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Of all the electrons activated so far by the downgrade, Clive Crook strikes a reasonable tone; both reassuring and foreboding. Truth be told, this was “baked in the cake” when the Obama stimulus turned out to be nothing but a payoff to his supporters.
In a way it will be puzzling if the S&P downgrade–despite all the blather about its historic significance–changes anything at all. Certainly, the news should not have come as a surprise: the agency has been talking about it for weeks and the rating for US government debt had been under formal negative review before the announcement. If there is a surprise, it is mainly that the agency had the nerve to go through with it.
More fundamentally, what new information did the downgrade and the analysis supporting it provide? None. After their performance of the past few years, rating agency analysts have, or should have, little credibility in any case. Reports of the initial $2 trillion misunderstanding in S&P’s examination of the Treasury’s books (they used the wrong CBO baseline) lend a tragicomic note, and run their reputational capital down even further. And all this would be true even if US Treasuries were arcane instruments that few investors could afford to monitor carefully, forcing them to rely on the agencies for lack of anything better. In fact, of course, US Treasuries are the most widely and intensely analyzed obligations on the planet. What does S&P know about them that you and I don’t? The informational content of the downgrade is precisely zero.
When it comes to judging market impact, two complications arise. One is the rules that some investors have adopted–or have had forced on them by regulators–obliging them to hold AAA assets. If those assets have to be dumped, the market implications would obviously be severe. According to what I read, these rules should not be triggered by a downgrade to a notch under AAA at just one agency. Federal regulators in the US, for instance, have already said that the news will have no effect on risk-based capital requirements for US banks. …
Investor’s Business Daily editors have comments.
As the economy flatlines and stocks crater, the Pied Piper of hope and change leads us over a cliff while blowing out birthday candles at the White House and snuffing out America’s future.
This administration has been so wretched, its performance so incompetent, that we half-expect to see billboards popping up with the image of Jimmy Carter and the words, “Miss me yet?”
At least Carter, who with any luck will be supplanted in 2013 as America’s worst former president, used appropriate symbolism in donning sweaters, sitting in front of fireplaces and complaining of America’s “malaise.” …
Mark Steyn’s column was written before the downgrade, so is prescient. Was going to write “remarkably prescient” but that’s what everybody writes. So in Pickings they’re just prescient. This little aside is remarkably precious.
… Under the “historic” “resolution” of the debt crisis (and don’t those very words “debt crisis” already feel so last week?), America will be cutting federal spending by $900 billion over 10 years. “Cutting federal spending by $900 billion over 10 years” is Washington-speak for increasing federal spending by $7 trillion over 10 years. And, as they’d originally planned to increase it by $8 trillion, that counts as a cut. If they’d planned to increase it by $20 trillion and then settled for merely $15 trillion, they could have saved five trillion. See how easy this is? …
… Like America’s political class, I have also been thinking about America circa 2020. Indeed, I’ve written a book on the subject. My prognosis is not as rosy as the Boehner-Obama deal, as attentive readers might just be able to deduce from the subtle clues in the title: “After America: Get Ready For Armageddon”. Oh, don’t worry, I’m not one of these “declinists”. I’m way beyond that, and in the express lane to total societal collapse. The fecklessness of Washington is an existential threat not only to the solvency of the republic but to the entire global order. If Ireland goes under, it’s lights out on Galway Bay. When America goes under, it drags the rest of the developed world down with it.
When I go around the country saying stuff like this, a lot of folks agree. Somewhere or other, they’ve a vague memory of having seen a newspaper story accompanied by a Congressional Budget Office graph with the line disappearing off the top of the page and running up the wall and into the rafters circa mid-century. So they usually say, “Well, fortunately, I won’t live to see it.” And I always reply that, unless you’re a centenarian with priority boarding for the Obamacare death panel, you will live to see it. Forget about mid-century. We’ve got until mid-decade to turn this thing around.
Otherwise, by 2020 just the interest payments on the debt will be larger than the U.S. military budget. That’s not paying down the debt, but merely staying current on the servicing – like when you get your MasterCard statement, and you can’t afford to pay off any of what you borrowed but you can just about cover the monthly interest charge. Except in this case the interest charge for U.S. taxpayers will be greater than the military budgets of China, Britain, France, Russia, Japan, Germany, Saudi Arabia, India, Italy, South Korea, Brazil, Canada, Australia, Spain, Turkey and Israel combined. …
WSJ Op-Ed by Peter Berkowitz examines the crack-up of the progressives.
… In the congressional elections of 2010, the electorate, led by the tea party movement and disaffected independents, rendered its judgment on the president’s priorities. The people dealt him and his party a historic midterm defeat, producing large Republican gains in the Senate and a comfortable majority in the House, including 87 freshmen.
The voters’ message was clear: Cut spending, compel the government to live within its means, and put Americans back to work. In short, the president and his party badly overreached in 2009 and 2010; and in 2011 the Republicans, to the extent their numbers in Congress allowed, have effectively pushed back.
But that’s not how progressives have tended to see things. They have ferociously attacked congressional Republicans, particularly those closely associated with the tea party movement, with something approaching hysteria.
Consider the unabashed incivility of progressive criticism, its tone dictated from the top. During and after the budget negotiations, we heard that tea party representatives were content with “blowing up our government” (Washington Post columnist E.J. Dionne). Then came accusations that “Tea Party Republicans have waged jihad on the American people” (New York Times columnist Joe Nocera), while acting like “a maniacal gang with knives held high” (New York Times columnist Maureen Dowd). At the height of negotiations, Vice President Biden either said, or agreed with House Democrats with whom he was meeting who said, that Congressional Republicans “have acted like terrorists.”
In addition, progressive legal scholars concocted a wild theory to justify an executive power grab by means of which President Obama would unilaterally raise the debt ceiling to avoid having to hammer out a deal with Congress. …
Michael Barone says Americans want to earn their success.
Why aren’t voters moving to the left, toward parties favoring bigger government, during what increasingly looks like an economic depression? That’s a question I’ve asked, and one that was addressed with characteristic thoughtfulness by Democratic pollster Stanley Greenberg in the New York Times last week.
Greenberg argues that voters agree with Democrats on issues but don’t back them on policy because they don’t trust government to carry it out fairly. I think he overstates their agreements on policies: They may favor “investment in education” until they figure out that it actually means political payoffs to teachers’ unions.
But his larger point rings true. He points out that “the growth of self-identified conservatives” began during the fall 2008 debate over the TARP legislation supported by George W. Bush, Barack Obama and John McCain. The voters’ take: “Government works for the irresponsible, not the responsible.” …