Friday, August 5, 2011

There Are Consequences For Bad Behavior

Standard & Poors has downgraded the nation’s credit rating from “AAA” to “AA+" with a “Negative Outlook.”  This is the first time in our nation’s history that it has received a rating less than AAA.  The country’s credit rating now falls below that of several other industrialized countries including: Germany, France, Australia and Canada. 
In announcing their decision S&P expressed  concern over the political climate in the country and questioned whether congress and the administration could come together to forge a long term solution to the county’s financial woes.  The agency cited the government’s failure to address entitlements or tax revenues and the use of default as a political bargaining chip as integral components in reaching their decision. The press release sounded more like a criticism of the nation's politics than it's finances.  
The White House reacted sharply with one senior White House official referring to the decision as “amateur hour.”  Many officials downplayed the decision; criticizing S&P’s professionalism.  Officials resurrected S&P’s disastrous AAA rating of the toxic mortgages in 2009 as evidence of their incompetence.  Ranking Democrat on the House Finance & Budget Committee, Barney Frank, pleaded with listeners to pay no attention to "this political statement by incompetent people.”
Naturally Republicans lost no time in placing blame squarely on the shoulders of the President exclaiming: “first downgrade in history occurs on Obama’s watch.”
We find the shock, outrage and utter hypocrisy to be laughable.
 S&P warned the government back in July that if they did not craft a comprehensive long term solution to lower nation’s debt a downgrade was likely.  Congress ignored the warning.  Tea Party members scoffed and threatened to bring the country to default if they didn’t get what they wanted.  The last minute deal barely put a dent in the deficit and didn’t address the major causes of the problem: entitlements and taxes.  So it should come as no surprise to anyone that the rating bureau did exactly what they said they would do.
As for the administration’s efforts to delegitimize the rating bureau and discount the affect of the downgrade; their statements are disingenuous at best.  These are the same people who for the past several weeks have warned us about all the bad things that would happen if the credit rating was lowered.  Higher interest rates, increased unemployment and the devaluation of the dollar where just some of the horrors that we would face if the rating dropped.  Now the administration would have us ignore the event as if it didn’t happen…“Nothing to see here.”

And don't get us started on the Republicans placing the blame on the President.  They need look no further than their own caucus, and the Tea Party that dwells within it, to find the root cause of this fiasco.
The repercussions of this debacle have yet to be determined.  The reaction of the markets on Monday morning will be interesting.
We are reminded of the words of Speaker Boehner who, when questioned about the debt ceiling compromise said: “I got 98% of what I wanted.  I’m pretty happy.”  Well done, Mr. Speaker. 
So, congratulations to the United States Congress and to the Obama administration.  You allowed a small group of uninformed, ideological zealots to hold the country’s economy hostage.   You lacked the political courage to overcome their recklessness and the political acumen to craft a substantive solution to solve the country’s financial woes.  You allowed your ego to blind you from the warnings raised by S&P and your own economists; and once again you put politics ahead of country.  Your irresponsible behavior, for the first time in history, has downgraded the full faith and credit of the United States of America.

And you have the nerve to call S&P “amateurs.”


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