The size of the current account deficits and long lasting effects are the direct result of the Bush Tax cuts from 2001 & 2003. Washington was warmed by the best economists around in regards to the long term effects they would have:
'Horrendous': Nobel economist George Akerlof criticizes Bush economic stimulus package
Paul Krugman on what the Bush tax cuts and foreign policy have in common
* the "positive" effects of supply-side tax cuts are based on mythology and not hard science. there is no economic data from any country or time period in the world which supports them as being a proven effective solution for anything except reducing government revenue.
the downgrading of the US credit rating is 100% the fault of the GOP and the tea-baggers. they turned a simple debt ceiling increase into a national debate about the deficit and a balanced budget plan when that has NEVER been the issue before in US history in terms of it being a factor to the standard debt ceiling increase process.
CRS Report for Congress
The Debt Limit: History and Recent Increases
http://fpc.state.gov/documents/organization/105193.pdf
is the deficit an issue, of course it is and nobody would ever dispute that but is is not more important as recovery measures post recession. not with our bullshit low wage consumption based economic model that we have been following for decades. the primary cause of the last recession was caused by the collapse of the banking system the secondary underlying factor was the credit bubble burst which has been fueling consumer consumption for decades. it would be fair to say that many overspent during the past decades to consume. and it would also be fair to say that many turned to credit to make up for the lack of income in wages.
as the info from the EPI shows the latest debt ceiling measures will make the recovery from the recession longer than it needed be and more painful. historical economic data shows that when gov spending (stimulus) is contracted during recession recovery when unemployment is still high it makes the problem worst and not better and we will soon experience this first hand thanks to politics in DC.
http://web.epi-data.org/temp727/EPI-TCF_IssueBrief_311.pdf
instead we should have stuck to the old tried and true and most effective method (surely not perfect but the best we have) of recovery but once again politics and rhetoric by the political economists (supply-siders) put the kibosh on that as well.
There is a simple Chart is on Page 5 which explains it all.
ABANDONING WHAT WORKS (AND MOST OTHER THINGS, TOO)
Expansionary fiscal policy is still the best tool for boosting jobs
http://www.epi.org/page/-/old/briefingpapers/BriefingPaper304 (4).pdf?nocdn=1
