…so We’ve been Downgraded…

I keep forgetting that the United States has been downgraded in its credit rating.  Then I come home and check the news alerts & updates waiting in my email.  Reality hits once again.  It’s hard for me to acknowledge the fact that this grand country of ours has…has what, exactly?  Sure, officially a credit rating organization has labeled the United States of America as not ‘top drawer’, as AA+ instead of AAA.  This can’t be good.  Or, can it?  Maybe it’s potentially good.  If you’re a reckless driver & your license is taken from you,well – it may be that your life was saved as a result of that. You’ll have to learn how to drive more carefully.   So…same principle.  

The issue is not so much a debt issue as it is about this government’s ability to function as it should.  As it can.  Standard & Poor’s reasoning behind the credit downgrade?

“The downgrade was motivated by all the debate about raising of the debt ceiling. It involved a level of brinksmanship greater than what we had expected.”   MSNBC’s Rachel Maddow says that S & P lowered our score because “ Washington is not working, and we did something insane with getting that close to defaulting on purpose…”  The rating agency cites a wide disparity in “.. differences between political parties…” as cause for much concern.  “The political brinksmanship {there’s that word again!}  of recent months highlights what we see as America’s governance and policymaking (italics mine)  becoming less stable, less effective, less predictable than we previously believed” continues S & P’s analysis.  Sounds like they don’t trust us at the wheel.  Can it really be argued that they are wrong?

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Senator John Kerry believes that America is in “one of the most telling, important moments” of her history, with her future & security at stake “in an unprecedented way.”    We have before us a potent  & sobering opportunity to turn the tide, but to do this Congress must be united in, as Senator Kerry declares, a “deadly serious” approach to managing our debt.  Getting past the blame game might be a good start.  I’m still seeing headlines about this one blaming that one blah-blah-blah, and my sole reaction to this is, what a bunch of bickering, childish, prideful politicians.  The issue now should be solutions going forward.  Both sides of the aisle need to keep their eyes on the prize:  American freedom, strength and security, of every kind. 

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These things being considered, however – I think it’s important to point towards every positive and hopeful aspect of this situation that can be found.

Both former Federal Reserve chairman Dr. Alan Greenspan & Austan Goolsbee, outgoing Economic Adviser for the White House have indicated that the actual probability of U.S. default is zero.  What we’ve been hearing, on the whole, hasn’t been that!  Greenspan contends that the United States can pay any debt it has because more money can always be printed.  Goolsbee calls our Treasury the safest asset in the world.  (Meet the Press)

(They are the experts, not me, so I’m taking them at their word…although I’ve never thought the idea of just printing up money willy-nilly sounded very…solid or responsible. It’s a concept I don’t understand – yet.)

In fact, Standard & Poor’s itself actually provides us with some solace.  David Beers, managing director at S&P, has indicated that the downgrade was not a catastrophic decline in the U.S.’s creditworthiness”     informing us that part of the reasoning behind that decision was, again, the political debate itself over the debt ceiling – or, as I’m interjecting here, Washington’s behavior.  And according to Ezra Klein, writer for the Business section of the Washington Post, the downgrade to AA+ reflected S & P’s estimation of – am I seeing a pattern here? – our political system, NOT  the actual ability of the United States of America to pay her debt.

(FYI: Klein comments:  “This is very odd timing from S&P.” See Point 3 in his article.)

Not only did the Moody’s and Fitch rating agencies leave our AAA credit rating intact (though with cautions), Fitch informs us that there is a negligible difference between AAA and AA scores anyway,(Reuters)  AND  goes on to elaborate on the expectation of U.S Treasuries   “to remain the benchmark security that anchors global fixed income markets for the foreseeable future.”  (BusinessWire)

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At issue, of course, would be the reliability of, and the motivation for, Standard & Poor’s unprecedented downgrade of United States creditworthiness.  Maybe the reliability and motivations of all of ‘em.  Hmmm…at this point in my research into all things default-related, my brain is melting down into mush.  Suffice it to say right now, that, like everything else in life & government, business & ratings agencies, there can be a ‘looking out for #1′ mentality.  Not saying that’s always a bad thing!  The Sunlight Foundation, a money-tracking organization, points out that these rating agencies have been rather adept at  “forestalling oversight and maintaining their independence.”  Well, that could go either way, preserving truth or muddying its waters! 

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Let me interject a touch of facetieae here, by Washington Post commenter woodyag:

“You may be surprised to know, there is a SUPER Ratings Agency, that rates Rating Agencies.

They just downgraded S&P, to BCC; and changed their outlook from “marginal” to “indictments soon”. Moody’s and Fitch are still rated BCC, and they’re hanging on to their marginal outlook.

All of the Big 3 Ratings Agencies were downgraded from longstanding AA to BCC, back in 2009; when it was publicly revealed that ALL the agencies had been dabbling with criminal collusion with the banks, to sell bundled mortgages at AA, when all the data indicated it was really DD (dead duck).

(little trivial disclosure; I’m the super agency, personally. I wish somebody paid me for it- but I don’t have the kickback schemes in place yet. Hey, S&P, want me to raise your rating? Send me a check. Lots of zeros, too.)”

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All this being said…and really, the more I’ve learned the more I’m thinking a certain amount of this debt ceiling/default fiasco has been hype, spin…still…in the final analysis, the pulse of the matter is our economy.  It needs to remain strong.  Or get stronger.  We all know there is a Washington spending problem.  I’m of Senator Kerry’s opinion – a ‘deadly serious’ approach is mandated.  We ARE the United States of America, proud, bold & free.  We want to stay that way.