Some thoughts on the S&P, the Tea Party and a “moveable feast”
Tuesday, Aug. 2. Congress approved legislation to raise the debt ceiling to around $17 trillion. The reasons: avoid default on payment, including Social Security checks, and a possible downgrade on our credit rating. Friday, Aug. 5, Standard & Poors lowered the country’s credit rating from AAA to AA+. Huh? According to Treasury Secretary Tim Geithner that wasn’t supposed to happen. Back in April, he said there was absolutely no chance of it.
Looks like Geithner’s crystal ball could use a little Windex.
This past Monday, the markets tanked, both here and abroad. The Dow Jones Industrials dropped 634 points in what was the sixth biggest decline in the exchange’s 112-year history. If you’ve followed the news, you’ve probably seen and had a bellyful of how we got into this financial fiasco, and the resulting blame game and finger pointing.
By Sunday’s political chat shows, Sen. John Kerry (D-Mass.), former Democratic National Committee Chair Howard Dean and Obama Campaign Manager David Axelrod were all calling it the “Tea Party Downgrade,” obviously all of them got the same DNC talking points memo. But is it really fair to blame everything on the Tea Party?
According to Rep. Charlie Rangel (D-NY), there’s plenty of blame to go around. From the White House, all we got were dire warnings about default and lots of great speeches by President Obama, though little in the way of actual leadership and no firm numbers in the way of debt guidance from the Bully Pulpit. From Congress, we got Mexican standoffs … Democrats in the Senate held their ground on protecting entitlements and Republicans in the House wouldn’t budge on tax cuts, among other threats of “over our dead bodies.”
Caught in the crossfire were many newly elected, Tea Party backed candidates who were put in office in 2010 to fulfill promises to shrink the size of government. In all fairness, months before the Aug. 2 deadline, they were among the first to raise a red flag about the debt problem. Frankly, as one observation noted, blaming the Tea Party does seem an awful lot like blaming the guy who called 911 to report a fire. And further, if the 2010 elections weren’t about spending, debt and the size of government, what were they about?
In any event, who’s responsible is one question, but another is should the downgrade have even happened? S&P said the downgrade happened because Congress and the administration were too partisan to get anything done that would significantly improve the nation’s debt outlook.
A couple of observations here:, the ratings downgrade points out our debt problem, at press time around $14.5 trillion; however, what it’s measured on in part is our ability to pay interest on the debt, which we can pay. S&P’s street cred is also in question, given that they weren’t very bullish on those responsible for the economic meltdown. Let’s face it, Lehman Brothers, which was at the heart of the whole crisis in 2008, had a AAA rating from … S&P, which also highly valued Goldman Sachs stock. And as of press time, the other two major ratings agencies, Moody’s and Fitch, have yet to follow suit. Why is that, do you think? Bottom line: the U.S. is still the world’s standard for risk-free investment. Is it riskier than it was 20 years ago? Possibly, but I’ll concede this point to the president: if the U.S. isn’t AAA, no country is.
By the debt deadline, deals and compromises had been made, and what did we end up with? So far, $1.2 trillion in reduction over the next 10 years! What we needed was $1.2 trillion per year for the next 10 years, but all we got after all that Capitol Hill infighting was a reduction in how much debt we’ll accumulate. In short, in 10 years time, the only question is will our debt sit at $23 trillion, $25 trillion or $27 trillion?
Approval ratings on handling the debt deal and the economy in general for both the president and Congress are at or near all-time lows. And what seems to be driving both ratings isn’t fear, but anger. American’s aren’t afraid; they’re pissed … at the White House and at Congress.
The president has been criticized for not owning up to his mistakes and not accepting that he’s half of the gridlock. Whereas President Clinton said, “I feel your pain,” President Obama seems to feel nothing. Congress fares no better, being labeled sell-outs for not going far enough on debt reduction and even taking heat from its own members for the 12-person so-called “Super Congress,” made up of six senators and six representatives, who would be charged with finding an additional $1.5 trillion in debt reduction.
Whether it’s the Super Congress or the president’s Debt Commission, it’s become a dubious pattern of late that when Congress can’t seem to do the job it was elected to do, that job is pawned off or farmed out to yet another “bipartisan” commission or committee.
As Congressman Rangel observed on Fox News, “People get another crack at this thing in 2012 and that’s a new Congress and a new ball game. So having 12 people … from the House and Senate determine the economic destiny of the United States of America to me is a complete forfeiture of our responsibilities as members of Congress.” And he’s exactly right.
But, as Republican presidential hopeful Herman Cain pointed out last weekend, “Common ground must be preceded by common sense,” and that’s apparently not a criteria when selecting members. Most of the picks seem to be based strictly on partisan lines, be it tax cuts or entitlements.
The “Super Congress” is already poised to deliver “Super Gridlock.” Excuse me, but don’t we already have plenty of that?
Voters will go to the polls next November, and by that time one would hope that Mr. Obama — and indeed those in Congress who also have seats up for re-election — would remember what happened in 2008. Then candidate Obama won the White House in part due to his “Hope and Change” message, but also in part due to a referendum on the outgoing President Bush. It was independent voters who carried the day for Mr. Obama, and without them we might be talking about President McCain instead.
As veteran NBC newsman Tom Brokaw has observed, “Independent voters are a ‘moveable feast.’” Everyone involved in this mess should tattoo that message on their brains, especially the president. Or he might wake up the day after the election and find that the “moveable feast” has put him and numerous members of Congress on the bread lines.
Author’s note: On Monday, Aug. 15, Fitch opted to retain the U.S. government’s AAA credit rating, calling the country’s economic outlook “stable.”