"Debt Crisis" was actually long-planned power grab by conservative Republicans

The Washington Post recently published a well-researched article which clearly establishes that the so-called "Debt Crisis" which resulted in the S&P downgrade of US treasury debt is the direct result of a long-term plan ram-rodded by Eric Cantor recover the power the Republican Party lost under the Bush administration.

This was not the tea partiers-gone-wild. This was not the Republicans reacting to disaffected voters as a result of the poor economy. It started before the economic collapse in fall of 2008 but was intended to take advantage of the economic conditions. This has been a long-term centrally-coordinated power grab by the national conservative Republicans.

This article was reported by Lori Montgomery, Paul Kane, Brady Dennis, Alec MacGillis, David Fahrenthold, Rosalind Helderman, Felicia Sonmez and Dan Balz. It was written by Dennis, MacGillis and Montgomery.

In mid-January, newly installed as the GOP House majority leader, Virginia’s Eric Cantor rose to the podium inside a spacious hotel ballroom to deliver a message to his troops, including the 87 newcomers who had given the party control of the House.

A vote to increase the nation’s $14.3 trillion debt limit was coming soon, he told the caucus members who had gathered at the Marriott in Baltimore’s Inner Harbor for a closed-door retreat less than 10 days after taking power. Think of it as a “hidden” opportunity, he implored them, a chance to achieve their goal of reining in the federal government and its spending habits.

“I’m asking you to look at a potential increase in the debt limit as a leverage moment when the White House and President Obama will have to deal with us,” said Cantor, one of several new House leaders who detailed the game plan for the coming months. “Either we stick together and demonstrate that we’re a team that will fight for and stand by our principles, or we will lose that leverage.”

The frantic showdown that followed, bringing the nation to the brink of default, looked like the haphazard escalation of a typical partisan standoff.

It wasn’t.

It was the natural outgrowth of a years-long effort by GOP recruiters to build a new majority and reverse the party’s fortunes. That effort began before the economy collapsed in 2008, before the government bailouts that followed, before the tea party rose in response to push its anti-tax, anti-spending message.

With the backing of the GOP establishment, Cantor and two colleagues banded together as the “Young Guns,” drawing their nickname from a magazine feature anointing them rising stars. They scoured the country for like-minded conservatives who shared their uncompromising commitment to shrinking the federal government. They showered these Young Gun recruits with money and support and exhorted them to maintain a laser-like fiscal focus.

By early 2010, talk of the “debt ceiling” began to creep into the lexicon of some Young Gun candidates, first as a reaction to Congress yet again giving the nation the authority to borrow more money. But in time, it became a shorthand, their synonym for all that was wrong with Washington.

How the shorthand of 2010 grew into the showdown of 2011 is the story of a Republican resurgence that brought immense advantage to the leadership but also created immense expectations among this new breed of lawmaker. Having built a majority on ideology, the GOP leadership found itself struggling to control a rambunctious rank and file determined to live up to the bold rhetoric that had brought it to Washington.

The newcomers took Cantor seriously when he urged them in January to see the debt ceiling as leverage. Democrats called the GOP irresponsible for gambling with the economy and the nation’s flawless credit. Republicans countered that an epic clash over the debt limit was inevitable, given the outcome of the election and widespread anger with runaway government spending.

When the deal was finally done and the threat of an economy-rattling default averted, the newcomers’ disdain for compromise had proved effective. They got most of what they wanted and gave little ground.

The new majority emerged emboldened — and hankering for the confrontations to come — even as the financial markets and much of the country reacted with unease about what had just happened.

This account of the party’s transformation, and its impact on the nation’s economic course, is drawn from interviews with the leading participants during this summer’s drama and from earlier interviews, some of them recorded, at various points during the past 21 / 2 years.

The story can be read in full here.

There are a lot of questions that flow from this story. One important question is why in Hell the media did not report it earlier. But if you had the feeling throughout the Debt Crisis discussions that the Republicans were doing their best to advance the cause of the Republican Party and to Hell with the needs of the United States, this story makes it completely clear that they were doing exactly that.

Maddow provides rare moment of Sunday morning Sanity

For a moment there was a rare moment of sanity and honesty on the Sunday morning shows. Where did the debt crisis come from? It was NOT a crisis about America's likelihood of financial default. It was a made-up crisis created by the Republican extremists in the House of Representatives - a made up crisis intended to create a hostage situation so that the extremists could get their self-centered irrational agenda passed because otherwise, no sane legislator would have given it a moment's notice.



The transcript is provided Here.

S&P downgrade of US debt not a financial decision - it's a rebuke of Republican national politics

S&P has essentially stated that while the GOP remains significant in national US politics S&P no longer trusts the US government to pay its bills. So they downgraded US government debt to AA+. Now S&P itself has rather dubious credibility but who could have followed the tea party-inspired Republican idiocy of the last month or so and still question S&P's decision?

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 budget

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.

Unless 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.

How long can America afford to accept Republican politicians as a legitimate American political party?

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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.

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.

The decision was more than just S&P's opinion of the politics, though. This was a clear political statement BY S&P itself!

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.

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?

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.

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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.

The insanity of S&P threatening to downgrade US credit

Kevin Drum has a very different take on the so-called debt "crisis."

There's something deeply weird going on here. Wall Street is allegedly worried over a default that's not going to happen, or else it's worried about the fiscal opinions of some rating agency analysts who don't know anything more about the financial future of the United States than anyone else. And those opinions don't even make much sense. The United States remains highly productive; the deficit of the past three years is completely justifiable; our long-term healthcare problems are exactly the same as every other advanced country in the world and exactly the same as they've been for years; and the current stalemate in Congress is — what? Six months old? They're talking about a downgrade of 30-year sovereign debt from the safest, most powerful country in the world based on a political spat that's been going on for less than a year?

This is crazy.

When it is stated this way it becomes completely clear that the entire thing is about the Republican crazies (A minority in the minority party) trying to force the majority of Americans to swallow libertarian economic and social prescriptions that will devastate the American middle class very quickly.

The Republican party was somewhat crazy under Nixon, quite crazy under Reagan and George H. W. Bush, utterly insane when they took over Congress in 1994, and became destructive of almost everything important in America when Bush/Cheney stole the 2000 Presidential election. Since then they have gone downhill. If they hadn't had the southern racists, FOX News, and some extremely rich and very weird families like the Koch brothers supporting them while the mass media has undergone a disastrous decline in revenues, no one would pay any more attention to the tea baggers than they do to beggars in the street in the poorer parts of a big city.

But those idiots are getting the attention they don't deserve, and as a result America is moving rapidly downward into the second tier of industrial nations as a result.

I see no chance that America will wise up and again become one of the premier nations in the world any time soon.

The endgame on the debt ceiling games.

This is the best description of what the idiots in Washington have really accomplished - nothing.

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Fineman and O'Donnell agree that it is going to come down to August 1 and we'll get an increase in the debt ceiling on a clean vote.

I really suspect that is too optimistic. I think it'll be a stalemate even at the end, with both sides blaming the other and the economy going to hell as they are paralyzed.

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Bill Maher is less optimistic. I agree with him.

In the meantime no one is doing a damned thing to increase jobs. That's the accomplishment of the Republicans with Obama's help. As Bill Maher says, in Nov ember 2012 the economy will have gone to crap (even worse than now) and the voters will have forgotten the lost Summer of 2011. Instead they are going to say "We elected a Democrat as President and we got a disaster."

I'd rather not be right on this.

The tea bag Republicans have already screwed America over - expensively

The debt ratings determine what interest rate lenders are going to demand before they lend money to a borrower. For years now, America's AAA rating has been so good that financial experts have used the US Treasury Bond interest rate as the so-called risk-free rate in their calculations.

Risk-free has meant that there was no risk of default, so no interest rate penalty was charged when lenders lent money to the United States. That was because of over a century in which the US always has paid the interest payments on time and has never even threatened to default.

Those days are now behind us. The ignorant stupid tea baggers have gotten their hands on the House of Representatives and made a show of not raising the debt ceiling because they cannot convince sane people that their programs of cutting programs and lowering taxes on the wealthy make any sense. John W. Schoen of MSNBC tells us where we are now.

As the stalemate over debt talks dragged on Wednesday, Congress and the White House may have passed the point of no return in avoiding a U.S. government debt downgrade.

If Uncle Sam loses his coveted AAA rating, the cost of borrowing goes up, the economy slows further and jobs get even tougher to find.

With hopes fading for a broad deficit-cutting package of spending cuts and tax increases, the White House Wednesday signaled that President Barack Obama could support a short-term extension of the U.S. borrowing limit as long as it was part of a broader long-term deficit reduction deal.

"We are in the 11th hour," said White House press secretary Jay Carney, repeating what Obama had said Tuesday. "We need to meet, talk, consult and narrow down in fairly short order what train we're riding into the station."

Carney also said the president would be willing to support a short-term extension as a stop-gap measure, but not without "an agreement on a larger deal."
Story: Democrats, Republicans meet with president separately

Though the Treasury has said it has enough cash until August 2 to keep paying the government's bills, including interest payments on $14 trillion in debt, time is rapidly running out for a comprehensive deal. The most promising to date, proposed by the so-called "Gang of Six" senators, would involve painful cuts and controversial tax increases.

Even if a broad agreement could be reached this week, both sides would have to hammer out specific line items and then return to their respective caucuses to sell the deal.

The alternative is a deal that raises the debt limit temporarily to allow the Treasury to pay its bills. But bond rating agencies Standard and Poor's and Moody's have said such stopgap moves would jeopardize the government's top-notch AAA credit rating.

"With the clock ticking, we doubt there is time to reach agreement on a comprehensive plan," said Paul Ashworth, chief U.S. economist at Capital Economics. "Instead, we expect a smaller scale plan to be passed that cuts $1.5 trillion from discretionary spending over the next decade. ... But it may not be enough to satisfy the rating agencies. The federal government is therefore still likely to lose its AAA rating within the next three months."

The deadline that counts is not August 2nd. The deadline that counts has already passed and now the US treasury interest rate will be going up. And every penny extra it costs will be tax money Americans have to pay for absolutely nothing except as a surcharge on the stupidity and greed of the Republican Party and it's tea bagger Republicans!

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Addendum 7/21/11 12:28 PM CDT
Add this from Steve Benen this morning.

" Ezra Klein had a good piece on this the other day.

The first to fall will be “directly linked” debt. These are bonds that rely on payments from the federal government. Naomi Richman, a managing director in Moody’s Public Finance division, puts it bluntly: “There are certain kinds of municipal bonds that are directly reliant on Treasury paying or some other direct payment,” she says. “If those bonds don’t receive their payment, they have no other source of revenue.” So down they go.

Then there’s the “indirectly linked” debt. That’s debt from state government, local governments, hospitals, universities and other institutions that rely, in some way or another, on payments from the federal government. If Medicaid stops paying its bills, all the hospitals that rely on Medicaid’s payments become less creditworthy. If we stop funding Pell grants, then all the universities that enroll students who pay using financial aid become less creditworthy. And since the federal government passes one-fifth of its revenues through to the states, and the states pass those revenues through to cities, if the federal government stops paying its bills, all states and all cities are suddenly in worse financial shape, which will make it harder for them to get loans.

And then there’s everything else. Mortgages. Credit cards. Loans that businesses take out to expand. Much of the debt in the American economy, and in fact globally, is “benchmarked” to Treasury debt.

The entire credit infrastructure is premised on the notion that U.S. Treasuries are the safest possible investment — the full and faith and credit of the United States is impervious, and the nation’s credit rating is the best bet on the planet.

Or it was, right up until Americans thought it was a good idea to give confused Republican extremists control of the U.S. House of Representatives.

As Ezra noted in his piece, “If America’s credit rating falls, it’s taking a lot more than just Treasury securities with it.”

So if the tea baggers and similar Republican Know-nothings in Congress like Michelle Bachmann get what they want and cause the American government to default, what are they going to do afterwards about they disaster they caused? Think they will stand up and admit that they caused the disaster and admit they were warned?

Of course not. These are not people who accept responsibility for what they caused. They will try to blame the Democrats for tanking the economy just to spite them. I'll guarantee the tea baggers causing this mess will not stand up and admit their fault. They'll be looking for someone else to blame.