As if on cue, Standard & Poor’s downgrades US debt. Yet another historic achievement for El Presidente. If you’re thinking about buying anything on credit, now would be a good time to lock in your rates.
It remains to be seen how far-reaching this will be. Supposedly Moody’s and the other big agencies aren’t budging, which I suppose would help. And while I think our problems are quite serious, this decision also smacks of politics.
Why’s that? Recall that S&P got burned pretty bad in the 2008 mortgage meltdown, by not downgrading clearly insolvent lenders until it was too late. Plus this quote from the linked story:
“S&P added that it expects that the upper income Bush-era tax cuts will continue, despite vows from Obama to end the breaks next year.
‘The majority of Republicans in Congress continue to resist any measure that would raise revenues,’ the firm said.”
So are they choosing sides? I wouldn’t put it past the Post to insert their own biases and flat-out make stuff up, but that would be pretty brazen. While there’s also more talk about cutting spending, you can bet that comment will be used to bludgeon the Republicans. I hope they’re prepared to fight back.
If they’re smart (always a question), they’ll use this fact to their advantage. We can’t soak the rich enough to balance our budget. Confiscate everything they make and it wouldn’t do it. And it would wreck the economy (how hard are you going to work if you know the Feds are going to take every dime?). That might make the social-justice crowd feel better, but the math is not on their side.
It also presumes that all government spending is somehow justified, and cannot be cut to the necessary degree. Therefore, we must fund it.
Sorry, I’m not buying it. And the way things are going, I may not be buying much of anything.
UPDATE: China weighs in. Among other things, our single biggest creditor demands “substantial cuts” to military spending. Surprise!