Saturday, August 6, 2011

What S&P Did Wrong

S&P downgraded US debt and argued it did so because the debt ceiling was not raised in a timely manner and because the US Congress and the administration are not working together well to resolve the long-term debt issues.

Now the blame game begins. Republicans will blame Obama and Obama will blame Republicans. That's how most Americans will see it anyway. Ezra Klein argues S&P was right to downgrade US debt, even arguing it was overdue. As a purely economic matter, S&P probably is right. But what Klein fails to point out and what the media will ignore (because of their "norm of objectivity" which is not actually objective) is this: S&P is to blame for the downgrade ... because they did not blame congressional Republicans. Had S&P and the larger Wall Street community stepped in and asked Republicans to be more reasonable and to stop playing around with the nation's debt ceiling, none of this would have happened. Because S&P tried to stay out of politics even when they knew who was right and who was wrong in this dispute, the Republicans pushed ahead with this outrageous and destructive political strategy. And worse, they now feel empowered to do it all over again and again and again. Even in the downgrade, S&P could have said that Republicans need to compromise on taxes. Instead, S&P said Republican intrangisence on taxes is equivalent to Democratic intrangisence on entitlements. That's just not true. It is untrue. It is wrong. S&P is lying ... in order to appear objective.

In essence, S&P is causing the downgrade

No comments: