Friday, August 5, 2011

Bone-headed luddites like Sarah Palin are wrecking the economy

From The N.Y. Times:

WASHINGTON – Standard & Poor’s removed the United States government from its list of risk-free borrowers on Friday night, citing concern about the rising burden of federal debt.

The rating on the country’s long-term debt was lowered one notch, from AAA to AA+, with a negative outlook.

The ratings agency had threatened the downgrade if the government did not act to reduce the federal debt by at least $4 trillion over the next decade. Earlier this week, Congress instead passed a plan to reduce the debt by at least $2.1 trillion. ...

Interestingly, there was a $4 trillion plan, but Speaker Boehner walked out of negotiations with President Obama, because that plan included revenue increases. It's uncertain whether that plan would have assuaged Standard & Poor's concerns, but it was a lot closer to their numbers.

There are two other major credit rating agencies: Moody's reaffirmed its AAA rating this week, and Fitch is reviewing its rating. It is unclear whether S&P's downgrade will make borrowing more costly. The other agencies may now follow S&P's lead.

Treasury auctions are scheduled for next week: An auction for 13-week and 26-week bills is scheduled for the 8th, so we may get a clue on Monday, but Monday's auctions are for short-term debt. 10-year notes and 30-year bonds are scheduled on the 10th and 11th, respectively. The auctions to watch are the 10-year and 30-year auctions.

A comparison of the Tea Party with terrorists may be in order: They didn't just hijack the plane, they're shooting the passengers. The credit downgrade will affect all of us.

Update: Reuters has a more detailed story, "United States loses AAA credit rating from S&P."

Update: Salon has "S&P to the U.S: Your credit is no good: Why the Tea Party-friendly Republicans of the U.S. House own this epic humiliation."

Update: The Huffington Post has, "S&P Downgrade: Tea Party Wins Battle, Loses War."

Update: The Times of India has "Shock waves in US after S&P downgrades its credit rating."

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