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Thread: How S&P Downgraded the Govt-- and Itself

  1. #1
    Havakasha is offline
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    How S&P Downgraded the Govt-- and Itself

    http://www.washingtonpost.com/busine...y.html?hpid=z2

    Ezra Klein
    Columnist
    How S&P downgraded the government — and itself
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    By Ezra Klein, Published: August 8

    Standard & Poor’s decision to downgrade the United States has drawn a lot of criticism. The White House called its performance, which included a miscalculation of about $2 trillion, “amateur hour.” Rep. Barney Frank was even less sparing. “These are some of the people who have the worst records of incompetence and irresponsibility around,” he told Rachel Maddow. They are trying to “justify their reputation.”

    All of this is true. But it doesn’t make Standard & Poor’s wrong. In fact, this downgrade is arguably serving two important functions: It’s drawing attention to the failures in the American political system, as well as the failures in Standard & Poor’s.


    Let’s begin with the country. “The downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges,” Standard & Poor’s said in the statement accompanying Friday’s decision.

    After Republicans in Congress spent three months weighing whether or not to default on our debt and Senate Minority Leader Mitch McConnell said that paying our bills would never again be a foregone conclusion, can anyone really argue with that? After every Republican presidential candidate save Jon Huntsman either remained silent on, or flatly opposed, the deal to raise the debt ceiling, can anyone really say that U.S. debt is completely riskless? That there’s no chance of a political miscalculation, and if there is such a chance, that they can perfectly predict the outcome of the ensuing chaos?

    In Washington, it’s almost trite to say that the political system is broken. It’s been clear for some time that things really are different, that norms and procedures that once kept fractious congresses functioning have eroded with terrifying speed. If anything, S&P is, as usual, noticing the deterioration too late. But that doesn’t mean the deterioration is not real, or that it should be ignored.

    That said, S&P’s report is a joke. The problem isn’t the agency’s $2 trillion mistake. It’s possible for the agency to have made that mistake without harming its underlying point about the weakness and unpredictability of American political institutions. But S&P hasn’t confined its argument to our political institutions. The original draft of its report included a section in the executive summary laying out the deficit math for the next decade. When that math proved wrong, S&P simply deleted the section. But that’s inconsistent with the calculations S&P left in the final report.

    In both versions, Standard & Poor’s says it would upgrade our outlook from “negative” to “stable” if the Bush tax cuts for income over $250,000 expire. That would net Treasury about $900 billion over 10 years. So according to S&P, $900 billion is a big deal. And it’s a big deal because of how much it would reduce the deficit. So let’s look at that.

  2. #2
    Havakasha is offline
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    i think this is much more serious subject then a rehash of the Clinton/Obama campaign.

  3. #3
    SiriuslyLong is offline
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    Quote Originally Posted by Havakasha View Post
    i think this is much more serious subject then a rehash of the Clinton/Obama campaign.
    Agreed. I thought the article was poignant and was looking for an "insiders" opinion which on a minimalist level, you provided.

    Personally, from your reaction, I take it that you don't like the article.

  4. #4
    Havakasha is offline
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    I wasnt interested in the Clinton article. But the one that i started this thread with, now thats another story.

  5. #5
    SiriuslyLong is offline
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    Oh, I see. You are back to "taxing the rich". No, you are not a rigid idealogue. This is not a liberal talking point. It's a brand new creative idea from you.

    What happens if the left can successfully convince republicans that taxing those who earn > $250,000 a year is a good idea and it happens. What next? What other measures are needed to reduce borrowing to a sustainable level?

  6. #6
    Havakasha is offline
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    Bill Gross the head of PIMCO, and David Stockman (former budget director under Reagan)both hardlly rigid ideologues; and many Republican economists
    believe you cant possibly balance the budget without raising revenues and especially on the rich. A large majority of the American people favor that as well.

    Its more mainstream then you acknowledge. I would argue that your position is much more rigid and in line with the Tea Party.

    If you cant convince enough Republicans in the House to agree that this is a fair way to go, then
    Obama will probably have to try to achieve what he wants through tax reform which eliminates
    a # of tax advantages for the wealthy. Barring that there is the expiration of the Bush tax cuts at theend of 2012 which he can use as a bargaining chip. It should get very interesting.
    Last edited by Havakasha; 08-09-2011 at 04:14 PM.

  7. #7
    Havakasha is offline
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    This is way more important than silly articles calling the President stupid.

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