Robert Stein 1924-2014

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Friday, August 05, 2011

Standard & Poor Tea Party

They just threw America's credit rating off Boston harbor.

The privately owned profit-making agency that fueled the economic crisis of 2008 by ranking Wall Street collections of junk-mortgages AAA has downgraded obligations of the United States to AA+, after a half-day delay to consider a Treasury Department notification of a $2 trillion error in their math.

In the world we live in, this move will shake confidence not in Standard & Poors but the U.S.

Even worse, the rationale for "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," citing "political gridlock" in government policy-making.

Translation: They are dampening their pants over Tea Party terrorism in the debt-ceiling deal and covering their posteriors over the prospect of more of the same.

As the White House and GOP prepare to point fingers at each other in a blameathon, it might be noted that one of S & P’s recommendations for a remedy is that Washington try to reduce the deficit by $4 trillion over 10 years and that anything less would be insufficient.

Oddly enough, that’s the amount that could have been saved if Republican diehards had not made it an article of faith to preserve Bush tax cuts for the superrich.

No one can be sure what the S & P downgrade will mean to the markets in the long run, but one possibility is that it may cut into future Wall Street bonuses and reduce their income by more than that.

Someone may want to explain it all to John Boehner and his Tea Party gang that rejected Obama’s Grand Bargain.

Update: Paul Krugman notes that “S & P is just making stuff up--and after the mortgage debacle, they really don’t have that right.

“So this is an outrage--not because America is A-OK, but because these people are in no position to pass judgment.”

The anger is bipartisan. Randy Neugebauer, a Texas Republican who heads the House Financial Services’ Subcommittee on Oversight and Investigations, says “it was speculative for the agency to use predictions of what Congress would do in the future as a rationale for a downgrade.

“One thing that puts them out in uncharted waters is trying to predict what the political environment is going to be. They’re not predicting an overly cooperative environment in Congress and that’s a very subjective call.”

1 comment:

Solomon Kleinsmith said...

This isn't even remotely Tea Party like. They said what most economists are saying, that our long term debt outlook is positively dire, and the deal just pushed through barely dents that. In fact they even said very specifically that the GOP should give way on cutting out loopholes, and that the dems need to give way on trimming entitlement spending. Without BOTH of those, there is no chance the debt problems will get any better.

Solomon Kleinsmith
Rise of the Center