S&P Downgrades US Debt Rating to AA+ For First Time in History; Overwhelmingly Blames Teapublicans

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    Earlier this evening, Standard and Poors downgraded the U.S. long-term sovereign credit rating from AAA to AA+. Why? S&P’s reasoning says it all:

    *”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.”

    In other words, the Republicans and Tea Partiers holding the debt ceiling increase hostage to their demands did not go over well with Standard and Poors. Shocker! (not)

    *”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.”

    Again, thank you Teapublicans for absolutely refusing to touch the revenues side of the equation. In fairness, Democrats weren’t exactly jumping up and down to deal with health care spending; also, Democrats should have pushed much harder for a public option when they had a chance, as this would have helped “bend the cost curve” of health care spending. But nooooo….

    *”The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed.”

    Political brinksmanship?  Gee, who could S&P possibly be referring to on that one? Hmmmm.

    *”It appears that for now, new revenues have dropped down on the menu of policy options… only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability.”

    In this case, there’s blame to go around, as neither party was serious – with the exceptions of President Obama and, apparently, John Boehner before he was reined in by his own caucus – about dealing with entitlements. And no, the Ryan Plan, which most every Teapublican voted for, does not count as “serious.” It’s a complete joke.

    *”…our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.”

    This one’s clearly the Teapublicans’ fault, essentially 100%, and is a big part of the reason why S&P believes the U.S. is not “likely to slow the deterioration of the government’s debt dynamics.”  In short, thank you, Teapublicans, for destroying America’s credit rating!

    UPDATE: This sums it up very well. Also, Matthew Yglesias has some thoughts.

    • The Richmonder

       Let’s start by giving Eric Cantor’s job to E. Wayne Powell in 2012!

      http://www.ewaynepowell.com/

    • Chris

      I can’t believe that some in the press are actually saying that there is plenty of blame to go around.  I mean, there is blame to go around, but it about 10% attributed to the Democrats and 90% to the GOP.  

      Make no mistake about it, the GOP has sought deliberately bankrupt the country for 30 years.  They have been pretty open about it – “Starve the beast”!

    • normanva

      Let’s look at what happened.  This was an artifical crisis caused by the tea party.  Mistakenly Boehner sent eric cantor to negotiate for 3:1 debt reduction/tax increases.   There are plenty of loopholes to close to raise revenue 1 trillion.  But NO, cantor put ambition before Country and refused to even raise 1 penny.  cantor and the tea baggers ran us along the edge of the clift.  cantor is the darling of the tea baggers, we are screwed. When you are the world’s reserve currency and superpower, you can only lose your AAA rating once.  True we may be able to get it back some day but you can bet if won’t be the same.

      Cantor: Ambition Before Country

    • Jim B

      You can bet the republicans will take no blame. So, I assume interest rates will rise and shut down more spending by consumers. It is a catch 22 over and over.

    • kindler

      Are they going to label S&P “socialist”?

    • kindler

      …ranking the US lower than Finland and Liechtenstein certainly makes no sense.

      This is all about the weakened nature of our political system as it fights off a nasty infection of teaparticoccus.  

    • glennbear

      I anxiously await the revelation in the coming days of how much Cantor and others of his ilk are making off the downgrade with their reverse hedging investments.

    • I really wish Kaine would just slam the Republicans, instead of dancing around it with “some in Congress” and “particularly the House of Representatives.” C’mon, we all know who caused this situation: Boehner, Can’tor, the Teapublican’ts!

      KAINE: S&P DOWNGRADE SHOWS CONGRESS MUST

      EMBRACE A BALANCED, COMPREHENSIVE SOLUTION

      Richmond, VA – Governor Tim Kaine released the following statement in reaction to the decision by Standard & Poor’s to downgrade the United States’ credit rating:

      “The action of S&P downgrading America’s credit rating yesterday was disappointing but predictable. The agency warned against the impact that political brinksmanship over the debt ceiling would have. And, once some in Congress decided to use the economy as political leverage, the agency warned that only a grand bargain — a balanced approach of spending cuts and new revenues — would be enough to guarantee America retaining its top credit rating. But, Congress — particularly the House of Representatives — ignored those warnings and backed away from the opportunity to embrace such a balanced and comprehensive solution. And, as S&P specified yesterday, the continuing resistance of Congressional Republicans to entertain the need for new revenue as part of a reasonable solution is a critical part of the downgrade decision.

      “Though the blame for this downgrade rests squarely on Washington’s shoulders, all Americans will pay the price. Higher interest payments as a result of the downgrade could cost the federal government up to $100 billion annually, increasing the deficit and negating the impact of cuts made as part of the debt-ceiling deal. American families and small businesses will also pay more out their own pocket for every dollar they borrow. And, in Virginia, where our Commonwealth and many Northern Virginia localities have already been placed on credit watch, we are increasingly vulnerable to a downgrade of our own.

      “The important thing now is to take the right steps to improve our fiscal position and bolster the economy. The Congressional super-committee and all members of Congress have until year-end to show that they can act decisively to put America’s long-term economic interest above their short-term political calculations. So far, this Congress has not been a ‘do nothing Congress’ — they’ve done actual harm to the nation through their petty politicking. They have to now step up and fix the problem they’ve created.

      “The right strategy for improving our fiscal condition has three components–spending reductions, tax reform and investments to grow the economy.