We deserved a debt ceiling spanking

Opinion August 11, 2011 0 Comments

We deserved a debt ceiling spanking

The day after after Congress voted to go to war in Iraq in October, 2002, I went to the post office to change my voter registration. Not because I’m a pacifist, but because I knew it was costly and unnecessary, as did, I believe, most Americans. I couldn’t be part of either party.

Since then, I’ve had little reason to change my mind. I’m just surprised that I now find myself in full agreement with the accountants.

As I write this editor’s column on Tuesday morning, August 9, the U.S. Stock Market is beginning to rebound a little bit from the drubbing it took since Standard & Poor’s made history, downgrading U.S. Bonds for the first time since such ratings were initiated in 1917.

That downgrade, and the resulting stock swoon set Washington into its usual cycle of partisan blaming. Democrats say the uncertainty caused by the prolonged “debt ceiling” negotiations eroded confidence. Republicans argue cuts were not steep enough. To the great electorate middle – the moderate political majority –  the response is more of the same: in the face of crisis, politicians seem incapable of getting past party-line sniping to actually solve a problem.

Apparently, it’s that very quality of Congress that provoked Standard & Poor’s to act in the first place.

S & P’s statement on the rationale behind downgrading is worth examination.

From their statement on downgrading U.S. Bonds:

“The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.

“More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policy-making and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.

“Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics any time soon.”

I’ve since read criticism that Standard & Poor’s had erred by practicing politics instead of accounting. Even President Obama moved to assure the public.

“No matter what some agency may say, we’ve always been and always will be a triple-A country.” he said.

But what strikes me about the agency’s comments is their stone-cold sobriety. Is it really political to call our  system broken when the facts overwhelmingly seem to demonstrate the claim? To call Congress anything but would seem to be far more of a political calculation than Standard & Poor’s evaluation. All the credit agency did was state what is obvious to most of us. There is no reason to continue to trust Congress to act responsibly when it has failed to do so, particularly in the last two years.

The question now, of course, is whether Republicans and Democrats in Congress get the message. U.S. debt is heading quickly towards 85 percent of GDP and even the trillions in spending cuts are not going to set things right. Medicare and Social Security are going to suffer. The Bush tax cuts  are now indefensible (though I know they will be defended). If the downgrade doesn’t get Congress’ attention, what will?

- Pete Mazzaccaro

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