So Who’s Up For A Round Of Messenger-Shooting?
“My guess is that once the US loses its triple-A, it’ll be gone forever.”
– Felix Salmon Izvestia in Atlanta (CNN)
We now suddenly receive a recent history lesson abouthow S&P financially rated Lehman Brothers prior to its collapse. Why would this be any more relevant to today’s problems than Paul Krugman’s cheerleading for a big housing bubble back in 2002? Because S&P could still downgrade their ratings of UST debt securities, where as Paul Krugman is pretty much a defunct economist; unless he is entertaining a cocktail party thrown by his self-appointed fluffer, Bradford DeLong.
The prospect of having S&P downgrading US debt has politicians scrambling to prevent such a Bonfire of The Keynesians. To forestall the coming horror, they worked tirelessly to pass a Balanced Budget Amendment, means test entitlement programs, close unnecessary military bases which were doled out as Congressional Pork, and repealed ObamaCare to the ringing cheers of small businesses all over America. Pysch! No they didn’t.
They immediately mounted a rhetorical assault against S&P for having the temerity to question the creditworthiness of an organization that has borrowed $5Tr dollars in the past five years, seen a precipitous and enduring decline in its corporate revenues, and has failed to fashion an acceptable long-term budget in the last 800 days. If a broker told me to buy lots of stock in some private corporation that tried that crap I’d hang up the phone on that individual without any further comment. S&P put it more politely when they said the following.
“We view an inability to timely agree and credibly implement medium-term fiscal consolidation policy as inconsistent with a ‘AAA’ sovereign rating.”
The Democrats are now “strongly encouraging” S&P to “reconsider” their evaluations for a very simple reason. They do so because organizations whose debt obligations are downgraded, find future borrowing to be increasingly difficult. It would have minimal impact at the beginning, effecting only the $2.8Tr that Congress blindly authorized the USG to fecklessly urinate into the snow of America’s frigidly dysfunctional economy.
Then, the USG would get to roll over the other $14Tr they owe. This would increasingly ratchet the interest costs on America’s existing debt. It could prevent us from doing the really important things like building more President Barack Obama Boulevards or handing out more of the productive citizenry’s money to America’s ever-increasing Free Stuff Army. Jim Millstein describes what could happen in S&P downgrades.
“Should a downgrade occur, even with this announced deal, and the government’s borrowing costs rise as a result, the now relatively small spending cuts contemplated in the first step of the latest two step plan will be more than offset by higher interest costs — producing no net reduction in the projected deficits.”
So the United States government has failed to pass a budget for 800 days. We have increased our national debt from $9Tr to $14Tr in the very recent near-term. Our President has recommended a budget that would have raised this indebtedness to $25Tr over the next ten. It’s a genuine shame we aren’t giving these people more revenues. They manage what we do give them so well.
On top of all of this feckless and pathetic epic fail, S&P has developed a large enough pair of cojones grandes to actually call the US out on this crap. This would force the US Treasury to pay more for borrowing money than its political overlords would appreciate. Therefore, we have to make like Zimbabwe and regulate the price we don’t like out of existence.
Brilliant! Some important dude over at S&P will wake up with the horse’s head next to him in bed. There will be “adjustments made” to how S&P evaluates UST debt securities. The threatened downgrade will quietly go away, and as Metallica once ironically sang, “It’s off to Never-Never Land.” God bless the United States of America.