Debt and Grabassery

Posted on August 6, 2011 at 8:14 am by Bob Cesca

Read the entire S&P press release here.

Couple of items that jumped off the page:

– The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.

Could threats from the credit ratings agencies, Moody’s, Fitch and S&P, be the reason for the hair-on-fire austerity fever? If so, talk about the tail wagging the dog. No for-profit corporation — and certainly not three of them — should be threatening the government, especially when the threats involve putting economic growth and employment in jeopardy.

And here are paragraphs four and five. In other words, these are major reasons for the downgrade.

– More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.

– Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics any time soon.

And so the S&P is frustrated with Republican obstructionism. They don’t say it explicitly, but it’s obvious. When has the White House, or the Democrats for that matter, ever resisted calls to compromise? Never. The Democrats have twisted themselves into knots trying to compromise, while the Republicans refused any attempt to meet them halfway because Mitch McConnell and others have made it perfectly clear that their goal is to obstruct and flummox the president. Nothing more, nothing less.

The Republicans get 95 percent of the blame for this, but don’t expect the cable news and Sunday show doofs to give you this analysis. Count on more of the “both sides” meme and try not to let your head explode.

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  • Corebela

    My head exploded months ago. Or was it years? Maybe more than once.

  • mrbrink

    During a Q&A in April, right after the first downgrade, representatives from S&P were asked:

    Audience question: Why did you revise the outlook now?

    Beers: We’ve been taking note of what we considered to be the gradual deterioration of the U.S.’s fiscal profile over a number of years, but most recently since the end of last year, with the agreement between Congress and the administration to extend the (Bush era) tax cuts.

    I said three weeks ago:

    Republicans weren’t satisfied with an S&P downgrade in April from stable to negative, a downgrade in which their policies are directly responsible, so now they’re shooting for the stars of fiscal instability and uncertainty.

    This little episode in right wing economics should further degrade our rating even if and when we decide to raise the debt ceiling.

    This is a rejection of GOP methods and policies.

    And nicole raised some valid concerns over whether or not because the Chamber of Commerce is part of this downgrade, it’s tainted, but I believe the Chamber may very well be trying to pull the political plug on their congressional Tea Party Frankenstein. Those crazy bastards are just bad for business and the Chamber has tried to politely put them in their place only to be challenged by a dead beat douche like Joe Walsh(R-IL). This downgrade pretty much reinforces not only the rift, but the fact that the Tea Party freshman are having their pea brains placed in an Abnormal jar and crated in some warehouse from Raiders of The Lost Ark.

    But the S&P, being a corporation, has to tip toe around appearances of partisanship.

    Make no mistake. This is a big business rejection of Tea Party terrorism.

    • http://www.politicalruminations.com/ nicole

      Krugman says the S&P are just making stuff up, and I agree:

      The agency has suggested that the downgrade depended on the size of agreed deficit reduction over the next decade, with $4 trillion apparently the magic number. Yet US solvency depends hardly at all on what happens in the near or even medium term: an extra trillion in debt adds only a fraction of a percent of GDP to future interest costs, so a couple of trillion more or less barely signifies in the long term. What matters is the longer-term prospect, which in turn mainly depends on health care costs.

      And, if they downgraded us because we didn’t go deep enough in to austerity…….well, in my mind, that says it’s a set-up.

      http://krugman.blogs.nytimes.com/2011/08/05/sp-and-the-usa/

      • mrbrink

        They downgraded us for two reasons.

        Right Wing Nutjobs controlling the purse strings and the Bush tax cuts.

        That’s it.

        • http://www.politicalruminations.com/ nicole

          Okay. Then why is Krugman saying that S&P indicated that we should have done deficit reduction of 4 trillion? (just trying to understand)

          • mrbrink

            If Krugman is saying the S&P downgraded simply because we didn’t cut enough then Krugman is wrong and/or misinterpreting the methodology.

            S&P has been insisting on cuts AND revenues to maintain AAA since at least April of this year and they have specifically referenced the Bush tax cuts being a trigger on separate occasions, not to mention they have referenced political imbeciles controlling the purse strings who have demonstrated they are crazy enough to crash the economy.

            I think Krugman reacted to the austerity portion of the reasoning for downgrade without considering it was really only 1/3 of the S&P’s methodology.

            Cuts.

            Revenues.

            Politics. (congress)

            Krugman’s fighting the good fight against the austerity jackals, but in the dust, he seems to have overlooked some other information here.

          • http://www.politicalruminations.com/ nicole

            Thank you, mrbrink. That makes sense.

  • red_pills
  • missliberties

    Bob! Listen up. This is the same credit rating agency that rated as Triple AAA, all of the garbage that caused the housing bubble.

    They made a 2 Trillion dollar error in their baseline….. admitted it yet still went ahead with the down grade…..

    You are correct the cable news is ignoring all of this. Instead of coming together as a nation……. pointing fingers of blame will further cripple our politics and our economy.

  • Ned F

    Why it isn’t blatantly obvious Republicans have absolutely no interest, cannot allow anything to improve the jobs or economic situation is because any thing other than doom and fear could be construed as a positive for Obama. And that, more than the economical health of the country, is their primary goal. Has been all along.

  • ElayneB

    On a positive note, my republican as hell father this morning was complaining about the tea party, how they refuse to raise taxes, how we should raise taxes, how the debt deal was terrible because of the tea party… on and on. I actually had to point out to him that last election he voted for several of them, including that POS Pat Toomey. But if even my father is getting sick of them, that’s HUGE.