Unpleasant news for Obama

Thursday brought unpleasant news for U.S. President Barack Obama.

The first disappointing piece of news was people’s reaction to President Obama’s recent address to the nation, in which he summed up the results of his first year in office and outlined his further plans. Once again, he attempted to convince people that despite current economic constraints, they can rest calm about the future. But did he succeed? Hardly so. Fresh opinion polls show that nearly 70% of Americans find the Obama Administration’s economic activities unsatisfactory. The figure was far lower before his address, which means that people did not believe him. And what can be worse for a head of state?

The same day, Moody’s Investor Service, an authoritative international rating agency, warned the United States that it must trim its deficits over the coming 3-4 years in order to avoid a credit downgrade. The U.S. credit rating remains a solid triple-A but it could be at risk if Washington fails to reduce its public debt, a senior Moody’s official told reporters.

Meanwhile, the Obama-proposed draft federal budget for 2011 stipulates the increase of America’s highest ever public debt of more than $12 trillion by a further $2 trillion. But what is a public debt? This is the amount of money owed by the Federal Government to holders of U.S. debt instruments such as Treasury Bills, U.S. Savings Bonds and other state securities, commonly referred to as “treasuries”. As long as America pays off its creditors on time and in real money, it is on the safe side but any default will deliver an irreparable blow to the U.S. economy with serious implications for the rest of the world.