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How S&P made it more likely the GOP will hold the debt ceiling hostage again



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Bear with me here.

1. GOP threatens to default on US debt as bargaining chip to force severe cuts in long-term federal budget.

2. After the Republicans start demanding massive cuts to the budget, S&P is suddenly concerned about the budget (which didn't magically grow any larger in the last few months than it was expected to last year, so why didn't S&P make these threats earlier?) and threatening to lower the US rating unless cuts on the order of $4 trillion are passed into law.

3. SEP downgrades the US' credit rating because it says not enough money was cut, but also, it claims, because of the uncertainty of the US budgeting and debt ceiling process, now that the Republicans are threatening to end the world as we know it for a new demand every single month.

But if S&P is truly worried about the uncertain US legislative process threatening America's ability and willingness to pay its debt, it would seem that S&P's downgrade just made things worse. Here's why:

If you're a Republican, here's what you just learned from the debt ceiling experience:

If I threaten to hold up the extension of the US debt ceiling, not only will I be able to force a Democratic president and Democrats in Congress to agree to massive cuts they would normally refuse (after all, they already admitted that it's a threat they're not willing to risk), but I'll be able to sweeten the extortion by enlisting the help of S&P.  S&P can't stand it when I threaten to hold the US debt hostage, and as a result, they'll threaten a downgrade if the cuts aren't big enough and/or if the ceiling isn't extended in time, putting overwhelming pressure on the Dems to cave to my demands.

None of these cuts would have happened had the GOP not threatened to destroy the US credit rating.  So why not keep making the threats?  And in fact, S&P has already said they're not happy with the amount of the cuts so far, they've even downgraded the US' rating, so it's pretty clear that another GOP threat, when the issue ripens again in two years, will create yet another perfect storm of budget cuts.

What S&P did was akin to what the Obama administration did: They gave in to the demands of economic hostage-takers, making it all the more likely that the economy will be taken hostage every chance the Republicans get since the GOP now knows that hostage-taking works. Which means S&P is creating the very situation it's using, and may be forced to use again, to justify the downgrade. Welcome to the Heisenberg Uncertainty Principle.

Which therefore brings up the question of why S&P did this? Did they really want the budget cut (when, oddly, they weren't threatening a downgrade until the GOP got involved a few months ago), or was S&P simply out for revenge?


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