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S&P Drops U.S. Credit Rating to AA+ // Obama and Reid’s Crowning Achievement

S&P Drops U.S. Credit Rating to AA+ // Obama and Reid’s Crowning Achievement

S&P has dropped the U.S. credit rating from AAA to AA+:

The United States’ credit rating was cut for the first time when Standard and  Poor’s lowered it from triple-A to AA+, citing the country’s looming deficit  burden and weak policy-making process.

Standard and Poor’s on Friday revised the nation’s rating downwards to a AA+  with a negative outlook, despite a push back from the White House, which said  the rating agency’s analysis of the US economy was deeply flawed.

It was the first time the US was downgraded since it first received a  triple-A rating from Moody’s in 1917; it has held the S&P rating since  1941.

S&P further warned:

The outlook on the long-term rating is negative. We could lower the long-term rating to ‘AA’ within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.

Democrats own the downgrade.  They fought Republicans and Tea Party supporters every step of they way, and forced a deal which was insufficient.  They played class warfare and race politics against arguments that we needed to drastically change our spending habits.

This is Barack Obama and Harry Reid’s crowning achievement.

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Comments

As much as I hate what Obama has done to the nation and the economy, Bush, Clinton, and Bush and virtually every president of the 20th Century carry some of this blame.

Neither part has been concerned about the debt when they are in power. Both parties want to grow the government.

But perhaps now that this trigger has been pulled, the GOP may wake up and realize that we are closer to the end of the process than they imagined.

I don’t have high hopes but it is at least possible for some Republicans…

    The President might direct spending from figurehead, but it’s the Congress with the purse strings. As you can see, George Bush didn’t have that much control after 2006; nor did Bill Clinton have much control over the ‘boom’ times in the late ’90’s.

Cowboy Curtis | August 5, 2011 at 10:08 pm

This is nothing short of abject racism. What are they trying to say, that black people all have bad credit?

bob aka either orr | August 5, 2011 at 10:12 pm

NerObama fiddles while America’s credit burns. Say no more.

Decades of high living and greedily spending at rates no country can afford have finally resulted in serious consequences.

The reaction of the American public will tell us about the character of the nation. If a majority blames the people who tried to warn against the situation we find ourselves in, then they will deserve the disaster that will certainly follow.

Unfortunately the mantra responses coming out are a systematic “Blame The Republicans”

http://www.americanprogress.org/
http://socialistparty-usa.org/
http://www.cpusa.org/

…since as frequently as not they seem to share the same talking points.
Lets see what comes out on WH.gov and the Soros tanks in the next 12 hours.

I wouldn’t be surprised if S&P gets in a lot of trouble for this one. There were whispers this morning from some friends of mine at Morgan Stanley that some of the larger clients of S&P were already trading on this information. That they refused to revise their assessment after a huge error was found suggests they were more worried about the clients positions than an accurate rating. I’d keep a very close eye on what happens in the next few weeks with S&P.

    Awing1 in reply to Awing1. | August 5, 2011 at 10:33 pm

    I should add, of course, that these are merely unsubstantiated rumors garnered from small pieces of conversations heard throughout the day.

      quiznilo in reply to Awing1. | August 6, 2011 at 12:47 am

      S&P would lose the last shred of credibility they had if they hadn’t downgraded us.

        Awing1 in reply to quiznilo. | August 6, 2011 at 9:10 am

        Do you have even the slightest idea how sovereign debt is rated? Ultimately this will have a marginal impact on the US, considering the world still treats us as AAA. Hell, just yesterday our T-bills were trading with a negative yield! That is confidence!

They fought Republicans and Tea Party supporters every step of they way, and forced a deal which was insufficient.

I would have to disagree with you there, Professor. I would exclude those who do not embrace the mantle of the Tea Party, most especially those who were so quick to eschew the cut, cap and balance approach.

It should be crystal clear to anyone drawing breath that only a wholesale reduction in Federal spending is the path to redemption. The reductions in spending would need to be so large as to result in a enormous spike in unemployment due to firings.

We are in BIG trouble. I liken it to being in a car driven by a man who is blind drunk, speeding down a road with nothing on his mind but speed. As his foot is crushing the accelerator into the floorboard, we are screaming for him to stop but all we can see is the unavoidable telephone pole in our path.

I pray constantly that God will intervene and deliver us from this monster.

    7hawaii in reply to turfmann. | August 6, 2011 at 8:33 pm

    Never mind GOD where is our military, this traitor should be in Gitmo being waterboarded with all his fiends.

got my lottery ticket, ready to leave america.
put a fork in it, it is done.

Damned corporate jet owners! If it hadn’t been for their accelerated depreciation schedule, this wouldn’t have happened!

S & P warned obama back in April this could happen if he did not get a handle on spending ….remember obama’s budget ….he knew then but pushed a budget that increased spending. I am beginning to think its deliberate

This is crap! The rating agencies don’t actually believe there is a higher chance of default. Despite what they say, the US is still the safest place to invent your money in the world. We will never default. S&P is reveling in this publicity, nothing more. They feel they have power over the United States itself, and they are trying to further that perception as far and as long as possible. It means nothing.

    quiznilo in reply to mikehinton. | August 6, 2011 at 12:53 am

    We have the greatest debt of any nation in the history of the world, by far. There is not a smidgen of evidence that our leaders care about excessive debt. We have worse books than Enron did a week before its complete collapse. S&P action was merely pro-forma, we all recognized our financial weakening long ago.

In the spirit of compromise, I agree with almost everyone commenting here today, with just a few exceptions of those wrongheaded and unbending misguided souls who refuse to acknowledge the wisdom of the consensus.

I rest my case and demand that compromise be the order of the day or else.

Cheers everyone.

Whichever Republican gets the nod, the campaign slogan of the season has already been written: How do you rate Obama? S&P give him an AA+.

“Democrats own the downgrade.” That’s an interesting theory, and probably only time will tell. However, currently, 72% of the country disapproves of the way congressional Republicans handled the negotiations, while Obama’s number in the same category is 47%. The Tea Party has just seen its unfavorable rating jump up to 40% (and only 20% favorable). With all those numbers, and with S & P citing the lack of revenue as one of the deciding factors, I don’t quite get how Democrats “own” the downgrade.

    cylinders in reply to cylinders. | August 6, 2011 at 12:29 am

    incidentally, someone ought to tell Boehner that the Democrats “own” the downgrade, because he’s been saying high and low that he got 98% of what he wanted.

      quiznilo in reply to cylinders. | August 6, 2011 at 12:56 am

      And you really believe we were downgraded solely as a result of last weekend’s debt deal? If you were intellectually honest (which you aren’t), raising the debt ceiling was opposed by the Tea Party and the GOP and only demanded by idiot democrats who needed to buy votes and fund their elections in 2012.

        cylinders in reply to quiznilo. | August 6, 2011 at 2:32 am

        I think we were downgraded largely because we demonstrated to the world that our current congress is largely dysfunctional, and more interested in scoring partisan political points than actual governance. In my opinion–which according to polling this week is shared by the overwhelming majority of Americans–the House Republicans are by far the worst offenders in this regard.

        You write: “If you were intellectually honest (which you aren’t), raising the debt ceiling was opposed by the Tea Party and the GOP and only demanded by idiot democrats who needed to buy votes and fund their elections in 2012.”

        If I am reading your words correctly, you are saying that only “idiot democracts” demanded that we raise the debt ceiling, and that raising the debt ceiling “was opposed by the Tea Party and the GOP.” In other words, the Tea Party and the GOP welcomed a default on our national debt, the money that we’ve already spent and already owe, and a denigration of the full faith and credit of this country? How is not paying back the money that you owe a “conservative” position?

        This guy apparently had a different opinion:
        “Dear Howard:
        This letter is to ask for your help and support, and that of your colleagues, in the passage of an increase in the limit on the public debt.
        As Secretary Regan has told you, the Treasury’s cash balances have reached a dangerously low point. Henceforth, the Treasury Department cannot guarantee that the Federal Government will have sufficient cash on any one day to meet all of its mandated expenses, and thus the United States could be forced to default on its obligations for the first time in its history.
        This country now possesses the strongest credit in the world. The full consequences of a default or even the serious prospect of default by the United States are impossible to predict and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and on the value of the dollar in exchange markets. The Nation can ill afford to allow such a result. The risks, the cost, the disruptions, and the incalculable damage lead me to but one conclusion: the Senate must pass this legislation before the Congress adjourns.
        I want to thank you for your immediate attention to this urgent problem and for your assistance in passing an extension of the debt ceiling.
        Sincerely,
        Ronald Reagan”

    sybilll in reply to cylinders. | August 6, 2011 at 1:54 am

    Did you notice that the debt ceiling would have been increased, with some showmance follies, as a “clean” increase, sans the Tea Party congresspersons? Didn’t think so.

    Aggie95 in reply to cylinders. | August 6, 2011 at 7:38 am

    Well…. I say the democrats own this lock ….stock and barrel ….why you ask simple. Obama wanted a clean bill with nothing attached even though he was told in April that this would happen if he did not take a serious approach to cut spending and the debt. He was going to ignore the problem and it was the democrats who refused to cut spending and called those in the senate and congress …terrorists ….. evil ….racists well guess what ….we were right …as usual

    jimg in reply to cylinders. | August 6, 2011 at 2:35 pm

    Apparently, reading comprehension isn’t your strong suit.

    You say: with S & P citing the lack of revenue as one of the deciding factors

    S&P says: if we see that less reduction in spending than agreed to

    What is it with people like you?

    For the last time, we don’t have a revenue problem; we have a spending problem!

This should be an interesting election: higher taxes vs less spending. Probably the side that has to be most specific loses.

Democrats own the debt, deficits and downgrade debacle.

Republicans own the debt, deficits and downgrade, too, but in lesser proportions.

They both own that debt-ceiling pretend deficit-reducing unideal deal.

The Tea Party’s going to pwn everyone come November 2012.

[You know, if ratings were like bra sizes, not being AAA would be a good thing.]

[…] Standard and Poor’s: Because of loss of the first, we are turning into the second. […]

The Left’s attitude reminds me of this joke, adjusted to be politically correct. Assume that the parties are in a shooting war:

The Democratic scout returned from patrol and reported one Republican camped over the hill. With high spirits, a 25 man team went out to kill or capture him.

Two hours later, one half-dead soldier crawled back into Democratic camp. “It was a trap. There were two of them.”

Today’s equivalent is that, despite 30 years of discussion and planning, with complete control to carefully put together the Democratic vision, Democrats blame all failures on the Republicans, for demanding details and explanation, and for opposing Democrats from the position of a minority.

Those darned Republicans and the Tea Party. If they would just all stop opposing, and agree in every way, the glorious future would unfold, as we finally find out how the Democratic plans really work, as the Democratic President implements what was never explained in writing. The Democrats believe that explaining things in writing only invites incorrect analysis and attack by their opponents.

I’ve often said B Hussein Obama is a man-child of no accomplishments. I can’t say that anymore…he has brought us to financial collapse faster than any chief executive in history.

Thanks Barrack.

[…] Democrats will be trying to blame the Tea Party for this mess but the fact is that the Tea Party is the only one that offered a plan that would have avoided the downgrade. Here is Professor Jacobson’s assessment: […]

Greyledge Gal | August 6, 2011 at 4:54 am

The theme for the 2012 elections should be “Restoring America: Working Together to Restore our AAA Rating and our Standing in the World”

Obama is already starting to fold himself in the “we can get through this together” mantle. We cannot afford for him to be re-elected.

[…] Professor Jacobson: Democrats own the downgrade.  They fought Republicans and Tea Party supporters every step of they way, and forced a deal which was insufficient.  They played class warfare and race politics against arguments that we needed to drastically change our spending habits. […]

“Democrats own the downgrade. They fought Republicans and Tea Party supporters every step of they way, and forced a deal which was insufficient.”

That’s not totally clear. Although the Dems are far more responsible for our colossal debt than the Republicans (who spend too much money, just nowhere near as much as the Dems), they can find plenty of wriggle room. They can claim that only they, the Democrats, had a plan which would reduce the deficit, but the Republicans wouldn’t let them do it. That plan would have been tax increases. Such a claim would just be standard Democratic lies and misdirection, but people who don’t actually follow the numbers (that is, most of them) may think it plausible. Not that such a plan would have worked; even their inspiration, the wildly misunderstood J.M. Keynes, could have told them that sucking money out of a moribund economy (via increased taxes) is a sure way to keep it moribund. And it’s not clear that S&P, whom we can reasonably suspect DO follow the numbers, would have been fooled into thinking that tax increases would get the debt under control without driving a stake through the heart of the national wallet. But no matter how bad things get, the Dems can always play the blame game. By this point it’s the only game they’ve got.

The great fallacy at the core of the last few weeks’ debacle is the claim that

failure to raise debt ceiling = default

This was an attempt by the White House to pretend that it was a game of chicken, and that the Republicans would have to give the White House what it demanded or there’d be a credit crash and we’d all go down the tubes. (Recall that “don’t call my bluff” stuff from Obama.)

This little con depends on fuzziness about what “default” means. If “default” means failure to pay bills which S&P et al consider important (that is, interest on the debt), the claim is obvious crap. The feds had more than enough to cover that. If, however, “default” means inability to pay every last silly bill which the feds had promised someone they’d pay, like, say, a quarter-million dollars to support the Miss Boll Weevil pageant, or midnight basketball courts, or some such fluff, then raising the ceiling would indeed be the only way (short-term, at least) to avoid “default”.

So, which definition is being used? It seems that apologists use either as required to fabricate their excuses.

BP non-oil corp American | August 6, 2011 at 7:38 am

Show me how the Democrats lead in reduction of spending.
Show me how the Democrats in charge for 2 years past one budget.
Show me how the Patient Protection and Affordable Health Care either saves money for government or the patient.
Show me how raising taxes increases jobs in capitalist society.
Show me how a Democratic pResident leads in crisis.
Show me how higher debt limit creates better government.
Show me how there open debates to increasing the debt.

After reviewing the above, it’s a wonder S & P did not downgrade to us to FFF-.

I don’t care Democrat, Republican, or Independent cut the size of government and make it balance between current income at current tax rates, and they will have my vote and I’m sure our bond rating will reflect our economic stability.

    Show me how Obama will be reelected now.

      quiznilo

      I pray you are right…this country is about to go off the deep but as of right now I still give B Hussein Obama a 50/50 chance of getting reelected.

      I’ll give you four reasons:

      1. Barry has his nomination, the protest of Barry Sanders not withstanding. He will not be snakebitten like Carter in 80 or Bush in 92.

      2. The fact Obama and the Dems have bankrupted this country, made it’s foreign policy a laughing stock, seized multiple industries and are running them into the ground, etc will not be challenges by the objective media….thank God for the alternative media and Internet.

      3. BO has vowed to raise a billion dollars for his campaign and he may not reach that he will raise hundred of millions….and I think the people who want money out of politics will be strangely silent.

      4. I agree this election should be a landslide for the Republicans on the scale of 84 or 72. Obama has a record of destruction that should make him vulnerable to the kid on the ETrade commercials. Any decent candidate will mop the floor with him…and there it is. Never underestimate the ability of the RINOs/Rockefellers who run the party to snatch defeat from the jaws of victory. A milquetoast RINO will be another also ran come November 12. And I see Romney as another McCain who will do nothing but turn off the conservative majority of this country.

      Suffice to say we ain’t out of the woods yet.

This downgrade was the only fair thing to do.

[…] “Democrats,” Professor William A. Jacobson writes own the downgrade. They fought Republicans and Tea Party supporters every step of they way, and forced a deal which was insufficient. They played class warfare and race politics against arguments that we needed to drastically change our spending habits. […]

I’m sorry, but I think all of you are simply looking at the one tree (the downgrading) and are missing the entire forest. This action, taken on the part of S & P was obvious to anyone paying attention. S & P warned everyone that we had to get our debt under control, not necessarily raise the debt limit, which only served to increase our debt.

But this problem had a beginning, although we can not now see an end. The beginning began with those politicians who made “affordable” housing an issue (and yes, that included Bush although he warned 17 TIMES that the GSEs were in trouble and should be audited). The very things that contributed to the crash, the government’s demand to abolish standard lending practices, government interference in lending rules, state and local land use laws, all of this contributed to the crash in the housing market, and the consequent crash in our economy. Yet, none of those things have been changed. Banks are still operating on the Community Reinvestement Rules and it was even reported that Eric Holder is now, once again in true Janet Reno style, going after banks and lending agencies that are not giving loans to unqualified low income buyers.

You want the politicians to cut our debt by cutting our spending. That is admirable and should be done. The FAA has been out for weeks, but has anyone noticed? If a federal agency can not be working, and no one notices, does it really deserve all the money we pour into it? But if we do not change the rules that were responsible for getting us where we are, becoming economically healthy is NOT possible. A good beginning would be to repeal the Community Reinvestment Act, encourage standard, time tested lending practices, cut those agencies that really hold no value that were simply created to give some D.C. politican a place to put a friend (as the head of that agency). Turn over to the states those very things that the federal government was never designed to be involved in.

As long as the most important purpose of the federal government is social engineering, we are going to continue to fall down the rabbit hole.

Yes, some government workers will lose their jobs. That means that they will have to do what it takes to be competitive in the private sector. Oh, the horrors of that thought. But when the government spends less, it will need less and the money the IRS no longer confiscates from individuals and companies will be poured back into the economy. Idle money (that which lands with a thud in D.C.) does not make more money, but when that money is in movement, jobs are created, more taxes are paid, debts come down.

There is no easy way. Some will hurt for awhile. Those hurting will have to rely on their own abilities to make it. But the time has come for government to no longer be a simple redistribution of wealth and for Americans to realize that government is not their mommy.

    Awing1 in reply to retire05. | August 6, 2011 at 11:52 am

    “The FAA has been out for weeks, but has anyone noticed?”

    Once again you demonstrate your penchant for misstatements. A small portion of the administrative and construction functions of the FAA were out. And sure, nobody would notice if we stopped upkeep on our roads for a few weeks, but after a few years, it’d be real clear as bridges started to fall apart, potholes when unfilled, and the transportation lines of the country fell apart. So whats your point that no one notices when construction functions of the FAA are shut down for a few weeks? That we can shut it down for longer and just save some money with no significant consequences? Good luck with that.

I See Debt People.

With every day that passes, Harry Reid reveals more and more of what are the almost caricaturistic traits of a used car salesman.

[…] of both Houses in 2012, dramatically escalated spending while rewarding their base constituencies. President Obama has seen fit to promote his vision of wealth distribution as he demonizes this country’s wealth […]

Coming to a city, municipality and state near you…

“S&P lists the entities related to the US that will have their ratings dropped. Fannie, Freddie and Ginnie Mae have been cut. Together that is about $6 Trillion worth of paper.

S&P has said that the ratings change for the US does not impact corporate ratings. But the states and cities are another matter. To me it’s just nutty to think that the city of Syracuse is a AAA and the federal government is worth less than that. No doubt but that Muni downgrades will be forthcoming. This should have happened years ago.”

http://www.businessinsider.com/11-points-about-the-sp-ratings-move-2011-8#ixzz1UGNA4n2b

[…] Cornell Law Professor William A. Jacobson […]

retire05 | August 6, 2011 at 10:36 am says, in pertinent part:

. . .

There is no easy way. Some will hurt for awhile. Those hurting will have to rely on their own abilities to make it. But the time has come for government to no longer be a simple redistribution of wealth and for Americans to realize that government is not their mommy.”

Yes. Quite correct. But let’s understand that we are in for a very ugly fight as this plays out over the 2012 election cycle.

There is a reason that liberals and progressives so viciously and falsely attacked Tea Party protesters by attempting to tag them, first as racists, and now as terrorists.

It was and is because, as the representatives for many erstwhile denizens of dependency amongst us, they thought they were going to legally nail down a lawful basis for their ongoing efforts to serve up a generous and “rightful” portion of the American Dream without anyone having to go through the time-tested intermediate step of actually working for it!

No . . . it was a “right” and, therefore, free.

Then along came these “pesky” Tea Party folks who said, “Uhhh . . . not so fast. You are not going to get away with saddling us with an unbelievably costly and ongoing obligation to allow you to mandate the redistribution of our earnings and wealth to provide “soup to nuts” care for huge numbers of people, many of whom have made no reasonable effort to provide for themselves! We believe America is the land of opportunity; not the land of the free lunch! We believe in a reasonable safety net; not a mandated raid our pantries to provide for your constituents!”

So, lacking anything like a legitimate response, the Democrats immediately commenced calling them by the pejorative “teabaggers,” then said they were violent and racist, all without any evidentiary basis whatsoever! They even cooked up a false “incident” over the so-called use of the “n” word, but videos made at the time proved it was false.

Unwilling (and electorally incapable) of compromising on the issue of a mammoth and hugely expensive program for providing across-the-board “free” healthcare, stimulus programs, and bailouts, the Democrats stooped to the most vile and dishonest forms of name-calling and demagoguery they could conjure up in order to push those programs through, in spite of the considerable and legitimate questions raised and protests launched.

The electoral cost to them in 2010 was considerable, but they do not intend to lay down and lose this fight for all the marbles in 2012! They will do virtually anything to win. Whatever they held back on last cycle, will be front and center this time around.

PoliticalClownParade | August 6, 2011 at 3:22 pm

Professor, didn’t you mean to say this was Obama’s clowning achievement?

Linked at: http://politicalclownparade.blogspot.com/2011/08/dobamas-clowning-achievement.html

MaggotAtBroadAndWall | August 6, 2011 at 6:48 pm

Well, that didn’t take long. The Treasuer of Indiana, who is challenging Dick Lugar in the Republican primary for U.S. Senator from Indiana, has called for Geithner’s firing and takes a shot at Lugar for supporting the debt ceiling deal. I’m not sure why it’s Geithner’s fault that Congress and the President can not control spending, but so be it.

http://www.reuters.com/article/2011/08/06/idUS48304+06-Aug-2011+PRN20110806

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