After U.S. downgrade, liberals attack messenger
Washington Examiner ^ | 8/6/11 | Byron York
In the wake of Standard & Poor's decision to downgrade the United States government's credit rating from AAA to AA+, a number of commentators on the left are directing most of the blame not at high levels of government spending, and not even at tax rates they would like to increase, but at the ratings agency itself. Since S&P made enormous mistakes in rating securities backed by subprime mortgages prior to the economic meltdown, they argue, the ratings agency has no right to judge the U.S. government today.
"These are some of the people who have the worst records of incompetence and irresponsibility around," top House Democrat Rep. Barney Frank told MSNBC. S&P analysts, Frank continued, are "trying to justify their reputation" by being tough on the U.S. An unnamed White House official, quoted by CNBC, called S&P's performance "amateur hour" and cited a $2 trillion math mistake made in an earlier S&P assessment. Another anonymous administration official added: "A judgment flawed by a $2 trillion error speaks for itself."
Farther along on the left, the New York Times columnist Paul Krugman called the downgrade "an outrage" and accused S&P of "just making stuff up." "After the mortgage debacle," Krugman said, "they really don't have that right." Later, Krugman approvingly passed along a tweet from the lefty blogger Atrios, who wrote of S&P: "Apparently we're supposed to care about what some idiots at some corrupt organization think about anything."
There's no doubt that S&P's rationale for the downgrade is subjective; much of the report reads like political punditry. On the other hand, S&P's assessment is based on a reasonable reading of trends in deficit spending that even administration officials admit are unsustainable. The bottom line of the report seems to be this: S&P's analysts doubt that all of the spending cuts in the recent debt-ceiling deal will actually take effect. And even if all those cuts do take effect, they would not be enough for the credit agency to restore the U.S. to its former AAA rating. And even if the Bush tax cuts on higher earners were allowed to expire, that would not be enough for a restored AAA rating without more spending cuts and taxes. And if none of the second round of cuts built into the debt deal actually occur, the U.S. rating could fall again to AA.
S&P analysts were clearly unsettled by the intensity of partisan fighting that led to the debt deal. But beyond politics, the numbers are what they are.
Nevertheless, some liberal analysts, after pointing the finger at S&P, direct the rest of their blame at Republicans. One said the downgrade was the result of a "manufactured crisis" -- that is, it occurred because Republicans created a political fight around the debt-ceiling extension. S&P gave the United States a top AAA rating, with a stable outlook, as recently as last year, some say, so the downgrade must be the result of Republican malfeasance.
There's a problem with that assessment. In its explanation for the downgrade, S&P points not only to recent spending trends and politics, but also to longer-term issues. "Our revised scenarios also take into account the significant negative revisions to historical GDP data that the Bureau of Economic Analysis announced on July 29," the report says. That revised data, S&P points out, shows that "the recent recession was deeper than previously assumed," and it highlights "the sub-par path of the current economic recovery when compared with rebounds following previous post-war recessions." In other words, the news on the economy has been even worse than we've know for the last couple of years.
For their part, many Republican presidential candidates blamed President Obama for the downgrade. But not everyone was quite so partisan. "This announcement is probably long overdue," said Republican Sen. Tom Coburn in a statement. "For decades, political careerism has trumped statesmanship in Washington. Both parties have done what is safe, not what is right. The dysfunction in Washington is the belief that we can live beyond our means forever. We can't. The moment to make the hard decisions we have long avoided has arrived. There is nowhere left to kick the can."
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