The U.S. credit rating slips, proving that the debt ceiling agreement didn’t really fix anything

We gave in to the Congressional Republicans on the debt ceiling debate on almost every issue. We agreed not to raise taxes on the wealthy. We agreed not to tighten loopholes that allowed them to hide their assets elsewhere. We said that, instead, we would slash government spending. We were told that there wasn’t a choice. We were told that, if we didn’t give in to their demands, that the world’s credit rating agencies would strip us of our perfect AAA rating, causing each of us to pay more for everything from student loans to mortgages. Well, guess what? We agreed to the shitty deal, and we got downgraded anyway. So, not only did we agree to balance the American budget on the backs of the non-wealthy, but we’ll all be paying more for the money we’ll need to borrow in order to keep our eating. It’s the perfect punchline, isn’t it?

And here’s the best part is… Standard & Poor’s, in their report, which was just issued this evening, came right out and said that, one way to keep from sliding even further into the economic abyss would be to let the Bush tax cuts expire, which everyone capable of rational thought has known since this whole thing started. Here’s a clip:

…The outlook on the long-term rating is negative. As our downside alternate fiscal scenario illustrates, a higher public debt trajectory than we currently assume could lead us to lower the long-term rating again. On the other hand, as our upside scenario highlights, if the recommendations of the Congressional Joint Select Committee on Deficit Reduction–independently or coupled with other initiatives, such as the lapsing of the 2001 and 2003 tax cuts for high earners–lead to fiscal consolidation measures beyond the minimum mandated, and we believe they are likely to slow the deterioration of the government’s debt dynamics, the long-term rating could stabilize at ‘AA+’…

Of course, they also mention that, given Republican unwillingness to budge on the matter, they think that’s unlikely. Here’s another clip from the report.

…Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act….

And, because I don’t think it can possibly be said enough, I’d like to remind people that, according to projections by the Congressional Budget Office, our national debt would have been retired by 2009, had we stayed on the course set by Bill Clinton. But, as you know, the Republicans, led by Dick “deficits don’t matter” Cheney, had a different vision for our country. Speaking of which, the following clip comes from a piece by Gene Lyons at

…By any rational accounting, Bush and the GOP Congress that gave him everything he wanted from 2001 to 2007 should be held responsible for the entire $10.6 trillion national debt — along with the $1.3 trillion yearly deficit they handed to Obama, as well as the Wall Street crisis and bank bailouts.

It’s that simple: With no Bush income tax cuts, no unfunded Medicare drug benefit, and no off-budget Iraq and Afghanistan wars, the U.S. balance sheet would have been in fine shape for his successor. Then government investment needed to rescue the economy from the doldrums wouldn’t have seemed so alarming.

See, that’s how Keynesian macroeconomics is supposed to work. Pay down the debt in good times, spend on job creation and tax cuts when people are hurting and the private economy’s sucking wind. This mysterious “confidence” everybody talks about? What it amounts to is money in people’s pockets. Economically speaking, there’s no other kind.

Instead, heeding Dick Cheney’s observation that “Reagan proved deficits don’t matter,” the Bush administration topped-up Scrooge McDuck’s bullion pool. Now Scrooge funds think tanks paying store-bought “scholars” to argue that the massive debt they created is all the Democrats’ fault for seducing grandma with socialist schemes like Medicare and Social Security…

But, instead of investing in infrastructure and putting the men and women of America to work, we decided that now would be a good time to do the exact opposite, and slash spending, forcing more people into poverty. To do otherwise, it seems, would have been feeding into the Republican narrative that Obama is a “big government” liberal. And we couldn’t have that, even if it was what the situation called for, could we?

And, here, with more on those prevalent American misconceptions, is a clip from a recent column by Paul Begala at The Daily Beast.

…(I)t is striking how absent that history has been from the coverage of our current crisis. I can understand why the GOP doesn’t want to remind folks of how they screwed the pooch. Indeed, they have a competing myth—that Washington went on a spending binge; radical young President Barack Obama went crazy with the national credit card. That, of course, is nonsense. But too few Democrats—and almost no media commentators—have countered the mendacious right-wing storyline…

Fuck everything about this. Fuck the media. Fuck Washington… This did not have to play out this way. We could have allowed the irresponsible Bush tax cuts to expire, invested in America’s clean energy future, fixed our crumbling infrastructure, and created jobs. Instead we gave in to the bullying of the “starve the beast” Republicans and their corporate masters, allowing them to purposefully bankrupt our nation and roll back the New Deal. I may have joked in the past that another American revolution is on the horizon, but I didn’t really believe it until this very moment. As of right now, I think it’s unavoidable. We’re on a collision course for a major, bloody societal reboot.

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  1. Jiminy Trickle
    Posted August 5, 2011 at 10:46 pm | Permalink

    One wonders if the founding fathers had blogs where readers could therapeutically vent their outrage, bone tickling political satire streaming 24/7, all manner of medications for ill disposition, and bargain priced canned goods and so on … if we wouldn’t all still be serving the crown.

    One also wonders what would’ve happened if if anyone seriously believed the prophet from 1985.

    One also wonders who will join this revolution if it means missing, not just one episode, but perhaps a full season of The Bachelorette.

  2. Jiminy Trickle
    Posted August 5, 2011 at 11:13 pm | Permalink

    One little quote from Postman, see if it resonates:

    What Orwell feared were those who would ban books. What Huxley feared was that there would be no reason to ban a book, for there would be no one who wanted to read one. Orwell feared those who would deprive us of information. Huxley feared those who would give us so much that we would be reduced to passivity and egoism. Orwell feared that the truth would be concealed from us. Huxley feared the truth would be drowned in a sea of irrelevance. Orwell feared we would become a captive culture. Huxley feared we would become a trivial culture, preoccupied with some equivalent of the feelies, the orgy porgy, and the centrifugal bumblepuppy. As Huxley remarked in Brave New World Revisited, the civil libertarians and rationalists who are ever on the alert to oppose tyranny “failed to take into account man’s almost infinite appetite for distractions.” In 1984, Orwell added, people are controlled by inflicting pain. In Brave New World, they are controlled by inflicting pleasure. In short, Orwell feared that what we fear will ruin us. Huxley feared that our desire will ruin us.

  3. dragon
    Posted August 6, 2011 at 1:42 am | Permalink

    The dingo ate my bAaa-by!

  4. kerwin
    Posted August 6, 2011 at 8:19 am | Permalink

    I still dont understand why the US has a AA+ rating. It should be below investment grade. What the federal government should do is stop spending money it does not have.

  5. Chairman Meow
    Posted August 6, 2011 at 8:28 am | Permalink

    Jiminy, this is haunting. And spot on.

    “[T]he contemporary world [is] better reflected by Aldous Huxley’s Brave New World, whose public was oppressed by their addiction to amusement . . .”

    So all the bloggers, armchair field marshalls, Facebook buddies, and so on, are having the flames of their class and sociopolitical outrage tamped down by the meager simulacra of “solidarity” found via pronouncements and parrottings and Visactivism on the internet. “I just gave $45 to MoveOn, so it’s okay if I stay here playing with my phone another few hours, while township police officers are outside nightsticking 12-year-olds.”

    But Mark Zuckerberg is a social democrat, right? He and the IMF have our best interests at heart, in any event. See you all in Heaven. They sell extra-small Lady Gaga t-shirts up there.

  6. Mr. X
    Posted August 6, 2011 at 10:54 am | Permalink

    If Obmama had had the gut to allow the Bush tax cuts to expire, as they were set to at the end of 2010, none of this would have happened. It was a colossal mistake on his part.

  7. Glen S.
    Posted August 6, 2011 at 11:17 am | Permalink

    Since the dawn of the “Regan Revolution” more than three decades ago, politicians in both parties have been working overtime to convince Americans that:

    * Tax cuts on wealthy individuals and corporations would stimulate the economy and create jobs.

    * America is an “exceptional” nation, filled with exceptionally rugged and independent individuals who don’t need government bureaucrats or labor unions to protect them or help look out for their best interests.

    * “Free trade” agreements with nations which have much lower wages, working conditions, environmental regulations, etc., than we do will be good for the U.S. economy and for American workers.

    * A permanent war economy, including multiple American-led wars in locations around the globe are necessary to promote Democracy and protect American interests.

    Aside from the Washington/Wall Street elites who have profited massively from this malfeasance — did anyone seriously think this wasn’t going to end badly?

  8. Glen S.
    Posted August 6, 2011 at 1:28 pm | Permalink

    “30 Years Ago Today: The Day the Middle Class Died” by Michael Moore

  9. TaterSalad
    Posted August 6, 2011 at 4:37 pm | Permalink

    Barack Obama, living up to his word that we all know is “solid”, according to his supporters, worshipers and followers, should tell the American people he is not running for re-election in 2012 like he stated in the video below. Will Oprah Winfrey and the Hollywood elite allow this to happen? The Democratic Party will need a Presidential challenger very soon, time is of an essence! Then again, why should we believe Obama then, we don’t believe him now.

  10. TaterSalad
    Posted August 6, 2011 at 4:44 pm | Permalink

    Has anyone here ever thought that Capt. Bullshi_ is the problem with his socialist ideology? Then again, you probably wouldn’t even recognize it!

    Americans are finally waking up about how little this President knows about an economy.

  11. Maria
    Posted August 6, 2011 at 4:51 pm | Permalink

    On the verge of a major societal reboot….Mark, we’ve been on this reboot for about 6 years, but I’m an old person, and things are very different already then when I was younger.
    I think we’re moving into Japan mode, slow contraction, not much happening..god forbid we move into a Germany post WWI scenario, now that was a major rebooting…

  12. TaterSalad
    Posted August 6, 2011 at 4:59 pm | Permalink

    It is now time for all the left wing morons out there to bend over and kiss the boots of every Tea Party member in the United States. Start early with the kissing part because there are alot of them. They were right, loons…..wrong……..again!

  13. Fran
    Posted August 6, 2011 at 5:32 pm | Permalink

    From my friend Kari Chisholm’s FB page (didn’t source it myself)…
    From S&P (page four): “We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.”

  14. Mr. X
    Posted August 6, 2011 at 6:15 pm | Permalink

    Saw that Romney was blaming Obama.

  15. Maria
    Posted August 6, 2011 at 6:23 pm | Permalink

    You know, Tater tot, I just don’t read your links and I don’t know if your posts are for real, or if they are parodies…

  16. Posted August 6, 2011 at 7:21 pm | Permalink

    Sorry, Tates, S and P was pretty clear.

    One of the reason they downgraded us was because the Congress stupidly refused to raise revenue.

  17. Meta
    Posted August 8, 2011 at 10:58 am | Permalink

    Thom Hartmann wonders why notone in the MSM is noting S&P’s mention of the Republican role in the downgrade.

    Have you seen, anywhere, in any media, or even heard reported or repeated on NPR, the following sentence?

    “We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.”

    It’s right there on Page 4 of the official Standard & Poor’s “Research Update” — the actual report on what they did and why — published on August 5th as the explanation for why they believe Congress — and even the Gang of Twelve — will be unable to actually deal with the US debt crisis. Perhaps it’s just lazy — the bullet points at the beginning of the report don’t mention the Republicans or taxes, but instead just say, for example (part of one of six quick bullet-points):

    “[T]he downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges”

    In order to figure out that one of the reasons why is that “Republicans in the Congress continue to resist any measure that would raise revenues,” a hard-working reporter would have to read to page four of the eight-page report.

    It’s just too much effort for most reporters?

    Although they do also mention this in the very first sentence of the report: “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.” (Italics mine)

    Or could it be that many reporters — and virtually all of the television talking heads — are themselves relatively high income-earners who don’t relish the idea of higher taxes?

    Or could it be that reporters are afraid that if they report the actual language of the S&P Research Report, then Republicans will punish them by denying them “access” — i.e. refusing to show up on their programs — which is the career and show kiss-of-death for radio and TV programs that rely on big-name politicians to work?

    I don’t know the reason, but it’s fascinating to see all the huffing and puffing about the S&P downgrade of America’s debt that all seems to be working so hard to avoid mentioning that critical sentence.

  18. Posted August 8, 2011 at 12:42 pm | Permalink

    Don’t tell Tater that. We’re supposedly supposed to be kissing the boots of every Tea Partier out there.

  19. Mr. X
    Posted August 8, 2011 at 1:19 pm | Permalink

    The MSM may be hiding the fact that the Tea Party is responsible, but the word is getting out. The Tea Party is polling lower than ever.

  20. Glen S.
    Posted August 8, 2011 at 3:20 pm | Permalink

    Following S&P’s “downgrade” of U.S. debt after the markets closed on Friday, a kind of tit-for-tat quickly ensued between Washington officials and S&P over whether their rating was fair, or even entirely accurate.

    S&P, essentially responding to this very public rebuke, decided today to downgrade U.S.-backed mortgage finance companies Freedie Mac and Fannie Mae — only adding to the stock market volatility that has shaved about 13 percent of shares over the past five days — and over six percent just today.

    Just days ago, Democrats and Republicans alike were shouting “The Sky is Falling!” while claiming an urgent needed to pass (what they all agreed was) a historically bad piece of legislation in order to avoid a credit downgrade and additional stock market carnage.

    Now, Democrats and Republicans are back at it … fighting over who is “more” responsible for the credit downgrade and ensuing market crash …

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