If you think deficit-reduction is being driven by
John Boehner or Harry Reid, think again. The biggest driver right now
is Standard & Poor's.
All of America's big credit-rating agencies -- Moody's, Fitch, and
Standard & Poor's -- have warned they might cut America's credit
rating if a deal isn't reached soon to raise the debt ceiling. This
isn't surprising. A borrower that won't pay its bills is bound to face a
lower credit rating.
But Standard & Poor's has gone a step further: It's warned it
might lower the nation's credit rating even if Democrats and Republicans
make a deal to raise the debt ceiling. Standard & Poor's insists
any deal must also contain a credible, bipartisan plan to reduce the
nation's long-term budget deficit by $4 trillion -- something neither
Harry Reid's nor John Boehner's plans do.
If Standard & Poor's downgrades America's debt, the other two big
credit-raters are likely to follow. The result: You'll be paying higher
interest on your variable-rate mortgage, your auto loan, your credit
card loans, and every other penny you borrow. And many of the securities
you own that you consider especially safe -- Treasury bills and other
highly-rated bonds -- will be worth less.
In other words, Standard & Poor's is threatening that if the 10-year budget deficit isn't cut by $4 trillion in a credible and
bipartisan way, you'll pay more -- even if the debt ceiling is lifted
With Republicans in the majority in the House, there's no way to lop
$4 trillion of the budget without harming Social Security, Medicare, and
Medicaid, as well as education, Pell grants, healthcare, highways and
bridges, and everything else the middle class and poor rely on.
And you thought Republicans were the only extortionists around.
Who is Standard & Poor's to tell America how much debt it has to shed in order to keep its credit rating?
Standard & Poor's didn't exactly distinguish itself prior to Wall
Street's financial meltdown in 2007. Until the eve of the collapse it
gave triple-A ratings to some of the Street's riskiest packages of
mortgage-backed securities and collateralized debt obligations.
Standard & Poor's (along with Moody's and Fitch) bear much of the
responsibility for what happened next. Had they done their job and
warned investors how much risk Wall Street was taking on, the housing
and debt bubbles wouldn't have become so large -- and their bursts
wouldn't have brought down much of the economy.
Had Standard & Poor's done its job, you and I and other taxpayers
wouldn't have had to bail out Wall Street; millions of Americans would be working now instead of collecting unemployment insurance; the
government wouldn't have had to inject the economy with a massive
stimulus to save millions of other jobs; and far more tax revenue would
now be pouring into the Treasury from individuals and businesses doing
better than they are now.
In other words, had Standard & Poor's done its job, today's budget deficit would be far smaller.
And where was Standard & Poor's (and the two others) during the
George W. Bush administration -- when W. turned a $5 trillion budget
surplus bequeathed to him by Bill Clinton into a gaping deficit?
Standard & Poor's didn't object to Bush's giant tax cuts for the
wealthy. Nor did it raise a warning about his huge Medicare drug benefit
(i.e., corporate welfare for Big Pharma), or his decision to fight two
expensive wars without paying for them.
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Add Bush's spending splurge and his tax cuts to the expenses brought
on by Wall Street's near collapse -- and today's budget deficit would be
Put another way: If Standard & Poor's had been doing the job it
was supposed to be doing between 2000 and 2008, the federal budget
wouldn't be in a crisis -- and Standard & Poor's wouldn't be
threatening the United States with a downgrade if we didn't come up with
a credible plan for lopping $4 trillion off it.
So why has Standard & Poor's decided now's the time to crack down
on the federal budget -- when it gave free passes to Wall Street's risky
securities and George W. Bush's giant tax cuts for the wealthy, thereby
contributing to the very crisis its now demanding be addressed?