Excellent Work, GOP

Govt officials: US expecting S&P downgrade

Two government officials tell ABC News that the federal government is expecting and preparing for bond rating agency Standard & Poor’s to downgrade the rating of US debt from its current AAA value.

Official reasons given, one official says, will be the political confusion surrounding the process of raising the debt ceiling, and lack of confidence that the political system will be able to agree to more deficit reduction. A source says Republicans saying that they refuse to accept any tax increases as part of a larger deal will be part of the reason cited. The official was unsure if the bond rating would be AA+ or AA.

A third official says that S&P made a "serious mistake" in its analysis, "based on flawed math and assumptions," so the Obama administration is pushing back. But even though "S&P has acknowledged its numbers are wrong, it's unclear what they're going to do.," the official said.

S&P refused to comment.

Monday at the market could be thrilling.

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Obviously this is mostly the GOPs fault

(#263302)

Only one party had many loudly proclaiming that default doesn't matter. And only one party had many more who obviously prioritize tax cuts over debt payment. 

 

But inaddition, this was a complete miscalculation by the Obama admin. and Treas. specifically that they could use the debt ceiling to their advantage on deficit reduction. They badly misunderstood how intransigent the Tea party caucus was and and how weak the GOP leadership.

 

You pass this type of deal when the budget comes around. They were counting on the danger of the default to assist in pushing an essentially conservative agenda. People were playing with matches here and got burned.

More comments from S&P blaming Republicans

(#263263)
HankP's picture

John Chambers, chairman of S&P's sovereign ratings committee, told CNN that the US could have averted a downgrade if it had resolved its congressional stalemate earlier.

 

"The first thing it could have done is raise the debt ceiling in a timely matter so the debate would have been avoided to begin with," he said.

 

. . .

 

"The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed," it added.

I blame it all on the Internet

Maybe S&P should be downgraded

(#263143)
Bird Dog's picture

A $2 trillion math error. Krugman has a fair point:

On the other hand, it’s hard to think of anyone less qualified to pass judgment on America than the rating agencies. The people who rated subprime-backed securities are now declaring that they are the judges of fiscal policy? Really?

Just to make it perfect, it turns out that S&P got the math wrong by $2 trillion, and after much discussion conceded the point — then went ahead with the downgrade.

More than that, everything I’ve heard about S&P’s demands suggests that it’s talking nonsense about the US fiscal situation. The agency has suggested that the downgrade depended on the size of agreed deficit reduction over the next decade, with $4 trillion apparently the magic number. Yet US solvency depends hardly at all on what happens in the near or even medium term: an extra trillion in debt adds only a fraction of a percent of GDP to future interest costs, so a couple of trillion more or less barely signifies in the long term. What matters is the longer-term prospect, which in turn mainly depends on health care costs.

So what was S&P even talking about? Presumably they had some theory that restraint now is an indicator of the future — but there’s no good reason to believe that theory, and for sure S&P has no authority to make that kind of vague political judgment.

In short, S&P is just making stuff up — and after the mortgage debacle, they really don’t have that right.

"Transparency and the rule of law will be the touchstones of this presidency."

--Barack Obama, January 2009

But do YOU agree with K-thug?

(#263198)
brutusettu's picture

Under [url=http://theforvm.org/diary/bird-dog/why-liberals-lose-part-ii#comment-263040]BD Theorem 263040[/url] did not the GOP cause S&P to downgrade the credit rating? Couldn't they have "averted" this earlier?

The agreement is implicit

(#263227)
Bird Dog's picture

A downgrade from AAA to AA+ isn't an economic disaster, especially when the downgrading is so judged by the incompetents at S&P. Default would have been.

"Transparency and the rule of law will be the touchstones of this presidency."

--Barack Obama, January 2009

Indeed

(#263340)
stinerman's picture

Good thing they cut a deal otherwise you know, they would have been totally responsible for the default.  Yes, totally.  As in 100%.  The debt debacle is wholly owned by the Republican Party and there is no way out of that.

The Constitution does not vest in Congress the authority to protect society from every bad act that might befall it. -- Clarence Thomas

S&P blames Republicans for downgrade

(#263131)
HankP's picture

from their report (pdf):

 

The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.

 

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 of course a$$holes like Erick Erickson are happy about it because they can blame it on Obama.

 

Or so they think. Republican friends of mine that I've talked to are furious at the GOP for this. They don't try to make excuses or further enable this self destructive behavior. But I guess it doesn't matter to republicans, do you realize that man is a ni?

 

I blame it all on the Internet

Both sides are to blame, Hank. -nt-

(#263139)

.

"Hell is truth seen too late." --Thomas Hobbes

No they're not.

(#263158)

When GHWB said "read my lips, no new taxes"  he backed down and it cost him a second term.   This time, when the GOP said it, they didn't back down, and I don't think I'm gonna be done selling all this gold for a decade, it's worth so much.

 

How is this possibly Obama's fault?   He asked for a more reasonable plan, he didn't get it.   How is this the Dems' fault?    They tried negotiating with the GOP and Boehner wouldn't budge.   Truth is, Boehner wouldn't budge because his own feet were held to the fire by the Tea Party, who might arguably bear the blame, all on their own, independently of actual Republicans.   But to say this was both parties' fault simply doesn't make any sense.   Obama might have negotiated a better deal, but based on what I've said about Boehner's feet in the fire, no I don't think he could have.

He Had Options He Didn't Use

(#263239)
M Scott Eiland's picture

Including going to the courts to block the debt limit law on 14th Amendment grounds (rather than the bad advice some were giving him just to do it unilaterally, a path that could well have led to impeachment). Apparently, he thought that the Republicans would fold and be humiliated as they were in 1995. He needs to learn that the Clinton playbook doesn't seem to be working for him, for reasons that should be obvious to anyone who compares the skillsets of the Presidents in question.

. . .and Don Mattingly must be fired (bye Ned--don't let the door hit you in the @$$ on the way out!).

He wouldn't have had to do anything

(#263264)
HankP's picture

if the Republicans didn't create this whole clusterf(*k in the first place. Don't try pulling out the "both sides do it" for this one, everyone sees right through it.

I blame it all on the Internet

Keep Saying That

(#263266)
M Scott Eiland's picture

It certainly can't make things worse for Obama to try. Oh, and having all the Democrats keep saying "hostage" and "terrorist." That'll go over well with moderate voters.

. . .and Don Mattingly must be fired (bye Ned--don't let the door hit you in the @$$ on the way out!).

Mitch McConnell said "hostage"

(#263267)
HankP's picture

as in "it was worth taking the economy hostage" -

 

“I think some of our members may have thought the default issue was a hostage you might take a chance at shooting,” he said. “Most of us didn’t think that. What we did learn is this — it’s a hostage that’s worth ransoming. And it focuses the Congress on something that must be done.”

 

 

I blame it all on the Internet

Irrelevant

(#263269)
brutusettu's picture

Irrelevant (noun)
1: Something that hurts your take on something, and it helps if it's not super widespread."That's irrelevant wtf does some random Congress dude have to do with anything? It's not like Mitch has a history of letting talking points/strategies out of the bag."

2: The GOP kept their memos and strategy locked up tight. "Only Mitch slipped up and briefly touched on the parable laden power point presentation of their strategy. The common folk are too stupid to call a spade a spade, so don't point out their strategy in parable terms."

Irrelevant

(#263268)
M Scott Eiland's picture

Just as the fact that some random tea party member made a reference to tea-bagging isn't an intellectually honest reason for labeling the whole movement that way (and using it as a convenient excuse to giggle at humor that is at the level of a retarded fifth-grader). Mitch McConnell got smacked around a lot in this kerfluffle, and he resented it--it doesn't give his words any additional weight.

. . .and Don Mattingly must be fired (bye Ned--don't let the door hit you in the @$$ on the way out!).

Pathetic

(#263271)
HankP's picture

He's the minority leader, and admitted to taking the economy hostage. On the record. How you can say that doesn't mean he took the economy hostage is an exercise for those who like to try and resolve logical contradictions or make a list of the stupidest statements ever uttered.

 

Really, that's the weakest thing I've heard here in years. "His feelings were hurt!" Maybe if his feelings get hurt again he'll confess to a murder or something.

I blame it all on the Internet

Lot Of Misquoting There

(#263272)
M Scott Eiland's picture

As reading the actual quote makes clear--McConnell certainly wasn't saying that he himself, or those who agreed with him, were holding the economy hostage. Still, less inept than the request for an example of the Commerce Clause impacting the Fourth Amendment.

. . .and Don Mattingly must be fired (bye Ned--don't let the door hit you in the @$$ on the way out!).

As a reading of the actual quote makes clear,

(#263283)

some of McConnell's colleagues actually wanted to shoot the hostage. McConnell merely learned that the hostage was "worth ransoming."

 

It seems like you have two choices: either McConnell paid the ransom, and is hoping to do so again in the future, or he demanded ransom, got paid, and is planning to do it again in the future. Good luck with that!

"Hell is truth seen too late." --Thomas Hobbes

And here's Eric Cantor, back in January,

(#263286)

telling the GOP to take the hostage in the first place:

“I’m asking you to look at a potential increase in the debt limit as a leverage moment when the White House and President Obama will have to deal with us,” said Cantor, one of several new House leaders who detailed the game plan for the coming months. “Either we stick together and demonstrate that we’re a team that will fight for and stand by our principles, or we will lose that leverage.”

Unprecedented? Yep. Harmful to the country? Uh huh. Was the hostage-taking idea entirely the creation of the GOP? Yes it was.

On Feb. 4, Congress voted to increase the nation’s borrowing limit — a vote it had taken 40 times in the past three decades — and a little-known city councilwoman in Montgomery, Ala., issued a statement.

 

“This ‘need’ to raise the debt ceiling is caused by one thing: out-of-control spending in Washington,” said Martha Roby, a Young Gun recruit whose campaign was ramping up.

 

By summer, “debt limit” had joined runaway spending as a sound bite. In South Dakota, GOP challenger Kristi Noem used the phrase to hammer her Democratic opponent, Rep. Stephanie Herseth Sandlin. Noem told Fox News that Sandlin had “voted for the budgets that have put this country further into debt. She voted to raise our country’s federal debt ceiling as well."

 

The Fox newscaster, Neil Cavuto, challenged her. “Yes, but a lot people voted to raise the debt ceiling, because the government would shut down without it, right?” “Well, a lot of people did,” Noem said. “But that doesn’t make it right.”

Great, great article about the GOP "Young Guns" and their absolute willingness to default on US debt to get what they want...and what they want is to default on Medicare & Social Security obligations.

"Hell is truth seen too late." --Thomas Hobbes

What we did learn is this, it’s a hostage that’s worth ransoming

(#263277)
HankP's picture

Explain away, trying to use the plain meaning of words.

 

And BTW, good job at encouraging discussion and debate. I'm sure people will be willing to ask questions of others when there's a shrieking monkey ready to turn it into a cliched sports metaphor*

 

*--not referring to anyone *here*, of course.

 

 

I blame it all on the Internet

Glass Houses -nt-

(#263279)
M Scott Eiland's picture

.

. . .and Don Mattingly must be fired (bye Ned--don't let the door hit you in the @$$ on the way out!).

"He asked for a reasonable plan..."

(#263176)
Bird Dog's picture

Maybe that was part of the problem. Obama didn't have his own plan.

"Transparency and the rule of law will be the touchstones of this presidency."

--Barack Obama, January 2009

Our dumb discourse

(#263299)

That's called a braindead talking point, BD. Sheesh. Just b/c Boehner said it doesn't make it so.

 

I suppose David Brooks was lying through his teeth when he wrote about Obama's proposals for a 4 trillion deal including cuts to entitlements?

Nah

(#263440)
Bird Dog's picture

Obama had no plan, seen from as far as across the pond

Pundits and political wise men have long dreamed of a “grand bargain”, which would arrest the growth of entitlement spending while raising tax revenue by closing loopholes. It is more or less the only formula that solves America’s budget woes while sharing political pain equally between the two parties. It is no coincidence that such a bargain lies at the heart of most recent bipartisan deficit-reduction schemes, including those put forward by the Senate’s “Gang of Six” and the president’s own fiscal commission. Both plans would have cut the deficit by roughly $4 trillion over the next decade, enough to put the debt on a downward path relative to GDP. Many hoped the debt-ceiling increase would be the vehicle to deliver it.

But Mr Obama, despite much talk about the need for long-term fiscal consolidation, has done little to advance it. He ignored his commission’s findings, and instead proposed a budget in February that left entitlements untouched.

In effect, Obama pretended that his own deficit reduction commission didn't exist. This doesn't exonerate the GOP, far from it, but it remains that Obama had no plan going into these negotiations, just talking points. It goes once again to his inexperience and uncourageousness, and it's not just a conservative who sees this.

The most charitable explanation is that he and his advisers have succumbed to a view of electoral success to which many Democrats succumb — that “centrist” voters like “centrist” politicians. Unfortunately, reality is more complicated. Centrist voters prefer honest politicians who help them solve their problems. A second possibility is that he is simply not up to the task by virtue of his lack of experience and a character defect that might not have been so debilitating at some other time in history. Those of us who were bewitched by his eloquence on the campaign trail chose to ignore some disquieting aspects of his biography: that he had accomplished very little before he ran for president, having never run a business or a state; that he had a singularly unremarkable career as a law professor, publishing nothing in 12 years at the University of Chicago other than an autobiography; and that, before joining the United States Senate, he had voted "present" (instead of "yea" or "nay") 130 times, sometimes dodging difficult issues.

A somewhat less charitable explanation is that we are a nation that is being held hostage not just by an extremist Republican Party but also by a president who either does not know what he believes or is willing to take whatever position he thinks will lead to his re-election. Perhaps those of us who were so enthralled with the magnificent story he told in “Dreams From My Father” appended a chapter at the end that wasn’t there — the chapter in which he resolves his identity and comes to know who he is and what he believes in.

Or perhaps, like so many politicians who come to Washington, he has already been consciously or unconsciously corrupted by a system that tests the souls even of people of tremendous integrity, by forcing them to dial for dollars — in the case of the modern presidency, for hundreds of millions of dollars. When he wants to be, the president is a brilliant and moving speaker, but his stories virtually always lack one element: the villain who caused the problem, who is always left out, described in impersonal terms, or described in passive voice, as if the cause of others’ misery has no agency and hence no culpability. Whether that reflects his aversion to conflict, an aversion to conflict with potential campaign donors that today cripples both parties’ ability to govern and threatens our democracy, or both, is unclear.

A final explanation is that he ran for president on two contradictory platforms: as a reformer who would clean up the system, and as a unity candidate who would transcend the lines of red and blue. He has pursued the one with which he is most comfortable given the constraints of his character, consistently choosing the message of bipartisanship over the message of confrontation.

Or in other words, the electorate pulled the lever for the bigger pussy. No wonder so many on the left are wondering if Hillary would've been the better C-in-C, pantsuits and all.

"Transparency and the rule of law will be the touchstones of this presidency."

--Barack Obama, January 2009

I'm not going to follow you down some rabbit hole

(#263446)

where you try and split semantic hairs and play dumb.

 

Just b/c Obama didn't follow his deficit commission from last year -- which by the way never issued a report due to internal divisions -- doesn't mean he didn't have specific proposals on the table during the debt ceiling negotiations. It was widely reported on and nothing in your link remotely contradicts it.

 

You're still contributing to our dumb discourse. And that's as much effort as I'll expend explaining why Boehner's brain-dead talking pt. isn't accurate.

JFCOAPS

(#263251)
HankP's picture

It was widely reported that Obama was negotiating with Boehner on a $4 trillion deal that included $3 trillion in spending cuts (including entitlements), and $1 trillion in "revenue enhancements" that didn't even involve raising tax rates. And it was widely reported that it was Boehner who pulled out because he couldn't get the tea partiers to back any revenue increases of any kind without offsetting tax cuts. It was Republican officeholders who kept saying that a default either wouldn't affect anything or that it would be good for the country to cut 40% of spending cold turkey.

 

Nice try at rewriting history. But everyone except the Erick Erickson's of the world know that it was the Republicans who started this whole clusterf&^k and who refused to compromise. Good luck with trying to bamboozle people into believing the tea party line.

I blame it all on the Internet

Nonsense.

(#263207)

A reasonable plan would have been a clean elevation (or repeal of) the debt ceiling. What we got instead was economic terrorism, and the GOP congresscreatures responsible are as treasonous and damnable as Timothy McVeigh.

 

The appropriate place for this battle was the budget process and the next budget bill. The GOP instead let themselves get led around by the teabagger caucus, and now things are starting to blow up in their faces. I am rooting for injuries as I watch the nascent GOP civil war.

"I've been on food stamps and welfare.  Anybody help me out?  No!" Craig T. Nelson (6/2/2009)

Yes he did. What was the GOP complaining about, exactly?

(#263184)

That Obama needed to raise the debt ceiling to fund a budget he'd already signed, presented to him by Congress?   Civics 101:  who has the power of the purse in the US Government?

Baseball Crank is useful reading

(#263188)
Bird Dog's picture

Here.

 

"Transparency and the rule of law will be the touchstones of this presidency."

--Barack Obama, January 2009

Heh. This is your civics textbook, BD?

(#263194)

.

Nope

(#263196)
Bird Dog's picture

Sad that all you've got left is insult.

Of course Congress passes laws and presidents sign them. Doesn't preclude presidents from developing and presenting their own plans.

"Transparency and the rule of law will be the touchstones of this presidency."

--Barack Obama, January 2009

Haha. As if! Forgotten the budget debacle some while back?

(#263205)

And now Obama's sposta provide leadership for the GOP kamikaze squad?

I was going for dry sarcasm.

(#263160)

May have been a little too dry.

"Hell is truth seen too late." --Thomas Hobbes

Once again, the details of

(#263074)

Once again, the details of the downgrade are complicated offering plenty of opportunities to distract and obfuscate.  

It would help

(#263076)
HankP's picture

if the Dems had a unified message - "The GOP f(*ked with the debt ceiling, and this is what happened". But they won't do it, because it requires 1. organization and 2. balls.

I blame it all on the Internet

great

(#263069)

they just f----d a lot of people, and for what?

 

seriously: why?

“The single biggest problem in communication is the illusion that it has taken place.” -George Bernard Shaw

Because that's what they do nt

(#263109)
HankP's picture

.

I blame it all on the Internet

Discipling governments is part of their thing

(#263082)

They may doing more to demonstrate their irrelevance here, who knows.

 

But OTOH, the US deserves it as much as many countries who've been downgraded. 

 

We have major political leaders openly welcoming default, many saying it doesn't matter at all, and many more obviously preferring tax cuts above all else.

 

In addition, S&Ps wishes to cement the idea that more austerity is necessary.

 

This is the financial establishment striking back for not being paid more deference recently.

Why? To Demonstrate

(#263070)

they're winning.

 

Not like those loser Liberals.

S&P downgrades US credit rating from AAA to AA+.

(#263068)

This is an historic first. A portion of the blame goes to the absolute, cult-like refusal of Republicans to consider tax cuts under any circumstances.

"Hell is truth seen too late." --Thomas Hobbes

Refusal to consider tax cuts? Republicans?

(#263105)
mmghosh's picture

And also, please explain to us plebs why this is such a big deal (the downgrading, I mean).  The warnings all seem pretty nebulous.  Its not like there's another reserve currency waiting in the wings.

freedom is a fundamental value that does not need to be justified in terms of some other value like efficiency

Oops, increases.

(#263135)

It's a big deal psychologically...the US just got its AAA cherry popped for the first time in history. The practical effects are nearly impossible to predict...but it's worth noting that the other ratings agencies are watching closely...a downgrade from two different agencies would likely trigger automatic selloff's from a large number of trusts & funds who have rules requiring a certain % of AAA securities in their portfolios. The selloffs would trigger rate increases, and the rate increases would have a cascade effect on thousands of state, municipal & institutional funds around the country which are linked directly to US treasuries. It would be a low-grade catastrophe at the least. 

"Hell is truth seen too late." --Thomas Hobbes

I think he misspoke

(#263108)
HankP's picture

and meant tax increases. You're correct that it doesn't seem to have affected the bond market so far. But all things being equal, it's more of a negative than a positive.

 

Also, some funds and trusts have requirements that they only invest in AAA securities. Many of them have exceptions for US Treasuries, but not all.

I blame it all on the Internet

exactly

(#263117)

Also, some funds and trusts have requirements that they only invest in AAA securities.

exactly, so all those funds must now sell those bonds, further depressing their value. for people who  have bond funds in their mix, thats a big hit basically because the GOP are a bunch of a holes.

“The single biggest problem in communication is the illusion that it has taken place.” -George Bernard Shaw

Are there numbers/estimates on how much this hit

(#263118)
mmghosh's picture

is going to be?

freedom is a fundamental value that does not need to be justified in terms of some other value like efficiency

Right now I don't think it will be much

(#263128)
HankP's picture

mostly because the alternatives are worse:

 

- the Euro is a shambles

- the British pound is under pressure due to their debt problems

- Japan has a debt of 225% of GDP

- China's renmimbi isn't fully convertible and subject to the whims of the government there

- the Russian ruble is controlled by a gangster state

- other currencies like the Brazilian real and the Indian Rupee (and some of the ones listed above) don't have deep or liquid enough markets to handle a huge increase in bonds.

 

So I don't expect the US bond rate to go up much right now, but it does make counterparties start to look for alternatives.

I blame it all on the Internet

... and the other portion

(#263072)
HankP's picture

is their use of the debt ceiling as a political weapon. Let's be clear, the US can easily service its debts and start running surpluses in a few years. The problem is not economic, it's the political pigheadedness of the radicals in congress.

I blame it all on the Internet

S&P is a joke on sovereign debt

(#263064)

At least they're trying to spin it to make the GOP look bad about taxes rather than Ds about spending. WE'll see how long that lasts.

They sound like bond vigilantiphobes, too. -nt-

(#263066)

.

"Hell is truth seen too late." --Thomas Hobbes