by Randolph T. Holhut
Chief of AR Correspondents
July 28, 2011
BLOWING UP THE U.S. ECONOMY TO SCORE A FEW POLITICAL POINTS IS MADNESS
DUMMERSTON, Vt. -- As I write this on Wednesday night, I am in utter disbelief at how completely messed up things are in Washington.
The routine matter of raising the country's debt ceiling, an act that has been done 36 times over the past 30 years with little debate, has turned into a fight that threatens to destroy our nation's credit rating no matter how it turns out.
Standard & Poor's released a report on July 18 stating that the United States' bond rating would be downgraded unless it struck a $4 trillion budget deal in the next 90 days or so.
Granted, S&P was one of the credit rating agencies that gave AAA ratings to the toxic mortgage-backed securities and credit default swaps that fueled the real estate bubble that burst in 2007 and 2008 and almost took down the global economy in the process.
But such is the power of S&P, Moody's and Fitch - the three main credit rating agencies - that they can threaten the AAA rating of U.S. Treasury bonds, long considered the absolute safest investment in the world.
"We may lower the long-term rating on the U.S. by one or more notches into the 'AA' category in the next three months," according to the S&P report, "if we conclude that Congress and the Administration have not achieved a credible solution to the rising U.S. government debt burden and are not likely to achieve one in the foreseeable future."
Or, as Ezra Klein of The Washington Post wrote last week, "if Washington hadn't tied the debt ceiling to a deficit-reduction package, and economic policy was still being made with a minimum of fuss, perhaps S&P would be less bothered now. But the bitter disagreements of the last few months have carried a cost. By showing how much trouble the two parties will have cutting a deal now, they've left observers like S&P wondering if we can cut one later, either."
Thanks to the extremists in the Republican Party, even if there is a last-minute agreement reached on the debt ceiling and deficit reduction, S&P, Moody's and Fitch can't trust Congress to commit to a course of action, even if control changes hands.
The fighting over something that up to now has never been a political issue has got the rating agencies thinking that the U.S., as Klein put it, "is not acting like a country that deserves a AAA-credit rating. Nice job, Congress."
If the financial markets agree, suddenly the cost of borrowing money goes significantly higher and we slide into an even deeper recession.
Add to this sorry mess the complete capitulation of President Obama to the extremists who are willing to destroy the U.S. economy for political gain. President Obama freely offered to Republicans something they have dreamed of for decades - gutting Social Security and Medicare in exchange for a modest tax increase on the wealthy - and the Republicans refused to accept the deal.
It's hard to say what's more disgusting: Mr. Obama turning his back on the bedrock beliefs of the Democratic Party to pick up a few conservative votes, or the Republicans refusing to agree to any deficit reduction plan if it includes taxes on the wealthy.
It can't be said enough. A majority of Americans want to see more spending on health care, education and job creation, and less spending on the military. They would prefer to see the budget deficit reduced by making the wealthy and corporations pay their fair share in taxes. They want to see Social Security and Medicare preserved.
President Obama and Congress are poised to give them exactly the opposite.
That's where we're at as a nation. And, there's still a budget for fiscal year 2013 to draw up, something that the Republicans in Congress have made sure will make no progress. Even if the debt ceiling is raised, there is a strong possibility that there will be a federal government shutdown in October. Again, it would be designed to further wreck the economy and prevent President Obama from gaining a second term.
This isn't governing. This is madness.
Chief of Correspondents Randolph T. Holhut has been a journalist in New England for more than 30 years. He edited "The George Seldes Reader" (Barricade Books). He can be reached at firstname.lastname@example.org.