedicated and enthusiastic about the organization and its mission.  If you are in business, you want the CEO to be a relentless optimist, a cheerleader for the company.  How confident or dedicated would you be in your work if the CEO of your company were constantly running down the organization?  Not too much I suspect.

Or consider your house of worship.  You wouldn’t want your parish priest, rabbi or pastor to be a non-believer or atheist.  Unless it’s clear that the leader passionately believes, followers won’t believe or follow either.  The pews will be empty. 

However, when it comes to America’s major institutions, the fundamental rule of management is turned on its head.

The people that control all the major institutions of American life are the people that have the least pride in the United States of America. 

Below are the results from Gallup regarding pride in America.  Barely half of all Democrats are very or extremely proud to be American versus 84 percent of Republicans.

Or looked at it another way, 48 percent of Democrats are just so-so on the country we live in.  They say “meh” about the USA.  

Yet the Democrats that control all our major institutions: Hollywood, the media, higher education, primary education, the arts, administrative government and in the last few years the military and big business too. 

Ponder this: In the 2020 presidential election, Democrats received 92 percent of the vote in the District of Columbia.  That percentage is far higher than in any state (next was Vermont at 66 percent).  If DC Democrats are like Democrats nationally (if anything, DC Democrats are more liberal) then it’s likely the case the bureaucrats that run our national government have less pride in the country than any comparably sized group anywhere in the United States.  How messed up is that?

The reason that most Americans believe that the country is on the wrong track is that the wrong people, the people with the least pride in the USA, are the ones running every major institution in America. 

We need to get back to management rule number one; have people that believe in and take pride in America be the ones in control of our major institutions if America is ever to be a great country again.   

 

Wide Support Among Young Americans for Ending the Use of Race in College Admissions

 

The media and Democrats portray young Americans as firmly behind affirmative action.  This isn’t true.  Young Americans are ready to put racial discrimination behind us. 

Don’t believe the media and Democrats on the Supreme Court decision to end racial discrimination in college admissions.   

Democrats and the media portray Gen Z and Millennials as fully behind the use of race in college admissions.  The truth is much different. 

A plurality of Americans oppose the use of race in college admissions.  A survey by the Pew Foundation found that 50 percent of all Americans opposed the use of race versus only 33 percent that approved.  Hispanics were equally divided, 39 percent to 39 percent.  Less than half of blacks (47 percent) approve of affirmative action.

Still, universities cling to the use of race.  This demonstrates how out of touch higher ed has become with middle America. 

Young people are at best split on the issue of affirmative action.  Just as many young people disapprove of using race for college admissions and hiring as do. 

Harvard University’s Youth Poll regularly asks Americans between the ages of 18 to 29 whether “qualified minorities should be given special preferences in hiring and education.”

In the most recent poll, only 30 percent agreed with affirmative action.  33 percent disagreed.  This that held strong opinions were more unfavorable toward affirmative action.  Only 12 percent strongly agreed with affirmative action while 18 percent were strongly opposed. 

Given that young people are at most evenly divided on the issue, the predominance of young backers in the media reflects not reality but instead the media’s preferred narrative. 

Instead of attacking the ruling, President Biden should stop dividing Americans based on race.  His own record on racial matters is a dismal one.    

Polling by Harvard shows that most young people don’t like the way Biden is handling race relations.  58 percent of 18–29-year-olds disapprove of Biden’s handling of race relations, only 38 percent approve. 

55 percent of blacks and 38 percent of Democrats between 18 and 29 disapprove of how Biden’s handling race relations.

 

 

Slouching Towards 1984: Shocking Numbers of Young Americans Embrace the Surveillance State

 

One wonders whether they still teach Orwell in schools these days.  Almost one in three members of Gen Z says that they would accept government surveillance cameras in their home.    

A new survey from the Cato Institute asked Americans about their view on government surveillance and central bank digital currencies. 

The survey found that large numbers of young Americans would be happy having Big Brother watching them. 

Almost one third of 18- to 29-year-olds said that they would favor having the government install surveillance cameras in their home to monitor them for illegal activity.    Only 6 percent of Baby Boomers would allow Big Brother into their homes.    

It’s not just their homes.  Gen Z also is happy having Big Brother in their pockets.  32 percent of Gen Zers support CBDCs.

In fact, 24 percent of Gen Z would support CBDC even if it meant that government could freeze the bank accounts of political protestors. 

That’s exactly what happened in the Canadian trucker protests in which the government ordered banks to freeze the accounts o truckers and other protesting the government’s authoritarian (and unnecessary) COVID lockdown. 

History shows that when governments have the ability to squelch dissent they will do it. 

Whether it is the East German Stasi, the Chinese Communist Party’s social credit system or the National Security Agency’s domestic bulk data collection program (for which they lied to Congress about its existence), the tools of government surveillance are the tools of totalitarianism. 

 

Deaths of Despair Growing Among Young Americans

 

The Wall Street Journal has an excellent piece pointing out that death rates among young people have been rising.  here's a quote from the article:

Between 2019 and 2020, the overall mortality rate for ages 1 to 19 rose by 10.7%, and increased by an additional 8.3% the following year, according to an analysis of federal death statistics led by Steven Woolf, director emeritus of the Center on Society and Health at Virginia Commonwealth University, published in JAMA in March. That’s the highest increase for two consecutive years in the half-century that the government has publicly tracked such figures, according to Woolf’s analysis.

Other developed countries including the United Kingdom, Germany, Canada and Norway also saw a rise in some death counts among young people during that time, though the upticks were often concentrated in narrow age groups or one gender, according to global death counts provided by Christopher J.L. Murray, director of the Institute for Health Metrics and Evaluation at the University of Washington.

Here is the graphic from their article: 

One of the comments made reference to how homeless or living rough should be considered a cause.  I agree.  That's not well captured in the medical data--it's hard to attribute a specific cause.  However, watching videos of homelessness, especially places like Philadelphia's Kensington neighborhood,. one gets the sense that there are too many young lives off course in our country.