aaa to b+

Robert Reich explains the credit downgrade

‘burned on a teacup’

Mark Mellman (The Hill): Make no mistake: Republicans castigating President Obama for S&P’s ill-considered downgrade are akin to a mugger attacking the mayor, then blaming the sheriff for “letting” him do it.

Republican members of Congress attacked the full faith and credit of the United States by arguing publicly that defaulting on our debts would not be so bad. No rating agency can hear that and remain confident America feels bound and determined to pay its bills.

When every serious GOP economist and most every Republican who has carefully investigated the issue – from Sen. Tom Coburn to former Sen. Alan Simpson – conclude that both spending cuts and revenue increases are required to restore our fiscal heath, but Republican leaders announce they will refuse to appoint anyone to the supercommittee who might even consider eliminating billions in subsidies to oil companies, they not only subordinate the national interest to the interests of Big Oil, they also send an unmistakable message to rating agencies that they aren’t serious about restoring fiscal discipline, thereby mugging America’s credit rating. Then they attack President Obama for what – allowing them to speak freely, if foolishly?

… “Tea Party” is becoming a dirty word …. Republicans running for every office from president to dog catcher are forced to pledge fealty to a group that is increasingly scorned by the American people.

The same could be said of the GOP itself. Just this week CNN/ORC pollsters found 59 percent of Americans harboring unfavorable views of the Republican Party, while only 33 percent offered favorable opinions. At no point in the last two decades has opinion of the Republican Party been so negative …. (While hardly loved, Democrats are 26 points better off than the GOP.)

…. Americans want compromise and moderation, while Republicans emerge from this crisis looking uncompromising in their extremism. Public preference for compromise is clear – three recent polls found 66 percent to 85 percent saying they would rather the parties compromise than stick to their principles.

But the GOP failed this test … Being uncompromising, extreme and in thrall to a movement that is becoming a pariah will hurt the GOP. Unfortunately, it hurts the country even more.

Full article here

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Gallup

surprise, surprise!

HughBoyOhBoy (DK): I did some checking this afternoon on the Federal Election Commission’s database of financial contributors to political candidates. Within minutes I found that Harold W. McGraw III, the Chairman, President, and CEO of Standard & Poor’s parent company, is a big money contributor to lots of Republicans.

Repeat recipients of McGraw’s largess include Mitt Romney, George W. Bush, the National Republican Congressional Committee, the National Republican Senatorial Committee, something called the Bush-Cheney Compliance Committee, and many more Republicans …. He has never given any money to the Obama campaign nor any to the Democratic Party.

Gee, how convenient. Standard and Poor’s issues a politically biased rating with a $2 trillion error. Republicans wave that rating around like Moses just brought it down from the mountain as verification of their defamation about the Obama presidency. And the head of the company making those ratings happens to give money to the likes of Mitt Romney and the Republican Party…

Thanks Fred

tuesday

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The White House announced Tuesday morning that the President’s trip to Interstate Moving Services in Springfield, VA., where he was scheduled to talk about fuel efficiency, has been cancelled.

Instead, the President will “meet with industry officials at the White House to discuss the first of their kind fuel efficiency standards for work trucks, buses, and other heavy duty vehicles,” the White House said.

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Eugene Robinson: The so-called analysts at Standard & Poor’s may not be the most reliable bunch, but there was one very good reason for them to downgrade U.S. debt: Republicans in Congress made a credible threat to force a default on our obligations.

This isn’t the rationale that S&P gave, but it’s the only one that makes sense. Like a lucky college student who partied the night before an exam, the ratings agency used flawed logic and faulty arithmetic to somehow come up with the right answer. No, life isn’t always fair.

And no, I can’t join the “we’re all at fault” chorus. Absent the threat of willful default, a downgrade would be unjustified and absurd. And history will note that it was House Republicans who issued that threat.

…. What happened this summer is that Republicans in the House, using the Tea Party freshmen as a battering ram, threatened to compel a default. More accurately, they demanded big budget cuts as the price of raising the debt ceiling. If the Senate and President Obama did not comply, the Treasury’s access to capital through borrowing would have been cut off.

…. The ratings agency should have focused instead on the one development that has direct bearing on our creditworthiness: the GOP threat to force a default. House Majority Leader Eric Cantor should never have planned to use the debt ceiling vote as “leverage.” Obama should have made clear from the start that if necessary he would take unilateral action, based on the 14th Amendment, to ensure there could never be a default. And yes, progressive Democrats who voted against the final debt-ceiling bill should be ashamed.

It’s pretty simple: If you threaten not to pay your bills, people will — and should — take you seriously.

Full article here

‘we’ve always been and always will be a triple-a country’

President Obama delivers remarks at the White House, July 8

monday

I’m late posting this video, but John Kerry is always worth the wait.

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The President has no public appearances in his schedule today – he attends two DNC events in Washington this evening (the first at a private residence, the second at the St. Regis Hotel)

axelrod

rusty, 98% honest

So, Standard & Poor’s downgrade the US credit rating after the debt ceiling saga/deal.

The Republicans blame President Obama for the downgrade.

But?

Ah, looks like Rusty Boehner is only apportioning 2% of the blame to the President. That’s good of him 😉

Thanks StR

timeline

Larger version of chart here

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Steve Benen:

1980: Ronald Reagan runs for president, promising a balanced budget

1981 – 1989: With support from congressional Republicans, Reagan runs enormous deficits, adds $2 trillion to the debt.

1993: Bill Clinton passes economic plan that lowers deficit, gets zero votes from congressional Republicans.

1998: U.S. deficit disappears for the first time in three decades. Debt clock is unplugged.

2000: George W. Bush runs for president, promising to maintain a balanced budget.

2001: CBO shows the United States is on track to pay off the entirety of its national debt within a decade.

2001 – 2009: With support from congressional Republicans, Bush runs enormous deficits, adds nearly $5 trillion to the debt.

2002: Dick Cheney declares, “Deficits don’t matter.” Congressional Republicans agree, approving tax cuts, two wars, and Medicare expansion without even trying to pay for them.

2009: Barack Obama inherits $1.3 trillion deficit from Bush; Republicans immediately condemn Obama’s fiscal irresponsibility.

2009: Congressional Democrats unveil several domestic policy initiatives …. which would lower the deficit. GOP opposes all of them, while continuing to push for deficit reduction.

September 2010: In Obama’s first fiscal year, the deficit shrinks by $122 billion. Republicans again condemn Obama’s fiscal irresponsibility.

October 2010: S&P endorses the nation’s AAA rating with a stable outlook….

November 2010: Republicans win a U.S. House majority, citing the need for fiscal responsibility.

December 2010: Congressional Republicans demand extension of Bush tax cuts ….. GOP continues to accuse Obama of fiscal irresponsibility.

March 2011: Congressional Republicans declare intention to hold full faith and credit of the United States hostage – a move without precedent in American history – until massive debt-reduction plan is approved.

July 2011: Obama offers Republicans a $4 trillion debt-reduction deal. GOP refuses, pushes debt-ceiling standoff until the last possible day, rattling international markets.

August 2011: S&P downgrades U.S. debt, citing GOP refusal to consider new revenues. Republicans rejoice and blame Obama for fiscal irresponsibility…..

Full post here

Tweeters? Tweet it! Please use the direct link to Steve Benen’s blog (here) rather than to mine – the more people who read this guy the better 😉

saturday – the downgrade

First, the President’s weekly address:

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Zachary Karabell (The Daily Beast): Math-challenged and politically-driven, S&P’s Friday night credit demotion puts the ratings agency on par with the Tea Party. Zachary Karabell on why that’s dangerous.

…. Let’s be clear: Congress and the White House did not cover themselves with glory during the debt debate throughout July. The United States has a stalled economy and a large amount of debt. But on so many levels, this downgrade is absurd.

…. there is the question of math. When S&P informed the White House of its intention to downgrade on Friday afternoon, the Treasury Department took issue with S&P’s math and claimed that their assessment of the trends of the U.S. debt burden and its ratio to GDP was off by trillions of dollars. No matter. After a brief review, the wizards at S&P went ahead and removed an A.

… I have no criticism of an academic theory about how nations function economically. But when debatable theories become the underpinnings of decisions by unelected individuals who run organizations with significant sway (sway ceded to them by governments throughout the 20th century), then we have a problem …. drawing on theories about the “right” level of debt puts S&P in a strange bedfellow alliance with the Tea Party.

The people who run the ratings agencies are welcome to their analysis, as is the Tea Party. But if Rogoff and Reinhart or the Tea Party announced that they were downgrading U.S. sovereign debt, they would be laughed for their audacity. Yet when it is one of the anointed ratings agencies, there is this sudden need to genuflect.

… The company assailed the Washington culture of “brinkmanship” so in display during the debt ceiling fiasco, and used that as the primary reason to take us down a notch. Excuse me, but since when is a pristine political process a key ingredient to good credit? Are we supposed to have civil politics in order to maintain the rating?

…. There is not a scintilla of evidence that the political process has yet impeded the ability of the United States to meet its debt obligations, even with the debt ceiling brinkmanship….

Finally, as a symbol that the United States is sliding off the rails, the downgrade is potent … the actions of S&P are part of problem and not just an independent verification that one exists.

These agencies have been elevated to heights that should not ascend; they have been chronically wrong and late in the past; and their rationale for a downgrade sounds more like a prim distaste for a dysfunctional political process that a reasoned assessment of the ability of the United States to discharge its obligations. No defense can be offered of our current political system or near-term economic prospects. But S&P – already on overreach as “neutral” judge of American creditworthiness – has no special standing to rule on the political system, and using that as a cudgel to prove their own power is a destructive act.

Full post here

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Politicususa: … Reality denying Republicans have already tried to shift the blame to Obama for the debt downgrade, but it is important to state the obvious. If Republicans would have passed a clean debt ceiling extension, the downgrade would have never happened. The GOP’s political recipe for bringing Obama down of one part chaos and one part obstruction was never going to allow that to happen. Many Republicans wanted the debt downgrade because it plays into their political strategy for 2012.

Whether or not S&P’s numbers are off, and with Standard and Poor’s track record they very well could be, the political point can’t be ignored. S&P downgraded our debt because our political leaders can’t agree on anything….

… The S&P can be described as a troubled and flawed organization at best. They took a justified beating from Democrats for their role in helping to cause the financial crash of 2008. It wouldn’t be much of a surprise if the people at S&P saw this as a chance for a bit of reputation enhancement and political payback.

In economic terms, S&P is one of three ratings agencies. As long as the other two agencies keep the US rating at AAA there should be little impact from S&P’s decision. The biggest impact will be likely felt politically, not economically.

Republicans can try to blame Obama all they want, but they the ones who ginned up a crisis out of thin air, and they are party that has forced the United States of America’s debt to be downgraded for the first time in this nation’s glorious history.

The message to Obama and the Democrats is simple. They can’t fix this. Republicans are hell bent on making sure that the economy doesn’t recover. This reality leaves Democrats with two choices. They can either battle with the Republicans thus adding to the gridlock that is trashing the economy, or they can compromise and flush the economy down the drain.

It is a lose-lose situation that has no hope of improving unless the voters wake up and remove the Republicans from the House majority in 2012. Until then the American people are going to force fed a buffet of embarrassment, humiliation, and failure prepared by the master chefs of economic destruction in the Republican Party.

Eat up America. This is government that you voted for in 2010.

Full article here

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Krugman

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Steve Benen: Before we get into Standard & Poor’s decision to downgrade United States debt, it’s worth appreciating the events that immediately preceded the announcement.

Officials from Standard & Poor’s provided documents to the Treasury Department, explaining the downgrade. Obama administration officials noticed a problem: the S&P numbers didn’t add up:

…..A Treasury staff member noticed the $2 trillion mistake within the hour, according to a department official. The Treasury called the company and explained the problem. About an hour later, the company conceded the problem but did not indicate how it planned to proceed, the official said. Hours later, S.& P. issued a revised release with new numbers but the same conclusion.

Got that? S&P prepared an analysis to justify a specific conclusion. The analysis was off by $2 trillion. Treasury explained to S&P that the analysis wasn’t even close to being accurate, which led the ratings agency to concede they’d made a mistake.

And a few hours later, S&P decided to reach the same conclusion anyway. The agency wanted to proceed with a downgrade; whether its numbers added up was irrelevant.

That certainly inspires confidence in the integrity of Standard & Poor’s decision making, doesn’t it?

I’m reminded of something Joe Klein said in April, after S&P first started making threats about this.

….. Hey, weren’t you the same guys who gave AAA ratings to the repackaged subprime mortgage-backed securities that, in truth, were utter dreck? And didn’t that help cause the 2008 economic collapse? And didn’t subsequent accounts reveal that you were in bed with the banks whose products you were supposed to be rating? I mean, you guys are still in business? Amazing.

Full post here