The deal to raise the debt ceiling struck between Democrats and Republican marked a new low in an already shallow pool. The US economy was literally held hostage in order to extract concessions. The threat of a looming US default and the ensuing ratings downgrade was leveraged to enact spending cuts well beyond what Democrats considered acceptable. The final agreement left both sides unhappy - normally the sign of a fair deal - but for unusual reasons. Democrats were aghast by tactics that bore closest resemblance to extortion; Republicans were upset they hadn't asked for more.
I knew that the latest low-water mark for Washington would be short lived. How long until the possibility of a government shutdown was raised? How long before the specter of another debt ceiling raise returned? Would the threat of a FAA lockdown be leveraged into another unpleasant 'compromise'?
I just didn't expect the next shakedown to come so quickly, or to be so brazen.
On Friday Standard and Poor’s downgraded USA's triple-A credit rating to AA+, the first downgrade in US history. In their explanation they took shots at both Republicans and Democrats, painting blame on congress in whole instead of either party. Republicans refuse to even consider tax raises, they mused, while Democrats are loathe to touch Medicare and entitlements.
Make no mistake - hidden under all the boilerplate conventional wisdom was not a credit ratings agency exasperated by gridlock in Washington. This was a credit ratings agency actively trying to enforce policy, trying to throw influence around in an effort to get its way.
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