The US is still the wealthiest nation in the world. It still CAN pay its bills. But with John Boehner and Mitch McConnell in Congress being whipsawed by the idiot teabaggers like Allen West there is reasonable doubt that the US WILL pay its bills. The S&P downgrade is an indictment of America's current politics.
It is also a total indictment of the Republican Party. Here is Steve Benen's timeline of major US financial decisions over the last 30 years.
1980: Ronald Reagan runs for president, promising a balanced budgetUnless you are a Republican partisan practicing Tobacco Industry Executive-level blindness to facts this timeline clearly shows that the Republican Party is the party of profligate spending and refusal to pay government debts.
1981 - 1989: With support from congressional Republicans, Reagan runs enormous deficits, adds $2 trillion to the debt.
1993: Bill Clinton passes economic plan that lowers deficit, gets zero votes from congressional Republicans.
1998: U.S. deficit disappears for the first time in three decades. Debt clock is unplugged.
2000: George W. Bush runs for president, promising to maintain a balanced budget.
2001: CBO shows the United States is on track to pay off the entirety of its national debt within a decade.
2001 - 2009: With support from congressional Republicans, Bush runs enormous deficits, adds nearly $5 trillion to the debt.
2002: Dick Cheney declares, “Deficits don’t matter.” Congressional Republicans agree, approving tax cuts, two wars, and Medicare expansion without even trying to pay for them.
2009: Barack Obama inherits $1.3 trillion deficit from Bush; Republicans immediately condemn Obama’s fiscal irresponsibility.
2009: Congressional Democrats unveil several domestic policy initiatives — including health care reform, cap and trade, DREAM Act — which would lower the deficit. GOP opposes all of them, while continuing to push for deficit reduction.
September 2010: In Obama’s first fiscal year, the deficit shrinks by $122 billion. Republicans again condemn Obama’s fiscal irresponsibility.
October 2010: S&P endorses the nation’s AAA rating with a stable outlook, saying the United States looks to be in solid fiscal shape for the foreseeable future.
November 2010: Republicans win a U.S. House majority, citing the need for fiscal responsibility.
December 2010: Congressional Republicans demand extension of Bush tax cuts, relying entirely on deficit financing. GOP continues to accuse Obama of fiscal irresponsibility.
March 2011: Congressional Republicans declare intention to hold full faith and credit of the United States hostage — a move without precedent in American history — until massive debt-reduction plan is approved.
July 2011: Obama offers Republicans a $4 trillion debt-reduction deal. GOP refuses, pushes debt-ceiling standoff until the last possible day, rattling international markets.
August 2011: S&P downgrades U.S. debt, citing GOP refusal to consider new revenues. Republicans rejoice and blame Obama for fiscal irresponsibility.
How long can America afford to accept Republican politicians as a legitimate American political party?
Addendum 1:13 PM CDT
This is from Daniel Gross, Economics editor at Yahoo Finance
S&P, which covered itself in a substance other than glory during the mortgage crisis, may have a poor record and strange methodology when it comes to sovereign ratings. France, which has a far higher debt per capita ratio than the U.S., still enjoys a AAA rating. And a downgrade, alone, doesn't mean U.S. interest rates will spike -- on Monday or at any time in the future. Japan's credit rating was downgraded several years ago, when the interest rates its government paid on bonds was already extremely low, and they've generally trended lower in the years since.The decision was more than just S&P's opinion of the politics, though. This was a clear political statement BY S&P itself!
Market conditions, the trajectory of economic growth and relative value can play as big -- if not a bigger -- of a role in determining interest rates than a rating.
But that doesn't mean we should ignore S&P's Friday evening shot across the bow. In downgrading the U.S.'s credit rating, S&P points out what has long been obvious: Washington's inability to come to an agreement on how to close the large fiscal gaps that have emerged since the recession began is troubling. Recent events have sapped the agency's confidence that the government can and will do what is necessary to align revenues with spending commitments. And it's difficult to escape the conclusion that America's credit rating was intentionally sabotaged by Congressional Republicans.
Steve Benen points this out.
Officials from Standard & Poor’s provided documents to the Treasury Department, explaining the downgrade. Obama administration officials noticed a problem: the S&P numbers didn’t add up.S&P makes its evaluations supposedly on the financial records of the organizations issuing debt. If this were the case, then France would have a lower rating than the US, but France still as an AAA rating. S&P was incompetent during the mortgage crisis and it once again proved itself to be financially incompetent and a collection of wealthy political hacks.
On Friday, the company notified the Treasury that it planned to issue a downgrade after the markets closed, and sent the department a copy of the announcement, which is a standard procedure.
A Treasury staff member noticed the $2 trillion mistake within the hour, according to a department official. The Treasury called the company and explained the problem. About an hour later, the company conceded the problem but did not indicate how it planned to proceed, the official said. Hours later, S.& P. issued a revised release with new numbers but the same conclusion.
Got that? S&P prepared an analysis to justify a specific conclusion. The analysis was off by $2 trillion. Treasury explained to S&P that the analysis wasn’t even close to being accurate, which led the ratings agency to concede they’d made a mistake.
And a few hours later, S&P decided to reach the same conclusion anyway. The agency wanted to proceed with a downgrade; whether its numbers added up was irrelevant.
That certainly inspires confidence in the integrity of Standard & Poor’s decision making, doesn’t it?
Addendum II 5:38 PM CDT
If you have any doubt at all that the S&P debt rating downgrade is totally a political act by an incompetent financial rating agency, then go read the analysis by Dean Baker. S&P's "justification" simply doesn't pass the smell test. There is no possibility at all that Social Security will contribute to the deficit in the future and the claim that out of control Medicare costs will effect the budget in the future overlooks the fact that Medicare has a great deal more control over medical costs than the private market does.