Standard and Poor's strips the federal government of its AAA status, and a fingerpointing epidemic breaks out in Washington
Standard and Poor's controversial announcement on Friday that it would downgrade the U.S. government's credit rating — from AAA to AA+ — shook up global financial markets. As soon as American markets opened Monday morning, the Dow Jones Industrial Average plunged more than 200 points. And predictably, the first credit downgrade in U.S. history ignited a heated blame game in Washington. S&P said it lowered the rating because Congress and the White House had failed to come up with a credible plan to get the national debt under control. Sen. John Kerry (D-Mass.) branded the move the "Tea Party downgrade," while conservatives blamed President Obama's "reckless spending." Whose fault is it really? Here, five possible culprits:
1. The Tea PartyDuring the debt-ceiling battle, Tea Party leaders made it clear they were willing to let the nation default on its debts and "cause a full-fledged economic disaster" if they didn't get all the spending cuts they wanted, says Charles Johnson at Little Green Footballs. They held the U.S. economy hostage while demanding massive cuts and no new revenues, and that made the federal government look so unreliable and dangerous that Tea Party Republicans effectively forced "the first U.S. credit downgrade in history, and that's not too shabby. Maybe next time, the apocalypse."
2. President Obama and Democrats The Left is in full spin mode to hide the downgrade's obvious cause — the "massive two-year binge of deficit spending embarked on by President Obama, Nancy Pelosi, and Harry Reid," says Robert Stacy McCain at The Other McCain. During the debt-ceiling debate, instead of dealing honestly with the debt problem, Obama insisted Republicans were trying to "steal Granny's Social Security check" so the rich could keep their corporate jets. "Democrats don't want to fix the problem, they want to score political points against Republicans."
3. President Obama and House Speaker John Boehner"The bond rating drop unequivocally is a direct result of the Barack Obama-John Boehner national-debt deal," says Gregg Easterbrook at Reuters. The last-minute agreement is "as phony as a three-dollar-bill," with no real effort to reduce our ballooning debt. Everybody knows we can't balance our finances without trimming Social Security and other entitlement programs, and raising taxes. But "both parties, and both the White House and Congress, are more interested in blowing smoke than in firm action."
4. Standard and Poor'sThe analysts at S&P are supposed to base their decisions on an "honest appraisal" of the nation's financial health, says Chris Rupkey, the chief financial economist at Bank of Tokyo-Mitsubishi, as quoted by Bloomberg. Instead, they got entangled in the partisan political fight over the national debt, sticking to the downgrade even after the government pointed out an error in S&P's calculations that caused a massive $2 trillion overestimation of next decade's debt. "The U.S. is not out of money, it has the financial resources to make good on its debt, and it should not have been downgraded."
5. Every politician in Washington"Ultimately, S&P didn't only downgrade the U.S. credit rating. It downgraded the whole political system," says Jonathan Allen at Politico. Democrats would only consider minor changes to entitlement programs; Republicans flatly ruled out new revenues without which there is no solution. "In the eyes of the raters, both parties punted the tough decisions"
