Folks, there are at least a few diaries this morning cherry picking what we want to hear on the S&P debt downgrade. But, can we look at what S&P said and at least try to be somewhat objective?
There's a front page story which does a good job of providing a more circumspective view. Hunter's front page story here:
To Summarize, what I think S&P is saying:
1. The US political system lacks the maturity, responsibility and will to deal with its long term debt crisis.
2. S&P believes we have a structural debt problem, primarily fueled by long term issues with Medicare and Social Security.
3. S&P believes we have a medium term debt problem. In other words, the debt package which was just passed had cuts which were backloaded and did nothing in the medium term.
4. S&P believes we need to increase revenues to deal with the medium term debt problem, and our political system lacks the will to do so.
5. S&P believes we need more government spending in the near term to stimulate the economy.
Some might see some of the above as in conflict with each other. I don't.
While Dems are screaming we need more stimulus and a jobs program, and to raise revenues, and Republicans scream that debt is a runaway freight train, I think S&P is saying they are both right, and that we need to deal with all of the above at the same time.
I believe S&P believes that we need more stimulus in the near term, increased taxes to deal with medium term debt, and deal with the structural issues of our long term debt, which they blame on Social Security and Medicare. And, they downgraded our rating because they believe we lack the political leadership and political will to do so. More specifically, they thought the $4 Trillion dollar package (the big deal) was the right thing to do, but we failed to do it. This was the deal Obama and Boehner were working on, but failed. That is the specific failure of political leadership. IMO, both Obama and Boehner own this failure in leadership. There is really no one else to blame. But, in the end, Obama will be punished the most severely - As in 2012, he will be known as "The President who lost the nation's sterling credit rating".
The President was right - we need to do more now - JOBS, we need to raise revenues, we need a "big deal" for long term. But, he failed to provide the strength of leadership to make that happen in a decisive way.