Saturday, August 6, 2011

A Quick Post on the Downgrade


Yesterday S&P downgraded America's credit rating from AAA to AA+.  We had held the AAA rating for 94 years, and losing it is yet another depressing sign of American decline. There are some pretty negative consequences for losing our rating, but I don't want to get into that.  If you're interested in the possible negative effects Hot Air has a pretty good write up here.

Instead, I want to just go over some things real quick.  First, lets look at S&P's reasoning for downgrading the US.  This little bit in particular.  Emphasis mine:

We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.

So basically, we lost our credit rating because we couldn't balance our budget or make considerable gains in doing so.  Since Democrats seem to only favor tax increases on the wealthiest 10%, and its mathematically impossible to balance the budget even if you tax the top 10% by 100%; it follows that Democrats don't want a balanced budget like those extreme and stupid Tea Partiers (Or that they're actually in favor of raising taxes on everyone, but using their rhetoric against them is so much more fun).  In other words its their fault, and I don't think its unfair to outright say that.  One side recognized that the budget needed to be balanced, entitlements represented a problem, and proposed realistic solutions.  The other stuck to unrealistic demands for a mixture of ideological and political reasons.  Oh and refused a deal that cut much more and may of saved our credit rating. 

There's a status I saw making its way around facebook that sums it up pretty well:

The United States of America has had a AAA credit rating since 1917. That rating survived WWI, the Great Depression, World War II, The Korean War, Vietnam, Jimmy Carter, 9-11, and those "unfunded" wars in Afghanistan and Iraq. It couldn't survive less than one term of the current White House occupant's misguided policies." -- Michael J. Fell

Its beautiful in its simplicity, and try as hard as some liberals will, this -will- be blamed on Obama.  Democrats may find a way to escape blame, and Republicans may inevitably get some blame, but Obama will be the one who gets the worst of this.  One of the arguments I've used on people who voted for Obama is that they elected him to make things better, and regardless of what mess Bush left him, he failed.  Philip Klein makes that same argument for why the downgrade is going to hurt Obama:

But there’s another reason why Obama won’t escape blame for this. Obama was elected president at a time when Americans felt the nation was in decline, and his central job was restore their faith that our best days were ahead of us, as President Reagan did after the Carter era. Whether you think he was dealt a poor hand or not, the bottom line is that the sense of decline has only deepened during the Obama presidency, and the first-ever downgrade of U.S. credit, whatever its ultimate financial implications, is yet another symbol of that decline.

The rest of his article (linked above) makes other good arguments for why this will fall on Obama, so give it a quick read if you're interested.  Hopefully America sees it the same way and this adds to the momentum conservatives are building as we head toward 2012.

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