Despite threats by the major credit rating agencies to downgrade America’s AAA credit rating, chances are now slim to none that they will actually do so. This reflects one of the ironic (or oxymoronic) perks of being both the richest and most-indebted nation in the history of mankind: i.e., rating agencies have to think twice about downgrading America because, in doing so, the ripple effect throughout the global economy would be disastrous.
(Crisis averted, but reputational damage done, The iPINIONS Journal, August 2, 2011)
Well, it seems I was only two-thirds right in asserting that the major credit rating agencies would not dare downgrade America’s AAA rating for the first time in history. Because, even though Fitch and Moody’s maintained the top rating, Standard & Poor’s (S&P) downgraded it to AA+ on Friday.
I am constrained to note, however, that there’s persuasive merit to the criticism that S&P’s move was more political than economic. Not least because S&P refused to reconsider their decision even after admitting, rather embarrassingly, that the Obama administration was correct in pointing out a $2 trillion error in the calculations upon which they based their downgrade.
They’ve handled themselves very poorly. And they’ve shown a stunning lack of knowledge about the basic U.S. fiscal math. Look at the quality of judgments they’ve made in the past…
I think everyone can be confident around the world, that Treasuries are the … most liquid, the strongest place to put your money at this time.
(U.S. Treasury Secretary Timothy Geithner, Associated Press, August 7, 2011)
This, in part, is why I maintain that the economic impact will be fleeting and relatively minimal. On the other hand, the political impact could be significant, which is arguably the intent. For nothing will help the Republicans marginalize (or Carterize) President Obama quite like being able to assail him as the president who presided over the once-unthinkable loss of America’s “gold-plated” credit rating.
Which begs the question: Do the politically motivated executives at S&P hate or resent Obama’s presidency so much that they would willfully inflict this kind of reputational damage on the United States – the ripple effects throughout the global economy be damned? You betcha!
After all, the rich businessmen funding and egging on the Tea Party (most notably the billionaire Koch brothers) were prepared to go even further by plunging the country into default — despite all of the reputational and practical damage that would have entailed.
Again, these born-again zealots would prefer economic Armageddon to what they have deluded themselves into thinking is Obama’s (black-nationalist/Muslim-inspired) plan to turn America into a socialist, Greek-style banana republic — ignoring the ironic fact that nobody is doing more towards this end than they. Their hatred of Obama is so irrational, one could also be forgiven the suspicion that their dark, ulterior motive is to see America become so dysfunctional and humiliated under his leadership that Americans would not even consider electing another Black person as president for at least another 100 years.
At any rate, I just hope the Democratic-controlled Senate makes a public show of summoning S&P’s executives to appear at an open hearing to expose the Machiavellian motives behind their decision. For they will be hard-pressed to explain why they downgraded the credit rating of the inherently solvent U.S. government when they never even hinted at downgrading that of any of the literally bankrupt mortgage and banking institutions that precipitated the global financial meltdown in 2008.
Frankly, it’s demonstrably clear that S&P are pursuing a political agenda not just to cover their asses for that historic blunder, but also to avoid the heightened regulation of their activities that would surely come if Obama is reelected. And, of course, doing whatever is necessary to ensure that Obama is not reelected just happens to coincide with the demonstrably clear Republican agenda.
For no less a person than Senate Republican leader Mitch McConnell has declared repeatedly and quite unabashedly that:
The single most-important thing we want to achieve is for President Obama to be a one-term president.
(Sen. McConnell, National Journal, October 23, 2010)
That, folks, is what this is all about – not creating jobs, reducing the national debt, or maintaining America’s AAA credit rating.
Related commentaries:
Crisis averted…
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