NEWS RACE

On April 18, 2011, Standard and Poor’s placed the United States on notice that it was at risk of having its pristine credit rating lowered if politicians in Washington could not agree on a plan to bring down the nation’s deficits over the long term.

At that same point they lowered their outlook for America’s long-term credit rating to “negative” from “stable.”

When Washington failed to heed their warning they lowered the US rating from AAA to AA+ on August 5, 2011.

In contrast the State of Texas is on a opposite path with Standard and Poor’s. On August 13, 2009 S&P decided to raise the State’s credit rating from AA to AA+ based on several factors outlined in a Press Release from the Office of the Governor Rick Perry.

AUSTIN – Standard & Poor’s (S&P) has raised Texas’ issuer credit and general obligation credit ratings to AA+ from AA based on the state’s strong and diverse economy and strong leadership from the governor and Legislature that has left a projected $9 billion in the state’s Rainy Day Fund. S&P also raised its rating on the state’s appropriation debt to AA from AA-.

“The ratings continue to reflect our opinion of the state’s large and steadily diversifying economy, which despite the recession continues to perform better than the nation in terms of both economic activity and employment,” S&P credit analyst Horacio Aldrete-Sanchez said. “Furthermore, we expect that the Texas economy will recover earlier and at a faster rate than most other states given its continued population growth and relatively low cost of doing business, which we expect will contribute to gradual employment gains in 2010, particularly in the health, education and services sectors.”

S&P’s decision was based on Texas’ 2010-11 biennial budget, the state’s strong Rainy Day Fund, and Texas’ low tax-supported debt burden. The higher rating means Texas will pay lower interest on money it borrows, saving of millions of taxpayer dollars.

“In light of the economic downturn affecting the nation, this session we continued to make wise choices, such as cutting taxes on 40,000 small businesses and maintaining a multi-billion dollar balance in our Rainy Day Fund that have helped our state sustain its overall economic strength,” Gov. Perry said. “These prudent and fiscally conservative decisions continue to pay off for our taxpayers.”

“Texas debt has always been well-received in the bond market, but for Texas to receive a rating upgrade in today’s challenging economic environment while other states are being downgraded, speaks to the high quality of the state’s financial stewardship as well as the positive long-term outlook for the Texas economy,” Bob Kline, executive director of the Texas Bond Review Board said.

Additionally, S&P, Moody’s Investors Service and Fitch Inc. have given Texas the highest possible short-term debt ratings for tax and revenue anticipation notes (TRANs), which will be sold later this month.

Texas’ business climate continues to lead the nation with more Fortune 500 companies than any other state, and is the nation’s top exporting state. Last month, Farouk Systems relocated its manufacturing headquarters to Houston, creating 1,200 new jobs and generating $26 million in capital investment. Additionally, National Review recently credited Texas’ small government and low tax environment with attracting jobs and companies from around the nation, and CNBC recently named Texas one of the Top States to do Business for the third year in a row.

“When people look at Texas, they’re discovering that we’ve fostered an environment that encourages people to pursue their dreams, build businesses and create jobs,” Gov. Perry said. “There is no question that Texas’ economy is on a growth trajectory thanks to our dynamic workforce, low taxes and predictable regulations.”

Now for the first time both the United States and the State of Texas enjoy the same AA+ Credit Rating from Standard and Poor’s; but based on the recent US downgrade report it appears that the two governments are headed in opposite directions.

Perhaps it would be wise for Washington to follow the policies that are working in Texas instead of the present policies that have failed to produce jobs and a sustained economic recovery.

Two glaring examples of how to jump start the national economy are a balanced budget amendment which has been in the Texas Constitution since 1876 and Tort Reform where loser’s pay which has been recently enacted into law in the State.

These two policies would appear to be fairly obvious and much needed to repair the US’s sagging economy and lowered rating.  But don’t hold your breath for common-sense reforms like these in Washington anytime soon; especially when they’re both being constantly demonized and labeled as radical and unreasonable by those on the left-side of the isle in Congress and in the White House as well.