Five Things The Liberal Left Do Not Want You To Know ABout the S&P Credit Downgrade!

1)  The liberal left says the S&P downgrade had to do with the Tea Party not wanting to raise taxes.  They hope you don’t read this:

  • Standard & Poor’s takes no position on the mix of spending and revenue measures that Congress and the Administration might conclude is appropriate for putting the U.S.’s finances on a sustainable footing.

2)  Despite the liberal left’s positon, it’s not just about taxes.  S&P prominently criticizes the political impossibilities of containing growth in public spending and reforming entitlements.  Is that the tea party’s fault too?

  • We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process.

3)   S&P noted that the debt ceiling deal didn’t raise the debt limit far enough.  Most folks should certainly recognize that as the Tea Party’s position!

  • We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.

4)  Along with the deepness of the recession, the sluggishly terrible Obama “recovery” was another reason for their negative position.  Is the Tea Party responsible for the Obama’s failed economic policies too?

  • First, the revisions show that the recent recession was deeper than previously assumed, so the GDP this year is lower than previously thought in both nominal and real terms. Consequently, the debt burden is slightly higher. Second, the revised data highlight the sub-par path of the current economic recovery when compared with rebounds following previous post-war recessions. We believe the sluggish pace of the current economic recovery could be consistent with the experiences of countries that have had financial crises in which the slow process of debt deleveraging in the private sector leads to a persistent drag on demand. As a result, our downside case scenario assumes relatively modest real trend GDP growth of 2.5% and inflation of near 1.5% annually going forward.

5)  They might downgrade us again if they see “less reduction in spending” than was agreed to.  Of course we all know the Tea Party is also responsible for not cutting spending enough!

  • The outlook on the long-term rating is negative. We could lower the long-term rating to ‘AA’ within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.
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