S&P Blames Republicans for Credit Downgrade. No mainstream media reports...

[ek forever]

The italicized is directly from the S&P report, here's a few points:

1) The left says the S&P downgrade had to do with the Tea Party and other freshmen Republicans not wanting to raise taxes. Leftists only hope you don’t read this part of the S&P report:

Standard & Poor’s takes no position on the mix of spending and revenue

measures that Congress and the Administration might conclude is appropriate

for putting the U.S.’s finances on a sustainable footing.

2) It’s not remotely all about taxes. S&P clearly criticizes the political impossibilities of containing growth in public spending and reforming entitlements. Is that the tea party’s fault?

We lowered our long-term rating on the U.S. because we believe that the

prolonged controversy over raising the statutory debt ceiling and the related

fiscal policy debate indicate that further near-term progress containing the

growth in public spending, especially on entitlements, or on reaching an

agreement on raising revenues is less likely than we previously assumed and

will remain a contentious and fitful process.

3) They note that the debt ceiling deal didn’t go far enough. You might recognize that as the Tea Party position considering the deal they supported cut $4 Trillion instead of $2.1. Democrats were arguing that the economy would crumble if they cut that much. The government is only expected to spend $46+ Trillion in the next 10 years. Even under the new debt deal we'll still borrow $12 Trillion It was really quite absurd. "If we cut government spending American jobs will be lost"

We also believe that the fiscal consolidation plan that Congress and the

Administration agreed to this week falls short of the amount that we believe is

necessary to stabilize the general government debt burden by the middle of the

decade.

4) Along with the deepness of the recession, the sluggishly terrible Obama “recovery” was another reason for their negative position. Who is responsible for Obama’s failed economic policies too? Remember that GDP includes government spending. I would imagine that our extremely anemic GDP would be negative, (shrinking) without government spending.

First, the revisions show that the recent recession was

deeper than previously assumed, so the GDP this year is lower than previously

thought in both nominal and real terms. Consequently, the debt burden is

slightly higher. Second, the revised data highlight the sub-par path of the

current economic recovery when compared with rebounds following

previous post-war recessions. We believe the sluggish pace of the current

economic recovery could be consistent with the experiences of countries that

have had financial crises in which the slow process of debt deleveraging in the private sector

leads to a persistent drag on demand. As a result, our downside case

scenario assumes relatively modest real trend GDP growth of 2.5% and inflation

of near 1.5% annually going forward.

5) They might downgrade us again if they see “less reduction in spending” than was agreed to. Are the republicans and the Tea party also responsible for not cutting spending enough? I was pretty sure they want to cut as much as possible. And considering that even in the debt deal there are no cuts in spending, merely cuts in growth in spending. A real cut would be to pass a budget that spent less than the previous years budget. Like Texas did this year.

The outlook on the long-term rating is negative. We could lower the

long-term rating to ‘AA’ within the next two years if we see that less

reduction in spending than agreed to, higher interest rates, or new

fiscal pressures during the period result in a higher general government

debt trajectory than we currently assume in our base case.