Cross-posted from New Deal 2.0.
Does anyone really think that Standard & Poor's downgrade of U.S. debt would have occurred unless there had been the Congressional stand-off on raising the debt ceiling? For all of S&P's handwringing about the nation's debt problems, Congressional recalcitrance was the driving issue. So when the press says neither the Democrats nor the Republicans can escape blame, it is in truth nonsense. The showdown caused the downgrade, not the nation's financial liabilities, and Republicans deliberately caused it in pursuit of their own political and ideological goals.
Of all the silly comments about the Standard & Poor's downgrade of U.S. debt, those of Senator Lindsey Graham might take the cake. He said any CEO would have to quit if his or her company's debt was downgraded. But Graham does not realize that private corporations are essentially dictatorships, only occasionally beholden to shareholders. President Obama has to deal with the deliberately obstructionist Congress led by Graham's party. Republicans could have lifted the debt ceiling and still fought for their case. Instead, they played chicken with U.S. credit in the name of ideology -- or, more likely, to target the president.
S&P adds to the confusion by making believe there are serious budget issues here as well. It admits the political showdown was a cause for concern. Then it goes on to talk about America's need to get its finances together. Let's be very clear: There would be no downgrade now if it were solely based on budget issues. It is all about politics.
And about S&P's clairvoyance on budget matters, the record is mostly a bad joke. Few will remember that the credit ratings agencies gave Penn Central a high rating in 1970 just before it went bankrupt. Similarly, it gave New York City high ratings just before the city's brush with bankruptcy in the mid-1970s, about which we are reminded by Governor Carey's death. (He was the man who managed the city's rescue along with a then rather young Felix Rohatyn, the investment banker.) The credit ratings agencies gave Enron a high rating before it became the biggest bankruptcy of all time. And of course it doled out triple-A ratings to tranches of collateralized debt obligations, and even synthetic CDOs, which were blatantly undeserved. A mistake? The ratings agencies made a lot of money with those kinds of mistakes, as the Financial Crisis Inquiry Commission made clear in its recent report. These CDOs were composed of subprime mortgage bonds. Defaults of 8 or 9 percent, not just the 25 percent or so we wound up with, caused those triple-A tranches to plummet in value. How could they not know that? Conflicts of interest were rife, of course.
Now Fannie Mae and Freddie Mac are being downgraded because of S&P's decision. Some municipalities will be as well. So there is one other lesson to be learned here. If S&P really has that much influence, financial markets are hardly efficient at all. There is no new financial news here, no new turns in the budget fight, and no new political news. Markets should have built these concerns into prices already. An S&P announcement changes almost no real world conditions, only perceptions.
My guess is the fallout from S&P's move will not be bad. Some fairly amateurish calculations -- note its enormous arithmetic mistake of $2 trillion -- by S&P shouldn't be affecting markets. What is affecting markets is that the underlying American economy is weak, and that in turn affects the rest of the world. This morning as I write, interest rates are not rising sharply as you'd expect from a downgrade --in fact, some Treasury rates are plunging -- but stocks are falling sharply as you'd expect from a weak economy. We should also keep in mind that a weak U.S. economy is also affecting the outlook for Europe. Any news of economic weakness in the U.S. can affect these markets, because it will mean less demand for goods and a lower dollar. It is not only European financial uncertainty that is affecting U.S. markets.
But the U.S. debt downgrade is driven by politics, not economics. And here the Republicans bear all the blame.
Natalie Pace: FAQs on the Standard & Poor's Downgrade of the U.S. Credit Rating
S&P downgrades US credit rating - Yahoo! News
S&P downgrades US credit rating from AAA - Yahoo! Finance
Text of S&P's downgrade of U.S. ratings outlook - MarketWatch
Some Thoughts on the S&P Downgrade - Clive Crook - Business - The ...
Conveniently overlooking the fact that the debt was run up by republican presidents, particularly the CEO President George W Bush.
"Conflicts of interest were rife, of course."
Were? Doughnuts to Derivatives that should read that conflicts of interest are rife.... With the Fed doling out money at near 0% to the big banks, and the banks sitting on that money in the form of purchasing Federal bonds at 2.4%, downgrading the nation's credit rating will increase the profit rate those banks get on their 0% Fed money when the nation has to pay higher interest on the bonds.
Only 20 percent of U.S. House of Representatives will visit Israel during summer recess
by JEFF BLANKFORT AND PHIL WEISS on AUGUST 8, 2011
ost of the representatives are freshmen congressmen, with 47 – or fully half of the freshmen Republicans voted into office in 2010 – making the trip.
For many of them, this will be their first trip to Israel.
The week-long trips are sponsored by the American Israel Education Foundation, a charitable organization affiliated with the American Israel Public Affairs Committee, which brings large delegations of congressmen here every other August.
House Democratic Whip Steny Hoyer (D-Maryland) will head the Democratic delegation, and House Majority Leader Eric Cantor (R-Virginia) will lead one of the Republican groups.
http://mondoweiss.net/2011/08/only-20-percent-of-u-s-house-of-representatives-will-visit-israel-during-summer-recess.html
But they CHOSE to let it carry over to this summer. And, from all indications, they chose to do so because they wanted to be "forced" by the seemingly nutty Republicans into tossing Social Security and Medicare onto the bonfire, which, incidentally, Obama dutifully did before the Republicans even suggested it.
It's not a matter of bad negotiating skills or lack of backbone. If it happened once or twice, maybe. But when sharp concessions to the extreme right occur over and over and over and over again, it's not plausible anymore to think that it's not intentional. For the Democratic Party, it's a matter of calculation and deception. They know exactly what they're doing.
This is the Democratic Party. On economic and financial issues, when they're in power, they're further to the right than Republicans and completely in tune with their corporate/financial funding sources (check the numbers on this). In that regard, they're substantively worse than the Republicans.
And yet the mainstream media refuses to pin the blame on the GOP and baggers. Why is that? It sure sounds to me like the long arm of media and corporate executives is twisting the stories to their liking. We need independent news and investigative reporting or all we'll get is corporate propaganda.
What should have been a simple, routine, already down over a hundred times thing was turned into a media circus/drama queen's (or king's) farce of a "crisis" that didn't and still doesn't exist.
This was done by a bunch of self-centered, egotistical, know nothing about governing and in some cases, government, so-called legislators who tried to bolster their own egos.
This is what happens when people allow themselves to be hoodwinked by a bunch of cons who never had any intention of behaving honorably or taking their oaths of office seriously. Shame on those fools who voted for them.
Here's what you obviously don't get: There should have been NO BILLS to vote on to begin with. Raising the debt ceiling has NOTHING to do with future spending, and therefore should NEVER have been tied to any kind of budget debate. Raising the debt ceiling (which covers money already borrowed -beginning with Reagan by the way) should be automatic and handled with integrity by Congress.
In other words, Congress, as our representatives, is supposed to tell the rest of the world - on our behalf - that YES, America does honor its debts and we WILL pay them, NO strings attached.
Obviousy, the Congressional Republicans no longer have any integrity.
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That is exactly what everyone was thinking when the American people found out what was in the DEMOCATIC Party's PARTISAN $787 BILLION Stimulus legislation - that no one was allowed to view - prior to being bum-rushed for a vote - by Pelosi and Reid.
The Weekly Standard had a piece on it - as being GRAFT of EPIC Proportions.
That is a truth that needs repeating early and often even though the teapublicons will never accept it.
Just ignore what the actual rating agencies have to say about it too. -LOL
Thanks for proving my point too. -LOL
I beleive I out LOLed you too. -LOL
And don't forget this:
Lowering the nation’s rating to one notch below AAA, the credit rating company said “political brinkmanship” in the debate over the debt had made the U.S. government’s ability to manage its finances “less stable, less effective and less predictable.”
http://www.washingtonpost.com/business/economy/sandp-considering-first-downgrade-of-us-credit-rating/2011/08/05/gIQAqKeIxI_story.html
But who cares what history or the rating agencies say right?
Just keep on denying the reality that the teapublicons OWN this.
What was different, what changed, in my life the day after S&P voiced their OPINION?
Nothing.
It's their opinion and that's all. They did not create the universe, they did not create Wall
Street, they did not create you or me. But they want you to live in fear of THEIR OPINION!
Be my guest if that's what it takes, fear, for you to get through your day.
President Bush, in his fiscal 2004 budget
President Bush's budget projects a $307-billion deficit for fiscal 2004 and no return to surplus for the next several years.-------not including the iraq war
well they got the years and years of deficits part right
And who controlled it from 2001-2006? Along with the White House.
"The run away spending during those years make Bush look like a rank amature."
Yeah I guess Bush didn't have veto power over any of those bills. It's not like Bush didn't enjoy claiming executive privledge over everything genius.
When Bush came into office there was a budget surplus. Bush claimed that his proposals would result in a balanced budget.
How'd that work out for ya Sparky?
When a president departs office, his decisions and responsibilities don't suddenly disappear, they continue on into the next leader's tenure. Something the right either has no comprehension of or are too ignorant to realize.
What it took 8 years for Bush to systematically destroy cannot be erased or rebuilt in 2-1/2 years.