Standard & Poor's announced Friday night that it has downgraded the U.S. credit rating for the first time, dealing a symbolic blow to the world's economic superpower in what was a sharply worded critique of the American political system.Make no mistake: The Republicans' chronic fuckery is to blame, and Obama's reflexive indulgence of their fuckery in pursuit of some fantastical ideal of bipartisan civility is to blame, and the Democrats' typical spinelessness is to blame (especially that jellyfish Harry Reid's), all for creating the embarrassing justification for this downgrade, but THAT SAID Standard & Poor's, which is already threatening a further downgrade, is full of absolute shit.
Lowering the nation's rating to one notch below AAA, the credit rating company said "political brinkmanship" in the debate over the debt had made the U.S. government's ability to manage its finances "less stable, less effective and less predictable." It said the bipartisan agreement reached this week to find at least $2.1 trillion in budget savings "fell short" of what was necessary to tame the nation's debt over time and predicted that leaders would not be likely to achieve more savings in the future.
"It's always possible the rating will come back, but we don't think it's coming back anytime soon," said David Beers, head of S&P's government debt rating unit.
Not only did the US Treasury Department find a $2 trillion math error in S&P's analysis on which they based the downgrade (which S&P conceded before commencing with the downgrade anyway), but S&P has its own political agenda, given its role in the mortgage crisis. As Paul Krugman wryly noted: "[I]t'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?"
And, ultimately, they're just basing this decision on faulty thinking, the same ludicrous austerity fantasy that underlined the debt ceiling deal, which they believe has not gone far enough. Krugman explains:
[E]verything 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.But here we are.
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.
So this is an outrage — not because America is A-OK, but because these people are in no position to pass judgment.
And S&P's jackass maneuver should come as no surprise to the US government, given their well-documented irresponsibility (see again: mortgage crisis), which is why, despite directing some well-deserved contempt in S&P's direction, we should also be furious with the collection of nincompoops behaving the fools in DC, whose failure to demonstrate anything resembling responsible leadership provided both the context and the excuse for which S&P was looking.
The Guardian is collecting reactions to the rating downgrade here.