What was the Real Basis of the S&P U.S. Credit Downgrade? POLITICS!
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In our view, there is enough blame to go around for all to share.
"The political brinkmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed."
That was the first sentence of the Standard and Poors statement accompanying the recent downgrade of the United States' credit rating.
And, it just about says it all.
Politicians are willing to stake the entire financial structure of the country, and probably the world, on whether they can win a tug of war in Washington.
But, wait! There's more! As they say on the TV ads.
"The statutory debt ceiling and the threat of default have become political bargaining chips in debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge . ."
Do we blame this on the Tea Party Grinches who are trying, apparently, to steal gramma's health care and Social Security?
Or is it the fault of Democrats for not throwing gramma under the bus to continue hefty tax cuts for the rich?
Robert Kuttner of The American Prospect laid it on S&P:
"You have to hand it to Standard and Poor's. Forget their two-trillion dollar math error. The whole idea that these people are evaluating the creditworthiness of the United States is just loony. These are the same people who brought us the crisis, by blessing junk sub-prime loans as AAA securities. And they did so because they were paid as consultants by the same financial scoundrels who created the securities. The last job they deserve is arbiter of the security of Treasury bonds."
In our view, there is enough blame to go around for all to share.
But the blame game has been going on far too long, and has gotten us in this mess. What a country!
How do we fix it? Can we ever return to those glorious days of yesteryear when junior could quit high school and walk into the nearest factory for a lifetime job, buy a place up north, a snowmobile and a second car and ride off into the sunset with his honey without a care in the world.
Do we blame El Presidente and look for some Republican knight in shining armor who will spirit us away from all this?
Here in Michigan, we might look to a name like Romney, whose father was highly respected, moderate and a conciliatory manager who made his bones in the auto industry.
But wait, the son, with the unlikely name of Mitt, was willing to trash his father's Rambler, Oldsmobile, Corvair and Caddy just to make time with the trolls under the nation's political bridge.
It doesn't sound like he's the man who will bring jobs back to the Rust Belt. Most of the rest of the GOP field seem of a similar angry type, raging out of the castle to smite the peasants grasping for bread.
Darrell West of the Brookings Institute had this analysis:
"Super-majority politics empower ideological extremists and lead to stalemated policy and inaction. Democracies cannot function effectively under rules where individual senators can stop action and prevent members from voting on important legislation, and it takes a 60 percent vote to stop filibusters.
"American democracy is based on bargaining and compromise. When political leaders have fundamentally different visions regarding the role of government, they must negotiate their differences if there is to be any significant legislation. The emergence in the House of Republican conservatives unwilling to consider tax increases on the wealthy or closing of corporate loopholes and Democratic liberals who won't touch entitlement programs prevents leaders from taking action to reduce the deficit in meaningful ways. The American public has expressed its support for sacrifice on the part of all Americans to close the budget deficit and is open to a range of policy proposals. But House extremists block action and keep Congress from taking reasonable steps to address the deficit and debt."
S&P, seemingly never knowing when to stop, went on with the depressing tale:
"And, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently.
"Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures. It appears that for now, new revenues have dropped down on the menu of policy options. In addition, the plan envisions entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability.
"Our opinion is that elected officials remain wary of tackling the structural issues required to effectively address the rising U.S. public debt burden in a manner consistent with a 'AAA' rating and with 'AAA' rated sovereign peers (see Sovereign Government Rating Methodology and Assumptions."
"In our view, the difficulty in framing a consensus on fiscal policy weakens the government's ability to manage public finances and diverts attention from the debate over how to achieve more balanced and dynamic economic growth in an era of fiscal stringency and private-sector deleveraging (ibid). A new political consensus might (or might not) emerge after the 2012 elections . . ."
Our challenge, then, as voters, is to decide which horse to ride in 2012, and to make sure there are plenty of men of war behind him, or her. Or, we can continue this uncertainty on the edge of the political cliff and see the future of our children and grandchildren frittered away into the Ethernet on clouds of continued arguments.
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