OK, so Standard and Poors has gone ahead with the downgrade. It’s a strange situation.
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.
On the one hand, it’s hard to think of anyone less qualified to pass judgment on America than the rating agencies. The same people who rated subprime-backed securities are now declaring that they are the judges of fiscal policy? Really?
Also, it turns out that S&P got the math wrong by $2 trillion, and after much discussion conceded the point — then went ahead with the downgrade anyway.
On the other hand, good job Republicans. Your sabotage strategy continues to work.
Here are paragraphs four and five. 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.
So it seems 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 (or straight-up capitulate), while the Republicans refuse any attempt to compromise, even when Democrats give the 100% of what they demand, because Mitch McConnell and others have made it clear that their only goal is to obstruct and flummox the President and the economy for their own political gain. 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.