The Fox News Channel special presentation… On the Brink, Answers From the Abyss, now Neil Cavuto.
Neil Cavuto: France is ahead of us, actually as of last night, more than a dozen countries are ahead of us, because for the first time in 70 years, the United States of America is no longer the top financial dog on earth. The investment ratings agency standard board is taking care of that yesterday, officially dinging our top notch AAA rating and kicking us out of the very elite club, that includes the likes of France, Germany, Switzerland, Australia but not us, not now. We are in with Belgium and New Zealand now and just getting our arms around that one not proving easy now, for years, top of the heap, now all but kicked to the curb, and growing fears my friends come Monday morning, we are going to get kicked in the markets, we just don’t know.
Here is what we do know, after all of the spending, the world is essentially telling us we are spent, and the jig is up and the pain could be severe, and we are all over the fallout that could be swift, with the likes of presidential candidates Michele Bachmann, Ron Paul and Herman Cain who say that the spending has got to stop. Democratic Congressman Dennis Kucinich who says that the spending has actually got to double, and Mark Zandi who says both Republicans and Democrats got to talk.
But before that, first this, the latest what’s happening right now. Georgia Republican Jack Kingston calling on Congress to reconvene immediately to pass a new deal with more cuts in the wake of the downgrade, the Congressman will be here later this hour. China taking a shot at us wasting no time saying and I quote “The good old days of borrowing are over.”
In Europe, G7 finance ministers will meet this weekend to discuss the impact of the downgrade and the Dow losing 700 points this week and that was before the S&P announcement. Saudi Arabia the first market on earth to trade since this news and it wasn’t pretty, stocks there down about 5.5%, banking issues in particular getting clobbered. The problem here is not the downgrade, it’s the debt that brought it on, a message it seems to getting lost in this drama, but now with my next guest Republican Presidential candidate Ron Paul on the phone. Congressman you weren’t at all surprised, but what now?
Ron Paul: Well it looks like we’re in for big trouble because we haven’t dealt with the problem, you know I’m surprised it took them so long to downgrade, I didn’t think it should have had that rating for a long, long time, but people are coming around to reality. You wonder about S&P because they’re usually pretty slow, so I think it’s very, very bad and it’s interesting that when we were working on raising the debt limit over my objection, they can say “Well if you don’t raise the debt limit, we’re going to downgrade you” so we raised the debt limit so they downgrade which means that the spending is not under control. But the other thing that bothers me is I read where S&P said that one of the reasons they downgraded was that we weren’t accepting tax increases. So there’s a lot of confused economic ideas out there but I think we’re in for a lot of trouble which is what is what I’ve been saying for a long time.
Neil Cavuto: You know the administration is already pointing fingers at S&P that their math is a little specious and it could be a case of accusing the accused, but what do you make of that?
Ron Paul: You mean about the treasury saying well they’ve made a mistake…
Neil Cavuto: Right… in other words this is kind of S&P’s fault.
Ron Paul: Well, the Congress is making even bigger mistakes because they keep talking about slashing and cutting and all this, but there have been no suggestions of cutting anything. It’s always the cutting from the baseline which is a steady increase and finally the people who are looking at the bonds are realizing it. But to me it’s interesting that although they’re downgrading it, still the world are buying our treasury bills and our bonds and our interest rates [remain low]…
Neil Cavuto: For now, but Congressman, we got to be careful. I guess what I’m asking is, we are concerned about the downgrade and whether it’s going to cost us more just for people to buy our debt and our notes and our bonds and you’re quite right to point out that people have still been pouncing on our securities as good havens. But how long do you really think that will be the case, and are we really more benefiting because the rest of the world just stinks more than we do.
Ron Paul: Yeah, I think that though the market is more powerful than the agencies who grade the bonds and even Congress. Economic laws are powerful which means that if you follow free market economics, interest rates will go up regardless of bond ratings and this might be just the incentive to start the rates going up again. But there’s no way in the world that you can print money endlessly and bailout everybody and spend endlessly and not expect the dollar to be devalued as it is, and it’s a worldwide currency and that’s why this is so serious. Under those conditions, you depreciate the currency, interest rates are destined to go up, it’s just a matter of time.
Neil Cavuto: Alright, when I was in your fine city this past week and you guys cobbled together this deal of which you were very, very critical, as is your son the Senator Rand Paul, the issue came up that if you guys were to cut too much – not you and your son – but if you would have cut too much it would be onerous to the economy at this iffy stage, so is there even going to be an appetite for cutting more spending in this environment?
Ron Paul: No, there isn’t, there is always a special interest that comes up. If you even suggest freezing the budget, that is considered a cut. Freezing the budget is a cut and anybody who has their budget frozen yells and screams. Can you imagine what the military industrial complex would say if you suggested freezing? They’re getting a percentage increase and it’s not enough and that’s the way with every entitlement program there is, so we’re locked in on this course and until we revamp the system entirely, the monetary system, the entitlement notion, the definition of entitlements versus rights, our foreign policy, believe me, within the next year or two, we will be dealing with what kind of country we want in the future and what economic policies we’re going to follow.
Neil Cavuto: You know it’s interesting, I guess it is hard to gauge right now Congressman, but a downgrade could lead to a lot of messier things but we’ll have to watch extremely closely. Congressman, thank you very much, always good seeing you.
Ron Paul: Thank you.
Neil Cavuto: Again to outline that deal that was the source of some of this concern and maybe S&P jumping here. This $2.1 trillion debt deal you hear so much about, it’s $2.1 trillion over 10 years but 70% of those cuts come after the year 2017, $28 billion over the next year hence this criticism by the part of S&P that it really wasn’t much better than the paper it was printed on. Anyway, the stunner from the White House this morning is no word from the White House this morning.