S&P…downgraded the credit rating of the United States. We go from AAA to AA+. What’s the difference? Apparently not much, but we’ve never been in this situation. There was some initial confusion, a shot fired back from the Treasury about funky math, but in the end it happened anyway. Jamie Dupree has a no frills copy of the presser. Ezra Klein has a succinct “Now What?” piece. So what does a passive pundit have to say about this?
Commentators seem to be split about this one. The other two ratings agencies have signaled no intent to downgrade our debt, and the US is responsible for so much sovereign debt in the world that it’s not clear investors have anywhere else to go. There have been sentiments echoed that I generally agree with. David Frum tweeted “If S&P is saying US cant pay – it’s flat wrong. If S&P is saying it’s worried US Congress might not pay – different story.” I can’t plausibly deny this assumption. The recent debt ceiling debacle made it clear that the GOP is willing to go farther than the Dem’s to achieve it’s ideological vision of a United States that many people don’t share. This is nothing new, but whether it’s Tea Party passion or just hatred of a Democratic President, we’ve reached a point where they are willing risk whatever consequences to achieve that goal.
So this could be thought of as a failure of politics, of people failing to govern at a time when we really need less partisanship and less cut throat zeal. We have a serious near term problem – jobs and weak economy. We have a serious medium term problem – burgeoning debt. We have a serious long term problem – entitlements (and the subsequent debt issues). Our near and medium term problems can really be helped by economic growth, but our enthusiasm for cutting spending at all costs is not going to get us there any sooner. The long term problem is something we’ve known about for, well, a long time. At some point we’ll have to sit down as a nation and decide what we want to pay for and how we pay for it. But if the consequences of having that conversation now means turning a ‘lost decade’ into something much longer, I don’t think it’s worth it.