First Time in our Nation’s History — S&P Downgrades our AAA Credit Rating!

As if yesterday’s stock market drop of 500+ points attributing to the worse week on Wall Street since 2008 was not enough bad news — there’s more bad news . . .   Reuters news service is reporting that the United States has lost its AAA credit rating from S&P.  For the first time in our nation’s history, S&P has downgraded the US credit rating to AA+. 

In a statement from S&P, “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.”  S&P goes on to say that there may be another credit downgrade in 15-18 months. 

Is this the outcome the Washington politicians were looking for in their childish debit-ceiling gridlock last week?  How can our elected officials possibly think that the bitter political battles were worth this price to the American people!  I don’t know how they look themselves in the mirror! 

I’m sad for all of us and thoroughly disgusted by many of our nation’s leaders.

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11 Comments

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  1. It’s really sad when our elected officials try to play the party line game when it effects everyone. Doesn’t matter if you’re a Dem or GOP… This game has to stop. It’s hurting everyone.

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  2. They warned the government way before the deadline that this would likely happen if they could not come to terms with themselves. The showing that both sides displayed was a disgrace. Nothing was done for the people. Even when politicians attempted to stick to their guns, it all came back to their own re-election. It will not surprise me if other credit ratings drop as well.

    I say we eliminate party lines in elections. I also say we limit to one 6 year term for president/house/senate. 6 years is enough time to get stuff done, but if they can’t run again, they don’t need to do things for themselves. No campaigning for re-election, means that others can campaign, while they continue to do the work they were elected for.

    No party lines means people have no allegiance or pressure from their party and can think independently.

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  3. And the “Politics of Blame” will continue – at the national level and, I expect, on this blog. Here is a short article that rings true.

    http://www.politico.com/blogs/bensmith/0811/The_politics_of_blame.html

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    Pattye Benson Reply:

    Thanks — Ben Smith’s blog post says it all!

    http://www.politico.com
    Ben Smith’s Blog
    August 05, 2011

    The politics of blame
    The decision of one of the three major ratings agencies to lower the U.S. credit ratings pushes deficits closer to the center of the political conversation, but it doesn’t advance a frozen policy argument, or bear in a direct way on the more immediate economic problems : Bond raters would be happy with high taxes, gutted services, or a combination. They just want the numbers to add up.

    But the symbolic value of the rating will inevitably be conflated with the generalized gloom and panic over a sense of American decline. And the politics of the rating are to intensify the urgency of placing blame. Obama, as president, is the default object of blame (and credit) for the things that happen on his watch. Polls suggest, somewhat surprisingly, that Americans still blame Bush more for the economy, and Congress more for the recent debt ceiling standoff.

    The clarity of the downgrade intensifies suggestions that the next year will be in no small part about pinning blame. Republican presidential candidates will blame Obama, and if he wants to escape that, he’s likely to launch a more aggressive and direct round of finger-pointing at Republican Congressional leaders than we’ve seen to date.

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  4. Maybe we should downgrade the credit raters. Aren’t they the samee ones who got us into this mess by giving Triple A ratings to those worthless mortgage notes?

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  5. The primary reason bond ratings get downgraded is because rating agencies don’t believe in the ability of the entity borrowing the money to pay it back.

    This downgrade has little to do with the raising of the debt limit (and the fight around it) than it does with the lack of corresponding action to get our national fiscal house in order.

    Neither the President nor Congress is willing to stand up and address where spending needs to be cut and how programs need to be adjusted. For example, Social Security was established when life expectancy was much less — meaning it was never designed to pay this much, for this long. The Social Security age needs to be changed.

    We also need to stop spending Social Security funds on annual operating expenses. Until then, there is no such thing as either “deficit reduction” or a “balanced budget.”

    The simple truth is, neither side is without blame and very few are willing to take the right stand (things need to change, incl. Medicare and Social Security). BOTH sides are wrong in this.

    People have come to feel entitled to things that never were meant to be, and the bills are now coming due. Either the President and Congress start to get serious or this downgrade will be the first of many.

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  6. The downgrade boils down to a single reason: too much spending and not enough revenue. The way to solve this problem is both to lower spending and increase revenue. It cannot be done just by tinkering with spending. The GOP never used to be so neurotic about tax increases. Ronald Reagan increased taxes several times. Tax simplification would go a long way to make sure everyone pays their fair share. It’s ridiculous that a middle class family earning $65,000 a year pays a higher tax rate than a millionaire hedge fund manager who creates no jobs.

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  7. I don’t like to be cynical, but at http://westchesterview.tumblr.com/ on July 29 I posted “Who stands to gain if Washington doesn’t ‘get its ass in line’?” (That’s John Boehner’s colorful phrase, not mine.) Answer, of course: big money lenders, AKA investment banks.

    Now re Pattye’s article I have to ask who stands to gain if US credit ratings go down and interest rates go up? Answer: big money lenders, AKA investment banks (the very ones who should be grateful to the US taxpayer for the kind bailouts instituted as TARP in October, 2008).

    Who could trust S&P’s motives any more, after the mess it and the other credit rating agencies got the country and world into by giving high ratings to overvalued bundled mortgage securities?

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  8. can you explain why big money lenders would gain if interest rates go up? Don’t they have to pay more for the money too?

    And isn’t true when interest rates are lower they tend to do more business?

    Please clarify.

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