S&P bond rater: It’s the debt, stupid; Update: S&P official: Another downgrade will come if we don’t reduce long-term debt

posted at 12:00 pm on August 7, 2011 by Ed Morrissey

What caused the United States to lose its AAA rating for the first time in 94 years, a rating that withstood two world wars, the Great Depression and (most of) the Great Recession, and a costly military buildup that bankrupted and demolished our Cold War foe, the Soviet Union, without a direct shot fired?  Was it the dastardly Tea Party, with its demands for fiscal sanity and a solution to an oncoming tsunami of entitlement liabilities?  According to the man who rates sovereign debt for the agency that downgraded the US, not really:

The head of Standard & Poor’s sovereign ratings, David Beers told “Fox News Sunday” he did not expect “that much impact” when global markets open on Monday due to what he called a “mild deterioration” in the U.S. credit standing to AA-plus from top-tier AAA. …

He also said the downgrade announced on Friday was not due to the budget positions of any political party and that on any future agreement, “We think credibility would mean any agreement would command support from both political parties.”

So a lack of consensus was part of the problem for S&P.  But consensus about what?

Beers called the U.S. Treasury Department’s criticism of the credit rating agency’s analysis a “complete misrepresentation.” Even with the debt limit agreement passed by Congress, he said, “the underlying debt burden of the U.S. is rising and will continue to rise over the next decade.”

Actually, the Tea Party caucus in Congress had it right.  The bond raters needed to see the US take a significant step towards ending deficit spending and getting future liabilities under control.  The problem with the lack of consensus came from the resistance of Democrats to the fiscal realities of the situation we face.  Instead of addressing the real problems, Democrats blocked any attempt to deal with the entitlement crises and would only agree to address discretionary spending.

I mentioned this as an aside in my earlier post, but it bears repeating here.  Republicans cut the only deal they could get without control of the Senate and the White House.  Had they refused to take that deal, then S&P and likely Moody’s would have lowered the rating on Wednesday, and Republicans would be taking the blame.  Instead, this clearly shows that Democratic refusals to deal rationally with the entitlement crises are the reason for the decline in confidence in the US.

Call it a clarifying moment.  Discretionary spending was and is a sideshow to what concerns rational investors.  We could eliminate every cent of discretionary spending — defense, homeland security, education, welfare — and we’d still be adding $300-400 billion a year to our deficit through fixed entitlement spending.

Want to see why it’s the debt and not the taxes, Tea Party, or Congressional tiddlywinks?  Heritage’s chart showing the growing bite from entitlements in the future demonstrates the problem quite clearly:

As for the political elements of the downgrade, they’re real — but it’s not the politics of the Tea Party that are the problem.  To follow up my point in my previous post, note well how ObamaCare’s “entitlement reform” impacts the problem and “bends the cost curve.”  The invariable end is a massive amount of liabilities that a free economy cannot possibly honor.

Janet Daley draws the proper conclusions, writing that both Europe and the US are currently proving that nanny-state structures cannot coexist with free economies in the long run.  Inevitably, people have to choose between the command economies required by burdensome entitlement programs or free economies and personal responsibility:

We have arrived at the endgame of what was an untenable doctrine: to pay for the kind of entitlements that populations have been led to expect by their politicians, the wealth-creating sector has to be taxed to a degree that makes it almost impossible for it to create the wealth that is needed to pay for the entitlements that populations have been led to expect, etc, etc.

The only way that state benefit programmes could be extended in the ways that are forecast for Europe’s ageing population would be by government seizing all the levers of the economy and producing as much (externally) worthless currency as was needed – in the manner of the old Soviet Union.

That is the problem. So profound is its challenge to the received wisdom of postwar Western democratic life that it is unutterable in the EU circles in which the crucial decisions are being made – or rather, not being made. …

We have been pretending – with ever more manic protestations – that this could go on for ever. Even when it became clear that European state pensions (and the US social security system) were gigantic Ponzi schemes in which the present beneficiaries were spending the money of the current generation of contributors, and that health provision was creating impossible demands on tax revenue, and that benefit dependency was becoming a substitute for wealth-creating employment, the lesson would not be learnt. We have been living on tick and wishful thinking.

And Daley hits the nail on the head over who exactly has been irrational and radical in this debate:

The hardest obstacle to overcome will be the idea that anyone who challenges the prevailing consensus of the past 50 years is irrational and irresponsible. That is what is being said about the Tea Partiers. In fact, what is irrational and irresponsible is the assumption that we can go on as we are.

Exactly — and that’s exactly the point S&P made with its downgrade.

Update: If we don’t stabilize and reduce our long-term liabilities soon, we’ll get downgraded again, says S&P:

The credit rating agency’s managing director, John Chambers, tells ABC’s “This Week” that if the fiscal position of the U.S. deteriorates further, or if political gridlock tightens even more, a further downgrade is possible.

Chambers also said Sunday that it would take “stabilization and eventual decline” of the federal debt as a share of the economy as well as more consensus in Washington for the U.S. to win back a top rating.

He puts the odds of another downgrade at 3:1.  I’d call it even money, at least while Democrats continue to blame the Tea Party for, er, wanting to do exactly what S&P demands.

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

Comment pages: 1 2

Rep. Steve Israel (N.Y.), chairman of the Democratic Congressional Campaign Committee, said: “The indisputable fact is that until this group of Roadblock Democrats forced President Obama to not touch entitlements and demand more taxes in the “grand bargain” deal, America never came to the brink of a default and we never experienced a downgrade. This downgrade is the direct result of Roadblock Democrats.”

Damn these Drunken Party traitors.

J_Crater on August 7, 2011 at 12:03 PM

The ugly truth is that the Bush tax cuts will end at the beginning of 2013 for everybody, not just the “rich.” And that still won’t be enough.

J_Crater on August 7, 2011 at 12:05 PM

The ugly truth is that the Bush tax cuts will end at the beginning of 2013 for everybody, not just the “rich.” And that still won’t be enough.

J_Crater on August 7, 2011 at 12:05 PM

“…That still won’t be enough” is true if you accept the premise that a tax increase is a step in the right direction. I don’t.

gryphon202 on August 7, 2011 at 12:09 PM

I’d sure like to again see that DNC ad using Ryan’s budget as the focus for pushing granny off the cliff. It was so cute. Obviously, S&P didn’t think so, but what do they know about it?

a capella on August 7, 2011 at 12:10 PM

Had they refused to take that deal, then S&P and likely Moody’s would have lowered the rating on Wednesday, and Republicans would be taking the blame. Instead, this clearly shows that Democratic refusals to deal rationally with the entitlement crises are the reason for the decline in confidence in the US.

Guh, bah, uh… Hold the line!!!

KingGold on August 7, 2011 at 12:11 PM

J_Crater –

Not necessarily. The new Congress can re-instate them – and the new Republican president will sign them into law within days of taking office.

honsy on August 7, 2011 at 12:12 PM

The hardest obstacle to overcome will be the idea that anyone who challenges the prevailing consensus of the past 50 years is irrational and irresponsible. That is what is being said about the Tea Partiers. In fact, what is irrational and irresponsible is the assumption that we can go on as we are.

This is EXACTLY why the liberal commies are stepping up their attacks against the tea party. They know the truth, but still want their destruction of this country. So they lash out. The want the alternative. A country where Government is king, and we’re all serfs.

capejasmine on August 7, 2011 at 12:14 PM

Great analysis, Ed…

I thought all through the debt ceiling issue that a downgrade was inevitable. I didn’t see any way for the Dems to allow the $4T in real cuts that the rating agencies wanted to see…

And personally, even if they would’ve, I didn’t want those discussions taking place in rushed, sectretive back-room meetings with ZERO public interaction and input…

Bring this whole mess to the forefront of the public’s attention, and deal with reality in the light of day…

OnlyOrange on August 7, 2011 at 12:15 PM

Then S&P made a hash of the write up they released with the downgrade.

MayBee on August 7, 2011 at 12:16 PM

On another blog, I read a lefty refer to the S&P as “criminal.” Is that the new meme? Criminal?? Really????

Blake on August 7, 2011 at 12:16 PM

If it’s the debt that is the problem, then forcing the government to balance its budget would have staved off the downgrade. That seems to disprove your ‘update’ on the previous thread on Obamacare that the tea party would have gotten the blame if we had succeeded in forcing the Ruling Class to balance the budget.

FloatingRock on August 7, 2011 at 12:17 PM

Good interview… in spite of Chris Wallace…

Khun Joe on August 7, 2011 at 12:17 PM

The head of Standard & Poor’s sovereign ratings, David Beers told “Fox News Sunday” he did not expect “that much impact” when global markets open on Monday…

World stock markets are competent prediction machines, where forecasters put up real money based on their predictions. Their predictions are far more honest than those of the spinning political talking heads. A downgrade has been assumed for months now. When it happens it will simply confirm that they were right.

slickwillie2001 on August 7, 2011 at 12:18 PM

Beers called the U.S. Treasury Department’s criticism of the credit rating agency’s analysis a “complete misrepresentation.”

“You lie!”

(Now, where have I heard that before?)

massrighty on August 7, 2011 at 12:18 PM

The problem with dumb-o-crats is that they will cling to their failed ideologies and pseudo religions

skanter on August 7, 2011 at 12:19 PM

That seems to disprove your ‘update’ on the previous thread on Obamacare that the tea party would have gotten the blame if we had succeeded in forcing the Ruling Class to balance the budget.

FloatingRock on August 7, 2011 at 12:17 PM

Which was never, ever, going to happen. The downgrade would have come first, and you’re lying to yourself if you think otherwise.

KingGold on August 7, 2011 at 12:20 PM

Thus we have the left attacking the Tea Party, because they know the Tea Party is correct. To counteract this liberal assault, the Tea Party needs to do something dramatic to drive home the wide-spread understanding of Americans that the spending has to stop, including entitlement growth. Without that the super-congress process is likely to be a disaster in that the Republican representatives will not have a Tea Party orientation.

GaltBlvnAtty on August 7, 2011 at 12:21 PM

The ugly truth is that the Bush tax cuts will end at the beginning of 2013 for everybody, not just the “rich.” And that still won’t be enough.

J_Crater on August 7, 2011 at 12:05 PM

If that happens it will be ugly. Americans have been programmed to think that President George W. Bush’s tax cuts were only for the rich fat cats that little Bammie loves to hate. It will be a learning opportunity for them.

slickwillie2001 on August 7, 2011 at 12:22 PM

Pass Cut, Cap & Balance = No downgrade.

novaculus on August 7, 2011 at 12:22 PM

Instead, this clearly shows that Democratic refusals to deal rationally with the entitlement crises are the reason for the decline in confidence in the US.

*crickets chirping*
-lsm
the lsm keeps pushing the ‘its the gop’s fault’ from the s&p review….

cmsinaz on August 7, 2011 at 12:22 PM

On another blog, I read a lefty refer to the S&P as “criminal.” Is that the new meme? Criminal?? Really????

Blake on August 7, 2011 at 12:16 PM

Calling those that disagree with them “criminals” is not new to them, Blake.

hawkdriver on August 7, 2011 at 12:23 PM

capejasmine on August 7, 2011 at 12:14 PM

Same thoughts; you wrote it first. Sorry for the overlap.

GaltBlvnAtty on August 7, 2011 at 12:23 PM

During WWII it was pointed out Japan was shooting metal back at us made from scrap we sent then before the war. Americans could have cried, whined and sat on their collective butts. Thank God they didn’t. Now we can cry, whine about S&P and sit on our collective butts OR we can see it is what it is and get busy fixing the problem. Spending is the problem so throw out ObamaCare because it hasn’t started yet and that goes a long way toward fixing the problem.

Herb on August 7, 2011 at 12:26 PM

In fact, what is irrational and irresponsible is the assumption that we can go on as we are.

ding ding ding

hello, dear leader & dems?

cmsinaz on August 7, 2011 at 12:26 PM

Which was never, ever, going to happen. The downgrade would have come first, and you’re lying to yourself if you think otherwise.

KingGold on August 7, 2011 at 12:20 PM

Which was never going to happen thanks to big-government RINO’s like yourself.

FloatingRock on August 7, 2011 at 12:30 PM

Republicans cut the only deal they could get without control of the Senate and the White House. Had they refused to take that deal, then S&P and likely Moody’s would have lowered the rating on Wednesday, and Republicans would be taking the blame.

Why should the Republicans take the blame? By that time we had already passed CCB (a plan which actually addressed the issues S&P wanted to see addressed) only to be rejected by Democrats in the senate.

The truth is the Tea Party would be blamed for any negative outcomes even if we had done nothing other than bend over and agree to a debt ceiling increase with no debate and no strings attached. It’s not like Obama and the MSM aren’t willing to lie to smear us. That being the case we may as well try to get what we want. Informed and intellectually honest people know the Democrats caused this.

Kataklysmic on August 7, 2011 at 12:30 PM

liberal Democrats are addicted masochists who relish self flagellation . . . they’ll persist in their destructive behavior until it consumes them or, until more responsible citizens run their leftist butts out of government never to return.

rplat on August 7, 2011 at 12:34 PM

April 18, 2001, S&P indicated without control of debt to GDP ratio, US ratings outlook was downward. From the full text of that report

In our baseline macroeconomic scenario of near 3% annual real growth, we expect the general government deficit to decline gradually but remain slightly higher than 6% of GDP in 2013. As a result, net general government debt would reach 84% of GDP by 2013. In our macroeconomic forecast’s optimistic scenario (assuming near 4% annual real growth), the fiscal deficit would fall to 4.6% of GDP by 2013, but the U.S.’s net general government debt would still rise to almost 80% of GDP by 2013. In our pessimistic scenario (a mild, one-year double-dip recession in 2012), the deficit would be 9.1%, while net debt would surpass 90% by 2013. Even in our optimistic scenario, we believe the U.S.’s fiscal profile would be less robust than those of other ‘AAA’ rated sovereigns by 2013. (For all of the assumptions underpinning our three forecast scenarios, see “U.S. Risks To The Forecast: Oil We Have to Fear Is…,” March 15, 2011, RatingsDirect.

Therefore both the WH and COngress knew out ratings was already in jeopardy, before they raised the debt ceiling

Seems obvious to me the deadline to rubber hose a raise in the debt ceiling thru COngress was not Ramadan, nore obama’s birthday, but to get it signed into law before S&P announced the downgrade.

Before the ink was dry, they had borrowed enough to raise the natl debt to exceed out GDP for the first time in US history

Brings to mind the Scottish saying “you might as well be hanged for a sheep as a lamb”

Since they were going to sink anyway, might as well blow the bank

Why the GOP leadership thought it was a good idea to help sink the nation before an election, and set it up so only a tax hike (later of course) could fix it remains to be seen

Now unless Obama is out of office, and we have a new PResident who will resist raising taxes, our GDP is going down the drain. We would need a turnover in the Senate of DEM and GOP to repeal the mess they got us into

While the ink was still wet both sides were and are rushing to blme the Tea party, the only group with clean hands in this crime

entagor on August 7, 2011 at 12:35 PM

The head of Standard & Poor’s sovereign ratings, David Beers told “Fox News Sunday” he did not expect “that much impact” when global markets open on Monday due to what he called a “mild deterioration” in the U.S. credit standing to AA-plus from top-tier AAA.

The Saudi Arabian and Israeli stock exchanges were down 6% and 7% respectively this weekend. If the Asian markets suffer similar blows, U.S. equities markets could make some very unpleasant history on Monday.

Mike Honcho on August 7, 2011 at 12:37 PM

Which was never going to happen thanks to big-government RINO’s like yourself.

FloatingRock on August 7, 2011 at 12:30 PM

Because, as we all know, RINOs control the government, have a majority in the Senate, and are currently running on a platform of entitlement preservation.

Are you acting like you don’t pay attention, or is that standard operating procedure for you?

KingGold on August 7, 2011 at 12:37 PM

On another blog, I read a lefty refer to the S&P as “criminal.” Is that the new meme? Criminal?? Really????

Blake on August 7, 2011 at 12:16 PM

They’re going to throw everything on the wall, see what sticks.

Rebar on August 7, 2011 at 12:38 PM

Because, as we all know, RINOs control the government, have a majority in the Senate, and are currently running on a platform of entitlement preservation.

Are you acting like you don’t pay attention, or is that standard operating procedure for you?

KingGold on August 7, 2011 at 12:37 PM

And you are acting deceitful, because you know full well that the RINO’s and the Democrats all support big-government; that big-government liberals control our federal government; that both Bush(RINOs) and Obama are responsible for the financial mess we are in today.

FloatingRock on August 7, 2011 at 12:39 PM

All nonsense. If this were true, then they would have downgraded a month ago. Nothing would change the debt in this deal in any measurable way. This was to make a statement. All the shenanigans people are bickering about now are silly. Takes obtuseness to miss the obvious.

SuperBunny on August 7, 2011 at 12:41 PM

FloatingRock on August 7, 2011 at 12:39 PM

If you’re unwilling to accept the reality that’s right in front of your face, and are willing to blame Republicans more than Democrats for “the financial mess we’re in today,” however the hell you choose to define it, then you’ll be better off posting at Huffpo or Kos.

They hate Republicans just as much as you do, apparently.

KingGold on August 7, 2011 at 12:42 PM

On another blog, I read a lefty refer to the S&P as “criminal.” Is that the new meme? Criminal?? Really????

Blake on August 7, 2011 at 12:16 PM

They’re going to throw everything on the wall, see what sticks.

Rebar on August 7, 2011 at 12:38 PM

The interesting thing is that if the liberal spin is to be believed, and the downgrade was actually due to the Tea Party’s antics, why then would S&P be “criminals” to the left? You’d figure they would be heros for telling the truth about those Tea party rubes and terrorists. Meme cognative dissonance happening here.

Kataklysmic on August 7, 2011 at 12:42 PM

SPREAD THIS LINK AROUND….

This article above is a great tool to email/FBook/etc. to friends/independents and TRUE-CON Dems (the few their are).

This puts the onus where it belongs (on the lying politicians in both parties that have been so gutless about cutting DEFICIT spending over the decades).

Like Hillary and her “presents” she wanted to give voters in late 2007/early 2008.

PappyD61 on August 7, 2011 at 12:44 PM

Here’s another debt chart that is a must-see.

Buy Danish on August 7, 2011 at 12:45 PM

They’re going to throw everything on the wall, see what sticks.

Rebar on August 7, 2011 at 12:38 PM

you are not kidding….

cmsinaz on August 7, 2011 at 12:47 PM

Meme cognative dissonance happening here.

Kataklysmic on August 7, 2011 at 12:42 PM

Nothing new.

Bush was both the dumbest man on earth, and an evil genius manipulating the world. There are thousands of other examples.

Liberalism is indeed a mental disorder.

Rebar on August 7, 2011 at 12:47 PM

“The Bush tax cuts” “Current tax law”
 
Don’t let the (D)s keep playing the blame game.

rogerb on August 7, 2011 at 12:48 PM

During WWII it was pointed out Japan was shooting metal back at us made from scrap we sent then before the war. Americans could have cried, whined and sat on their collective butts. Thank God they didn’t. Now we can cry, whine about S&P and sit on our collective butts OR we can see it is what it is and get busy fixing the problem. Spending is the problem so throw out ObamaCare because it hasn’t started yet and that goes a long way toward fixing the problem.

Herb on August 7, 2011 at 12:26 PM

Somewhere I read that within a couple of years, the interest we pay on our debt to the Chinese will be enough to fund all of their military.

slickwillie2001 on August 7, 2011 at 12:49 PM

rogerb on August 7, 2011 at 12:48 PM

they’ve got help through the lsm big time

cmsinaz on August 7, 2011 at 12:51 PM

But if the Democrats had agreed to entitlement reforms to head off a debt downgrade, their entire “Mediscare” plan to win the 2012 congressional elections would have been negated. Obama would have gone for nibbling at entitlements in order to proclaim himself the great compromiser but Pelosi and Reid would not have gone along.

Only the 2012 election can solve this problem. We need a united team (not independent candidates standing on “principle” throwing elections to the big-spending party)

KW64 on August 7, 2011 at 12:53 PM

The interesting thing is that if the liberal spin is to be believed, and the downgrade was actually due to the Tea Party’s antics, why then would S&P be “criminals” to the left? You’d figure they would be heros for telling the truth about those Tea party rubes and terrorists. Meme cognative dissonance happening here.

Kataklysmic on August 7, 2011 at 12:42 PM

You should ask one of our HA Leftists that. Could be great entertainment.

Del Dolemonte on August 7, 2011 at 12:53 PM

Nice posting, Ed. I’ll get you linked up on this in a bit.

Meanwhile, this story really pisses me off: ‘Widener’s Dean Linda Ammons Goes After Law School Professor Lawrence Connell’.

Donald Douglas on August 7, 2011 at 12:53 PM

Get focused, people. Another distraction away from the truth that this is all unfolding exactly as the progressive elites want. The system is destabilizing as per Cloward & Piven. It is on overload. Soon it will implode so that it can be replaced with the new system the progressives want.

Do you realize that everyone who works or serves Federal Reserve had an exemption from having to sell stock they owned in the banks and other financial institutes they were bailing out? Wonder if they still have this exemption? Wonder if they have an exemption to hedge against the US?

I’ll bet that Pelosi didn’t lose any money last week.

Greyledge Gal on August 7, 2011 at 12:55 PM

Apparently, not everyone has grasped one of the most important take aways from the above chart. If you examine it again you will see that the tax revenue-GDP ratio has not budged significantly far from 18% historical average since 1970 (actually this is also true for 1950-70). During this time, marginal tax rates have been fiddled with quite extensively, e.g. Reagan nearly cut them in half after the 1980-81 downturn. This means that any attempt to raise marginal tax rates will create a negative incentive on economic activity and earnings. In essence, the “return” on the higher tax rates will be minimal, except in the sense of discouraging savings, investment, productivity, growth and job creation. And, I mean, who wants those things!?!

boqueronman on August 7, 2011 at 12:55 PM

With this latest update, I can say we’re as good as downgraded already. It’s just a matter of how long it will take.

gryphon202 on August 7, 2011 at 12:57 PM

What infuriates me about this whole mess is that the tea party and republicans have been screaming about debt and deficits for over 2 years now, despite being called racists, despite being called teabaggers, despite being called Unamerican (Pelosi) and now terrorists and hobbits. Republicans have stuck to their guns and remained serious about reductions and have passed bill after bill trying to address the problem and ended making a whole pile of concessions while democrats and this president have done nothing but whine about people with corporate jets paying more taxes. And now I suspect what will happen is we’ll all end up paying more taxes because that’s the only thing that will appease these vultures and if Mr. President can’t appease them he can’t be reelected. And that’s what it will all come down to.

scalleywag on August 7, 2011 at 12:57 PM

When they downgraded Italy, the Italian govt raided S&P’s and Moody’s offices. No doubt Obama is contemplating that.

itsnotaboutme on August 7, 2011 at 12:58 PM

If it’s the debt that is the problem, then forcing the government to balance its budget would have staved off the downgrade. That seems to disprove your ‘update’ on the previous thread on Obamacare that the tea party would have gotten the blame if we had succeeded in forcing the Ruling Class to balance the budget.

FloatingRock on August 7, 2011 at 12:17 PM

My God man, read this post again, if you even read it once. Your reading comprehension can’t get through the blockage in your one track mind.

Vince on August 7, 2011 at 12:59 PM

The interesting thing is that if the liberal spin is to be believed, and the downgrade was actually due to the Tea Party’s antics, why then would S&P be “criminals” to the left? You’d figure they would be heros for telling the truth about those Tea party rubes and terrorists. Meme cognative dissonance happening here.

Kataklysmic on August 7, 2011 at 12:42 PM

You should ask one of our HA Leftists that. Could be great entertainment.

Del Dolemonte on August 7, 2011 at 12:53 PM

I’m not a lefty but I read enough lefty blogs that I think I get it. S&P are “criminals” to them because they rated all the junk mortgages (CDS) as AAA and have never been prosecuted for their part in it. They feel the same about Moody’s and other ratings agencies.

As far as the cognitive dissonance party, pray tell when did the progressives’ arguments ever square??? :)

Greyledge Gal on August 7, 2011 at 1:00 PM

Donald Douglas on August 7, 2011 at 12:53 PM

Saw that at Instapundit, she’s a trip isn’t she?

Cindy Munford on August 7, 2011 at 1:00 PM

What part of “Stop The Spending” is so hard to understand?

ajacksonian on August 7, 2011 at 1:01 PM

scalleywag on August 7, 2011 at 12:57 PM

Explain to me again how we get tax increases with a Republican, conservative fearing Republican House of Representatives?

This why the whole thing is such a sham. The House and only the House has absolute authority over the budget and debt. The Senate and the President can honestly only do one of two things, agree or disagree.

astonerii on August 7, 2011 at 1:03 PM

Old and busted: The buck stops here.

New and shiny: The buck-passing starts here.

SouthernGent on August 7, 2011 at 1:04 PM

KingGold on August 7, 2011 at 12:42 PM

Yes, I blame both parties, and factually so.

I find it humorous that you are “unwilling to accept the reality that’s right in front of your face”, yet accuse me of same.

FloatingRock on August 7, 2011 at 1:04 PM

When they downgraded Italy, the Italian govt raided S&P’s and Moody’s offices. No doubt Obama is contemplating that.

itsnotaboutme on August 7, 2011 at 12:58 PM

I was reading an article about the downgrade on the NY Times about an hour ago. The overwhelming response (over 1000 comments) was that the DOJ should go in Monday and immediately open an investigation into all the ratings services.

That will surely help us not get downgraded further. But it’s the Chicago Way . . .

Greyledge Gal on August 7, 2011 at 1:04 PM

He puts the odds of another downgrade at 3:1. I’d call it even money, at least while Democrats continue to blame the Tea Party for, er, wanting to do exactly what S&P demands.

Second downgrade by the end of the year, Ed. I’m starting to believe the “blame the Tea Party” crap has stuck.

And I will ask one more time……When is President Downgrade going to go on the boob tube to address this, or better yet, throw the Tea Party and S & P under the bus for whole world to see?

Knucklehead on August 7, 2011 at 1:04 PM

With this latest update, I can say we’re as good as downgraded already. It’s just a matter of how long it will take.

gryphon202 on August 7, 2011 at 12:57 PM

Uh… did you mean downgraded again? We’ve already been downgraded.

Vince on August 7, 2011 at 1:05 PM

Correction:

That will surely help us not get downgraded further. /sarc

But it’s the Chicago Way . . .

Greyledge Gal on August 7, 2011 at 1:05 PM

get paul ryan out there front and center….they need to push his plan or even the CC&B plan back to the senate and say this is our plan…where is your plan???

cmsinaz on August 7, 2011 at 1:06 PM

He puts the odds of another downgrade at 3:1. I’d call it even money, at least while Democrats continue to blame the Tea Party for, er, wanting to do exactly what S&P demands.

I thought he said 1 in 3. No?

SlaveDog on August 7, 2011 at 1:06 PM

SouthernGent on August 7, 2011 at 1:04 PM

+1

cmsinaz on August 7, 2011 at 1:07 PM

KingGold on August 7, 2011 at 12:42 PM

Yes, I blame both parties, and factually so.

I find it humorous that you are “unwilling to accept the reality that’s right in front of your face”, yet accuse me of same.

FloatingRock on August 7, 2011 at 1:04 PM

I think both of you gentlemen are right to an extent. Bush 43 was bad. So was Clinton. And for that matter, so was Bush 41. Establishment hacks all. Reagan did what he could, but should have done more — and what he was actually capable of with a Democratic congress will be a subject of eternal historical debate. Point is, we haven’t been a consitutional republic since long before most of us were born. And Barack Hussein Soetoro-Obama made it far worse than it was before.

So, instead of carping on each other about what the problem was, can we at least agree on what the problem is and worry about what we’re going to do about it tomorrow? In 2012? And going forward?

gryphon202 on August 7, 2011 at 1:07 PM

Greyledge Gal on August 7, 2011 at 1:04 PM

i can see holder doing this…

cmsinaz on August 7, 2011 at 1:07 PM

Is Obama playing golf today?

SlaveDog on August 7, 2011 at 1:08 PM

Uh… did you mean downgraded again? We’ve already been downgraded.

Vince on August 7, 2011 at 1:05 PM

Did you read Ed’s update?

Knucklehead on August 7, 2011 at 1:08 PM

With this latest update, I can say we’re as good as downgraded already. It’s just a matter of how long it will take.

gryphon202 on August 7, 2011 at 12:57 PM

Uh… did you mean downgraded again? We’ve already been downgraded.

Vince on August 7, 2011 at 1:05 PM

I meant downgraded again. Knowing the bond market as I do, AA+ is still wayyyy too optimistic as a way of describing the current “full faith and credit of the United States of America.”

gryphon202 on August 7, 2011 at 1:08 PM

Uh… did you mean downgraded again? We’ve already been downgraded.

Vince on August 7, 2011 at 1:05 PM

Did you read Ed’s update?

Knucklehead on August 7, 2011 at 1:08 PM

Don’t be too hard on him, Knuck. I didn’t make myself clear. But Vince was right. I meant downgraded *again*.

gryphon202 on August 7, 2011 at 1:10 PM

FloatingRock on August 7, 2011 at 1:04 PM

As you can see the moderate Right doesn’t like the Tea Party either.

Cindy Munford on August 7, 2011 at 1:11 PM

S&P official: Another downgrade will come if we don’t reduce long-term debt

Bond traders know exactly what this means, which is:

Its worse than AA+ right now, but we’re doing the world a favor. Get your shit together, or we’ll be forced to tell the truth, the whole truth and nothing but the truth.

And you can’t handle the truth.

BobMbx on August 7, 2011 at 1:11 PM

Yes, I blame both parties, and factually so.

FloatingRock on August 7, 2011 at 1:04 PM

Fine. You blame both parties. Then why are you agitating for action against one (primary those RINOs even if the Democrats get their seats) and not the other (get those Democrats out, no matter who we have to replace them with)?

KingGold on August 7, 2011 at 1:12 PM

Shouldn’t S&P credibility at bond rating be downgraded, too? They rated the US so high for so long, and this evidence that we should be downgraded has been there for them to see all along for a very long time, so they should suffer some pain, too, for helping things get to where they are today.

Christien on August 7, 2011 at 1:12 PM

Is Obama playing golf today?

SlaveDog on August 7, 2011 at 1:08 PM

Is today Sunday?

slickwillie2001 on August 7, 2011 at 1:12 PM

gryphon202 on August 7, 2011 at 1:07 PM

The problem’s that were, still are. Neither Democrats nor RINO’s have any intention of cutting the size and scope of government. Aside from useless rhetoric, is there any evidence to the contrary? (Answer: no)

FloatingRock on August 7, 2011 at 1:13 PM

Yes, I blame both parties, and factually so.

FloatingRock on August 7, 2011 at 1:04 PM

Fine. You blame both parties. Then why are you agitating for action against one (primary those RINOs even if the Democrats get their seats) and not the other (get those Democrats out, no matter who we have to replace them with)?

KingGold on August 7, 2011 at 1:12 PM

I know the question is not directed at me, but I feel a need to address it. If we have to agitate against DEMOCRATS, then America is well-and-truly over. I think the whole point of agitating against RINOS is to get people to understand that they’ve placed their faith in the Republican party wrongly.

Is there anyone here who would honestly entertain the thought of helping to elect a democrat?

gryphon202 on August 7, 2011 at 1:13 PM

April 18, 2001, S&P indicated without control of debt to GDP ratio, US ratings outlook was downward. From the full text of that report

In our baseline macroeconomic scenario of near 3% annual real growth, we expect the general government deficit to decline gradually but remain slightly higher than 6% of GDP in 2013. As a result, net general government debt would reach 84% of GDP by 2013. In our macroeconomic forecast’s optimistic scenario (assuming near 4% annual real growth), the fiscal deficit would fall to 4.6% of GDP by 2013, but the U.S.’s net general government debt would still rise to almost 80% of GDP by 2013. In our pessimistic scenario (a mild, one-year double-dip recession in 2012), the deficit would be 9.1%, while net debt would surpass 90% by 2013. Even in our optimistic scenario, we believe the U.S.’s fiscal profile would be less robust than those of other ‘AAA’ rated sovereigns by 2013. (For all of the assumptions underpinning our three forecast scenarios, see “U.S. Risks To The Forecast: Oil We Have to Fear Is…,” March 15, 2011, RatingsDirect.

Therefore both the WH and COngress knew out ratings was already in jeopardy, before they raised the debt ceiling

Seems obvious to me the deadline to rubber hose a raise in the debt ceiling thru COngress was not Ramadan, nore obama’s birthday, but to get it signed into law before S&P announced the downgrade.

Before the ink was dry, they had borrowed enough to raise the natl debt to exceed out GDP for the first time in US history…

entagor on August 7, 2011 at 12:35 PM

Debt as a % of GDP was 96.4% in January, and we hit the debt ceiling in May. Treasury cooked the books to make it look like things were better than they were despite the fact they hit the ceiling, all the while knowing that those tricks would be exposed once the ceiling was increased.

youngTXcon on August 7, 2011 at 1:14 PM

The problem’s that were, still are. Neither Democrats nor RINO’s have any intention of cutting the size and scope of government. Aside from useless rhetoric, is there any evidence to the contrary? (Answer: no)

FloatingRock on August 7, 2011 at 1:13 PM

I’m about solutions. And when somebody tells me “The GOP will betray you,” they’d better have an answer to the question, “So what do we do next?” I don’t choose my actions out of fear of anything or anyone.

gryphon202 on August 7, 2011 at 1:15 PM

By the way, that Janet Daley piece out today is killer. Things are coming to a head! ‘A Capitalist Economy Can’t Support a Socialist Welfare State’.

Donald Douglas on August 7, 2011 at 1:15 PM

Is there anyone here who would honestly entertain the thought of helping to elect a democrat?

gryphon202 on August 7, 2011 at 1:13 PM

Ahem.

“If O’Donnell can’t win the general, better still the Democrat than Mike Castle.”

KingGold on August 7, 2011 at 1:16 PM

Fine. You blame both parties. Then why are you agitating for action against one (primary those RINOs even if the Democrats get their seats) and not the other (get those Democrats out, no matter who we have to replace them with)?

KingGold on August 7, 2011 at 1:12 PM

Because the Democrats aren’t the ones stabbing me in the back. They are across on the other side where they have a hard time getting at me and I can keep my eyes on them. It’s the ones that we allow behind our own lines that are killing America by preventing responsible people from trying to save it.

FloatingRock on August 7, 2011 at 1:16 PM

Two points:

1. Re: comment posted above:
“I mentioned this as an aside in my earlier post, but it bears repeating here. Republicans cut the only deal they could get without control of the Senate and the White House. Had they refused to take that deal, then S&P and likely Moody’s would have lowered the rating on Wednesday, and Republicans would be taking the blame. Instead, this clearly shows that Democratic refusals to deal rationally with the entitlement crises are the reason for the decline in confidence in the US.”

BS…hogwash….stand on your principles and let the chips fall where they may – quit playing these silly, juvenile
games.

2. When our government tackles the waste in the government
agencies, EPA, etc. along with the fraud and waste in
Medicaid, welfare, etc. THEN and only THEN should they look at lowering any benefits in Social Security and Medicare.

Social Security and Medicare are paid into by its citizens.
Quit acting like seniors are trying to defraud the government by being on these programs. As a matter of fact, one, unless self funded, is forced to be on Medicare when one turns 65. This is a smoke screen that really ticks me off.

Amjean on August 7, 2011 at 1:17 PM

Is there anyone here who would honestly entertain the thought of helping to elect a democrat?

gryphon202 on August 7, 2011 at 1:13 PM

Ahem.

“If O’Donnell can’t win the general, better still the Democrat than Mike Castle.”

KingGold on August 7, 2011 at 1:16 PM

I meant helping as in proactively campaigning for/donating to, King. You’re barking up the wrong tree with me, especially as goes 2012. Need I remind you, I said NOTHING aobut Christine O’Donnell before she had secured her primary victory, and even then I only went so far as to say I didn’t think it was strategically/politically wise to snipe at her. Besides, what kind of naivete was required to expect any better out of the state that keeps sending Joe Biden back to the Senate?

gryphon202 on August 7, 2011 at 1:20 PM

IIRC, the Wall Street Journal reported that Treasury caught S&P botching their calculations by $2 trillion or more, and they admitted it.

If true, S&P needs to take a serious if not fatal hit to it’s own rating, including bond ratings. Right now, it looks like they’re trying to cover their mistake by going on the offensive saying another downgrade is approaching without serious changes.

I’d say botching a calculation this important means S&P should already be facing another threat of another hit if THEY don’t make necessary changes, too. They’re part of this whole mess and should have to face the music, too.

Christien on August 7, 2011 at 1:24 PM

Del Dolemonte on August 7, 2011 at 12:53 PM

I’m not a lefty but I read enough lefty blogs that I think I get it. S&P are “criminals” to them because they rated all the junk mortgages (CDS) as AAA and have never been prosecuted for their part in it. They feel the same about Moody’s and other ratings agencies.

As far as the cognitive dissonance party, pray tell when did the progressives’ arguments ever square??? :)

Greyledge Gal on August 7, 2011 at 1:00 PM

Hey, the Left has to blame somebody for this other than O’bama. They would rather be waterboarded than admit he and the Democrats who controlled Congress from 2007 til 2011 had anything to do with this downgrade.

The quickest way to shut them up is to invite them to actually read the entire text of S & P’s statement from Friday. Not once is the Tea Party blamed, although S & P does make a vague reference to “Republicans in Congress”. However, S & P also says part of the reason for the downgrade was because of the legislation that was passed last week. Of course, the Democrat Senate had to sign off on that too, but S & P never mentions that.

Another reason S & P did what they did comes later in their statement where they say that the economic stats released by the O’bama Regime in late June prove that they had previously manipulated the economic data to make it appear that the recession wasn’t as bad as it really was.

Had this downgrade taken place during a Republican Administration, that would be the Democrat Media’s Talking Point on this matter. So they will simply pretend S & P never said this in their statement, so they won’t have to report it.

Del Dolemonte on August 7, 2011 at 1:24 PM

Seniors are selfishly sucking up the youth’s future by threatening anyone who tries to take away e free money. You are getting three times more from SS and Medicare than you put in. Thieves.

andy85719 on August 7, 2011 at 1:25 PM

Meh. I’m letting the topic get derailed here. It is sheer naivete to believe that Republicans aren’t worthy of criticism in all this. Republicans had congress AND the executive branch for six years without reducing actual spending a single thin penny. Plenty of blame to go around.

gryphon202 on August 7, 2011 at 1:25 PM

as well as more consensus in Washington

WTF does that mean? Consensus on what? There’s plenty of consensus in Washington right now. Unfortunately for us the consensus is that we’re going to spend more than we bring in no matter what.

ButterflyDragon on August 7, 2011 at 1:26 PM

Besides, what kind of naivete was required to expect any better out of the state that keeps sending Joe Biden back to the Senate?

gryphon202 on August 7, 2011 at 1:20 PM

I reiterate. Scott Brown and the Maine sisters voted for Cut Cap and Balance, which, unless people are being thoroughly dishonest, was the ultimate goal here. There is no reason to believe, considering that Castle’s voting record was identical to those three, that he wouldn’t have voted for it. Same with Sue Lowden and Jane Norton, who were similarly beaten to the nomination by “True Conservative” candidates.

Instead, Chris Coons, Michael Bennet, and Harry Reid voted to kill it. Sometimes, success as a political movement means choosing where and when to fight, and making a very tough choice to side with the lesser of two evils.

KingGold on August 7, 2011 at 1:28 PM

The S&P statement was disturbing on several levels. It seem to imply that the GOP was more culpable than the Democrats. Even though the entire mess was caused by wild Democratic spending . So is S&P saying we should raise taxes? Knowing that will cause more layoffs resulting in even more spending? The whole exercise seems disingenuous. As if they had all ready determined that a grade reduction was in order and then sent a babbling fool out, who happens to be a English major, to justify it.
Standard and Poor’s is a huge contributor to the Democratic Party:
http://influenceexplorer.com/organization/standard-poors/69ef116db51541288f82666a423a5fe5

It was instrumental in up grading bundled C paper into AA+ instruments against all reason. It failed to down grade Fannie, Freddie, and AIG in spite of incredibly obvious weaknesses.
It is right up there with Goldman Sachs and GE in the crony capitalist ranks. Corrupt and biased. Elite liberals run the company. And they find the Democratic Party far easier to corrupt than the GOP.

pat on August 7, 2011 at 1:29 PM

Had this downgrade taken place during a Republican Administration, that would be the Democrat Media’s Talking Point on this matter.

Del Dolemonte on August 7, 2011 at 1:24 PM

they would actually be giddy if this fell under a gop president…24/7 glee..they would insist he/she would be unelectable because the buck stops at the presidency, he is the man in charge and should take the blame….we certainly don’t see that scenario now…

cmsinaz on August 7, 2011 at 1:30 PM

I’d say botching a calculation this important means S&P should already be facing another threat of another hit if THEY don’t make necessary changes, too. They’re part of this whole mess and should have to face the music, too.

Christien on August 7, 2011 at 1:24 PM

Except that this isn’t a “calculation,” strictly speaking. Yes, they were off. But they recalculated and stuck with their original conclusions.

Bond ratings represent an opinion on the part of a corporate entity (such as S&P, Moodys, or others) concerning the soudness of a bond investment. The only “calculation” involved is the math that aids them in coming to this opinion.

What S&P is essentially saying is, “Okay. So we were 2 billion off. We cop to that. We still don’t see America reigning in her debt anytime soon, and we’re long past the point that we can paper it over.” I don’t know many right-thinking Americans who would disagree with that most basic of premises.

In closing, please let me remind my fellow commenters that accounting is a mathematical science, but economics is a behavioral science. Thank you.

gryphon202 on August 7, 2011 at 1:31 PM

How about a B+?

MaiDee on August 7, 2011 at 1:32 PM

Quit acting like seniors are trying to defraud the government by being on these programs. As a matter of fact, one, unless self funded, is forced to be on Medicare when one turns 65. This is a smoke screen that really ticks me off.

Amjean on August 7, 2011 at 1:17 PM

Medicare Fraud: A $60 Billion Crime

Read it and weep. Privatize Medicare now!!!!

Knucklehead on August 7, 2011 at 1:33 PM

Instead, Chris Coons, Michael Bennet, and Harry Reid voted to kill it. Sometimes, success as a political movement means choosing where and when to fight, and making a very tough choice to side with the lesser of two evils.

KingGold on August 7, 2011 at 1:28 PM

Which is exactly why I, living out here in South Dakota, did not comment on the Delaware situation until after the primaries were concluded. I refuse to follow you into the pit of idle speculation from which I would probably never return.

We are dealt a hand here, and we must play it as-is. We don’t get to go back to 2010 and think, “Gee. If only I had another ace.”

gryphon202 on August 7, 2011 at 1:33 PM

So a lack of consensus was part of the problem for S&P. But consensus about what?

Beers called the U.S. Treasury Department’s criticism of the credit rating agency’s analysis a “complete misrepresentation.” Even with the debt limit agreement passed by Congress, he said, “the underlying debt burden of the U.S. is rising and will continue to rise over the next decade.”

Actually, the Tea Party caucus in Congress had it right. The bond raters needed to see the US take a significant step towards ending deficit spending and getting future liabilities under control. The problem with the lack of consensus came from the resistance of Democrats to the fiscal realities of the situation we face. Instead of addressing the real problems, Democrats blocked any attempt to deal with the entitlement crises and would only agree to address discretionary spending.

I would agree with this myself, but it ignores the larger point made by S&P…they are talking about both sides, not just the Democrats. The Democrats would respond with the above statement by saying that they offered a deal that cut more than $4 billion, but the Tea Party people would not accept any kind of deal that included revenue increases.

In other words, S&P is saying, that the long term drivers of debt are entitlements and we need to deal with that, but they have also shown disdain for the Bush tax cuts. They are saying both sides need to reach a consensus. And if that means that there has to be a deal on tax increases and entitlements..then both sides need to make that deal..not keep arguing about it forever.

I am just not sure if people are ready to do that. After all, each side still thinks they are the side that is right and the other guys are bunch of crazy people. This is why Obama came out of this with better numbers than the Tea Party people did..he did not make such an issue of pursuing a particular policy. The very fact that he did not have a plan helped him with the public. They saw him as ready to be flexible. I am not saying I agree with this, but I do think that is how the general public saw things.

Seniors are selfishly sucking up the youth’s future by threatening anyone who tries to take away e free money. You are getting three times more from SS and Medicare than you put in. Thieves.

andy85719 on August 7, 2011 at 1:25 PM

One of the reasons people rejected Obamacare was that it required taking money out of medicare. And Republicans like Sarah Palin used that fear by making an issue of things such as the socalled death panels. Can’t have it both ways, you can not be the protectors of medicare and call its recepients thieves.

Terrye on August 7, 2011 at 1:35 PM

Elite liberals run the company. And they find the Democratic Party far easier to corrupt than the GOP.

pat on August 7, 2011 at 1:29 PM

Maybe so, but if they’re doing the right thing for the wrong reasons, I’ll take it anyhow.

gryphon202 on August 7, 2011 at 1:35 PM

Comment pages: 1 2