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Downgraded

Standard and Poor has just downgraded us to AA+ rating.

There will be a lot said and a lot of finger-pointing. I’ll have more to say later (I’m traveling). But this is simply the result of 11 uninterrupted years of fiscal recklessness capped by a knock-down drag-out blue-in-the-face fight over spending cuts that wouldn’t impress the most gullible subprime loan company.

We brought this on ourselves. All of us.

Update: It bears pointing out that S&P gave AAA ratings to mortgage-backed securities. So they may be out to lunch. But the refusal to budge on either entitlements or taxes is scaring the markets.

Update: What she said:

Well, frankly, I don’t blame Standard and Poor’s. And not because we didn’t make deeper cuts–we have lower debt loads and more favorable demographics than countries like France and the UK which still have their AAA. S&P is apparently telling us exactly what this is about: the frightening breakdown in our political system. Unless those reports turn out to be wrong, everything else is excuse-making.

That means that in order to make a plausible deal, both parties are going to have to hold hands and jump together . . . and yes, that’s right, GOP, I mean compromise. I mean higher taxes. I don’t like it. But I also don’t see any way around it. Any party that tries a unilateral solution will simply be removed from office the next time around.

The Democrats played their role, obviously, by going hysterical over even the most mild budget cuts. But keep this in mind: a large fraction of the Tea Party wanted us to not raise the debt ceiling at all.

52 comments

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  1. Mississippi Yankee says:

    But this is simply the result of 11 uninterrupted years of fiscal recklessness capped by a knock-down drag-out blue-in-the-face fight over spending cuts that wouldn’t impress the most gullible subprime loan company.

    A finger pointing apologist right to the bitter end. I’m shocked!

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  2. West Virginia Rebel says:

    Well, at least Obama can still have another party.
    West Virginia Rebel recently posted..Double AMy Profile

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  3. InsipiD says:

    That means that in order to make a plausible deal, both parties are going to have to hold hands and jump together .

    It’s bad enough that the GOP jumped with them on the compromise, but now we’re being told that we have to ask “how high,” too? The only thing more disgusting to me right now than the Democrats’ spending is the Republicans’ spinelessness. They come out and talk a good game for weeks and then a plan ends up getting passed amid huge hoopla that is full of liberal spending tricks instead of cuts.

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  4. Hal_10000 says:

    S&P specifically cited opposition to tax hikes and the likelihood the Bush cuts will be extended as a reason for the downgrade.

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  5. sahrab says:

    Really? I read it as the S&P cited the EXECESSIVE SPENDING without the means to pay for it as the reason

    but hey i’m just a guy that expects one to live within the means

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  6. Seattle Outcast says:

    It’s not as if they promised to stop spending like drunk sailors on leave…

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  7. FPrefect89 says:

    They are not spending like drunken sailors, sailors stop when they are out of money.

    Forgot who said that, I think it was a congresscritter.

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  8. Section8 says:

    Hal, the potential to raise revenue is finite, the potential to spend or accumulate obligations can go on forever. That is until no one believes you can meet those obligations which is what the world and the ratings agencies are beginning to have an issue with. Raising taxes is not the bargaining chip here. Government must show they can cut first, then worry about taxes to clean up the mess rather than provide fuel for more spending if we can’t get a serious commitment to cut. We had a GOP that spent like mad, we all got pissed. Then we have the tea party that wants to cut spending, and you bitched about them for making a stand. Everything seems to lead back to taxes with you. Why is that?

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  9. bgeek says:

    Quoting Section8:

    Government must show they can cut first

    This is exactly what needs to happen if they want to raise taxes. For me, 75-80% of the debt reduction needs to come from cuts with the rest coming from increased revenue (or about $3-$4 of cuts to $1 additional revenue). Wishful thinking, I know. Grandkids be damned.

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  10. Kimpost says:

    Hal’s pointing his fingers at both parties. How’s that being an apologist?

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  11. AlexInCT says:

    Well said Sarah, but the people with the end goal of keeping government fat and thus their jobs protected, seem incapable of getting off the bandwagon that the problem is Bush’s evil tax cuts and opposition to continued borrowing & spending policies that have gotten us where we are today.

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  12. AlexInCT says:

    And I think we should add/clarify that fictitious cuts that won’t happen for a decade or more, without obligating the congress of that time to do them, are not cuts: they are slight of hand.

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  13. Manwhore says:

    simply the result of 11 uninterrupted years of fiscal recklessness capped by a knock-down drag-out blue-in-the-face fight over spending cuts that wouldn’t impress the most gullible subprime loan company.

    I thought that the downgrade was all the tea party’s fault for being idiots and not raising the debt ceiling? Rich’s post about it warranted a big “THIS” for you in the comment threads. You two gotta talk back there in the boiler room, you make it too easy for us minions to fling poo!

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  14. richtaylor365 says:

    you make it too easy for us minions to fling poo!

    Comment removed.

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  15. Kimpost says:

    Talk about misrepresenting what people actually have said…

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  16. Rann says:

    … That was terrible. That wasn’t a burn! That wasn’t even an indian burn!

    You need to research your creative insults. I’m prescribing at least five hours of Gordon Ramsay shows.

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  17. Hal_10000 says:

    Yes, they sited our $100 trillion in future obligations and he likelihood that planned spending cuts won’t happen. But we’re looking at $7 trilion in debt over the next decade … if the tax cuts expire. That explodes to $11 trillion if he cuts are extended.

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  18. Hal_10000 says:

    As I said in that thread, I like the Tea Party but think they are now placing ideological purity over governing. Half the Tea Party caucus voted against raising the debt ceiling and helped scuttle a 5-1 grand bargain that would have tackled entitlements. How did that not contribute to this?

    But I always forget the problems Manwhore has with declarative english sentences when they contradict his burning desire to shovel everyone else into the flaming liberal category.

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  19. Hal_10000 says:

    Somewhat unusually, I find myself agreeing with Mark Steyn. The UK, Spain, Italy, Greece — these countries are actually doing something about their budgets. We …. cut planned spending growth by 5%. When it would have been possible to raise the retirement age and chain social security to CPI.

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  20. Hal_10000 says:

    Such a bargain was on the table.

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  21. Hal_10000 says:

    Here is what S&P said about taxes:

    Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012,
    remain in place. We have changed our assumption on this because the majority
    of Republicans in Congress continue to resist any measure that would raise
    revenues, a position we believe Congress reinforced by passing the act.

    ….

    Our revised upside scenario–which, other things being equal, we view as
    consistent with the outlook on the ‘AA+’ long-term rating being revised to
    stable–retains these same macroeconomic assumptions. In addition, it
    incorporates $950 billion of new revenues on the assumption that the 2001 and
    2003 tax cuts for high earners lapse from 2013 onwards, as the Administration
    is advocating. In this scenario, we project that the net general government
    debt would rise from an estimated 74% of GDP by the end of 2011 to 77% in 2015
    and to 78% by 2021.

    You don’t have to agree. But this is pretty clearly what they said.

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  22. Section8 says:

    Explodes to 11 trillion? Are you kidding me? From a just fine 7 trillion? You are funny man. That’s like saying you’re better off sitting naked in a 1000 degree oven over a 2000 degree one. At some point the numbers become irrelevant because they are all ridiculous. SPENDING CUTS NEED TO COME FIRST. The government has demonstrated plenty of times ti can raise and cut taxes, but spending has been like Mann’s hockey stick graph. It’s that simple.

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  23. richtaylor365 says:

    Not to mitigate the seriousness of our predicament, it is dire, but given that the numbers they used to warrant the downgrade was off by $2 trillion, and their reputation still reeling from the sub prime mess, I’m wondering if too much influence is given to these rating agencies. The world perception has not changed wrt the attractiveness of our debt, they still want to own it. Moody’s and Fitch has not followed suit so it appears S&P is an outlier.

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  24. Hal_10000 says:

    I have said we should cut spending about a million times. I have detailed programs I think should be cut and steps hat should be taken. Does everything I say have to be preceeded by an “of course we should cut spending, but…” ? I think the need for spending cuts goes without saying. My biggest problem with the current deal is that it does not, in fact, cut spending. And it does not tackle entitlements.

    What I am saying, what S&P is saying, what Simpson-Bowles is saying is that you can’t get our finances under control without increasing revenues. This isn’t either-or.

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  25. Section8 says:

    As I said in that thread, I like the Tea Party but think they are now placing ideological purity over governing.

    Right, as is typical of most Americans they want leaders who will stand for something until they actually stand for something, because they’d prefer to bitch that their leadership stands for nothing. Maybe it’s not the politicians that are the ones who are all fucked up, but a symptom of the mentality of the voting public.

    Half the Tea Party caucus voted against raising the debt ceiling and helped scuttle a 5-1 grand bargain that would have tackled entitlements. How did that not contribute to this?

    Why are we even having to vote on extending the debt ceiling? Wasn’t it put there for a purpose? Do you know what that purpose was? To find ways to make ends meet within the limits given, not simply expand those limits year after year and by greater and greater amounts. It’s the fact that we’re even put in this situation that is the problem.

    As far as the “grand bargain” Obama wanted, show it to us. My understanding was Boehner rejected further negotiations after Obama added on extra taxes at the last minute, but that doesn’t mean Reid couldn’t have put it out there for vote if the Democrats were even serious from the beginning, but since our most transparent president in history never really showed us the plan I guess we don’t really know what bargain he was offering do we? Maybe the Tea Party is to blame.

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  26. Section8 says:

    What I am saying, what S&P is saying, what Simpson-Bowles is saying is that you can’t get our finances under control without increasing revenues. This isn’t either-or.

    Please ask dear leader where his plan is, not the GOP.. The GOP is finally starting to step up due to the ideologists. Why lay most of the blame on them now?

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  27. richtaylor365 says:

    I read the press release over at the WSJ, here is the soup bone paragraph:

    We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.

    Bolding, mine

    They mentioned the urgency in raising revenue a few times in the press release, no where do they ever mention or advocate raising taxes, this is an important distinction.

    Another way of putting it, and one that so far the left has resisted is “tax reform”. K.C. talks about it in his latest op ed:

    True tax reform that removes loopholes while lowering tax rates is the Holy Grail of social policy. It appeals equally to left and right because, almost uniquely, it promotes both economic efficiency and fairness. Economic efficiency — because it removes tax dodges that distort capital flows (and thereby diminish productivity) while cutting marginal tax rates (thereby spurring growth). Fairness — because a corrupted tax code with myriad breaks grants deeply unfair advantage to the rich who buy the lobbyists who create the loopholes and buy the lawyers who exploit them.

    Reducing tax rate paid by corporations and small businesses could put more people back to work, people that would be paying taxes not draining them. Removing (or a gradual phase out) of private golden calf deductions, things like mortgage deductions, child credits, even charitable giving, depreciating property, all these should be on the table.

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  28. Hal_10000 says:

    Um, Section? Budgets originate in the House.

    I agree that Obama has been derelict of duty. Again, this is a point I have made a thousand times and don’t think I need to throw into every discussion.

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  29. Hal_10000 says:

    Why are we even having to vote on extending the debt ceiling? Wasn’t it put there for a purpose? Do you know what that purpose was? To find ways to make ends meet within the limits given, not simply expand those limits year after year and by greater and greater amounts. It’s the fact that we’re even put in this situation that is the problem.

    The purpose, actually, was to raise large amounts of cash at once for WW1. We were going to have to raise the debt ceiling at some point, unless you honestly think we can instantly cut spending by 40%.

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  30. Hal_10000 says:

    I agree Rich. That’s why I sometimes say “increase revenue” because “raising taxes” usually means rates. Simpson-Bowles, I believe, would leave us with a top rate of 23%, which would be awesome.

    IF you read S&P, as I quote above, they specifically say that the new (worse) outlook is based on the idea that the tax cuts will be extended while the upside scenario involves eliminating some of the tax cuts.

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  31. Section8 says:

    Good point, so whose plan that the Tea Party squandered are you referring to? The one the originated in the House?

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  32. Hal_10000 says:

    The reported plan that Boehner and Obama were working out.

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  33. Hal_10000 says:

    Two last points:

    1) I give the GOP — and especially the Tea Party – credit for yielding on cuts to defense spending. It’s beautiful to watch some GOP establishment types foam at the mouth because the Tea Party has put defense firmly on the table.

    2) Tax hikes, revenue increase, whatever — can ot happen without entitlement reform. The GOP bent on defense; now it’s the Democrats turn.

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  34. Kimpost says:

    2) Tax hikes, revenue increase, whatever — can ot happen without entitlement reform. The GOP bent on defense; now it’s the Democrats turn.

    But entitlements were already on the table, or are you talking about something else?

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  35. AlexInCT says:

    So the media says that the people that got the whole housing thing wrong – because they kept handing out high ratings when they should not have – are now basically saying that the problem is that the US government isn’t confiscating enough from the productive, and you think that the spending is still fine? Seriously, burn it all fucking down and start over.

    These crooks are all pissed that the days where they could keep pretending that as long as they could keep taking as much as they wanted from the productive sector to keep government growing out of control are now over, and they want to go back to the way things where. Even when it is now obvious that the way things where was disastrous and unsustainable. Let me say it again: let it all burn down.

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  36. AlexInCT says:

    No it was not. Never, ever. We got fake cuts that would never happen, a dmeand to raise taxes now on people, and more borrowing. It was a shitty deal.

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  37. AlexInCT says:

    As I said in that thread, I like the Tea Party but think they are now placing ideological purity over governing.

    Admitting that what the government is doing right now and saying it has to stop isn’t ideological purity: it is economic reality. This gravy train the collectivist big government Keynesians have had us on has finally drailed, as many of us pointed out it would, and no amount of pretending will get it back on the tracks and running like normal ever again. If governing means keep doing more of the same stupid shit that has driven us into a gaping abyss and pretending the next time it will not cause even bigger pain, then I am going to say we need anarchy. It is less destructive.

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  38. Section8 says:

    No they never really were, it wasn’t in Reid’s bill, and Obama talked about it in press conferences lately, but we have never seen anything drafted or attempted to be pushed through either the house or senate, and for good reason, the vote would have been on the Democrats, which they have no interest in. It’s better to spin it’s all the Tea Party meme.

    Nor do we know what cuts were in Obama’s proposal. Were they real cuts or the Harry type of cuts of calling something that wouldn’t be budgeted for anyhow a “cut”. You’d think we know exactly what his proposal was give he’s the most “transparent” guy in history and all.

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  39. Kimpost says:

    The entitlement cuts have been acknowledged by both sides. They were in the grand deal that almost got done.

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  40. Section8 says:

    Really?

    Please let these reports know. The’d like to know what this “grand deal” was all about. Oh, and if you could let us know that would be great too.

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  41. Section8 says:

    Here’s more on trying to get details of the “grand plan” Link. It was not put out there for a reason.

    1) Either the president never intended on getting this to the floor

    2) He knew It would be shot down in flames by his own party

    You guys can spin this forever, it’s pretty obvious this was just more of the same Washington 3-card Monte. It’s interesting that even at least some in the normally sympathetic press isn’t even buying this crap.

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  42. Kimpost says:

    I’m not sure where you’re going with any of this, because all I see is the usual “show us your plan”-meme. That’s one of the narratives that made me hate politicians during the whole mess. It’s probably on the top ten list, together with “corporate jets” and “job creators”.

    As you’ve probably seen before, I’m not generally a fan of conspiracy theories, which at least in my mind, nullifies the possibility of Obama pretending to go along, to then wilfully jump ship at the last moment. Frankly I find the notion absurd, and am hesitant to even discuss it, unless I see witness reports, audio or video recordings, signed confessions and whatnot.

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  43. Hal_10000 says:

    Jesus, Alex. No one ever said the spending was fine. Not S&P ad certainly no me.

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  44. Section8 says:

    TAPPER: Every time there have been specifics on the table, the president has not gotten in the boat. With his own deficit commission, he didn’t get in that boat.

    From one of my links. Apparently the press is all in the conspiracy theory as well asking for details and not empty political rhetoric. He talked about a plan and had done nothing more than that period. Now if you want to go off and scream conspiracy theorist go right ahead. I won’t waste any more time with you. Clearly YOU can’t come back with anything of substance. Show me the fucking plan or shut the fuck up about it.

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  45. Kimpost says:

    For fucks sake. Obama actually signed off on a plan, which is in place now. I wonder how he managed that, since he didn’t put forward a plan of his own prior to it?

    Again. No, Obama didn’t offer a grand plan of his own. Instead he chose to deal directly at the table. That could have been right or that could have been wrong, but that was what he did. If Boehner and Obama had agreed on the deal, I have little doubt that it would have happened (disregarding possible House opposition here). Now is that really in dispute, in your opinion? You think that Obama never intended to follow through on what was said during those discussions? Are you fucking kidding me?

    The press you are talking about aren’t in on the conspiracy. They did however participate in the pointless bickering. “Where’s your plan, Mr President?” *sigh*

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  46. Manwhore says:

    You know, Section 8 is trying to be nice. Let me give you the real. you two are fucking idiots that are now running scared about what the world has become.

    With your infinite government employee wisdom tell us what we are are paying for? Rich to be an uninformed tennis bum? California can use more of those. You, Hal? A hopeless liberal who feels entitled to your research despite the idea that it might do nothing for society.

    Rich is already scrambling behind the 8ball with his Meserhle prediction, and that guy got off easy. How much more bullshit do we read from you guys before you just apologize for misleading people with your posts.

    Admit it. You don’t know this shit.

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  47. Section8 says:

    Kimpost, the story is Obama was willing to put it all on the table but Boehner rejected because of a few dollars in tax increases Link. Hal likes to tack on the Tea Party ideologists for good measure. Fact is the Tea Party couldn’t have walked on this because no one knows what the fricken cuts were , or what the revenue increases actually were, or changes to medicare, SS, etc. I’ve read up to 800 billion in new taxes some of it slapped on at the last minute which is a far cry from 100 or 400 billion. If someone other Boehner or Obama were privy to these cuts and other details, it’s be up on a web page by now or on the news, because someone always talks. Anyhow, what the Tea Party did reject was Boehner’s weak ass bill he submitted on his own. If anyone including Hal wants to prove me wrong on this go right ahead, I’m all for getting the facts straight, and perhaps I’m wrong, but generalizations of politicians prancing around about their “intent” without numbers to back it up is equal to bullshit in my opinion. I guess if it comes from our Deity and Chief though, nothing should ever be questioned, or any demand of anything other than generalized rhetoric.

    Obama was doing what was called grandstanding. I know you don’t live in this country so grandstanding = conspiracy to you, but it’s quite common here. To get on TV, say how great you are, and then produce nothing of substance. All our politicians do it on both sides.

    Oh, and yes, asking for details on a plan that would affect the lives of every American is not a meme. It’s what we’d actually expect our leaders to do. Maybe in Sweden all the spending, cuts, revenue increases, and laws passed are shrouded in secrecy and you’re fine with that, but it’s no longer popular here, I’m not sure it ever has been.

    Fact is Obama knows his party would have never accepted this. Pelosi said she would not support anything with entitlement cuts, Reid never proposed Obama’s plan or anything remotely close to what Obama was proposing (although we don’t have any idea of what that would be in any sort of detail), and if you look at my links Obama’s press secretary made it quite clear why they didn’t want to put their version of the grand deal out there for a vote. As for Obama, he’s not taking any questions from the press. If Bush were pulling this shit….

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  48. balthazar says:

    WTF are you rambling on about?

    There was no fucking plan with any sort of entitlement cuts actually written. Obama said it was on the table, then made sure that any discussions about cutting entitlements were scuttled because he insisted to raise taxes by 400-800 billion.

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  49. Kimpost says:

    “Show me a plan in writing, publicly, because if you don’t you’re not really negotiating, and have nothing.”

    *sob* *whine* *snivel*

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  50. balthazar says:

    So your fucking clueless as to what their plan was too Eh Kimpost?

    Just like Obama, he was clueless too, just spouted off some inane comments about how HE has a GRAND PLAN. And the mean old Reps are tearing him down and wont let him persevere.

    That comment is worthy of CM WTG Kompost.

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  51. Kimpost says:

    Kompost.

    Really? Wow… :)

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  52. CM says:

    Balthazar’s mommy clearly didn’t give him a kiss before school this morning.

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