"We can debate the strength of the analysis that they [S&P] did, the history of S&P and so on," Axelrod told CBS' Bob Schieffer, of Standard & Poor's, the credit rating agency that downgraded the U.S. market from AAA to AA+ on Friday. "They made an egregious analytical error here but theirs was largely a political analysis... They want to see the kind of solution that the president has been fighting for... that will be balanced, that will include revenues, that will deal with some of our long-term issues."The death of the $4 trillion dollar deal is described in a N.Y. Times article, "Boehner Scales Back Deficit Talks, Citing Tax Increases." That article suggests that Speaker Boehner may have abandoned the $4 trillion negotiations on account of the intransigence of Representative Eric Cantor of Virginia, the House majority leader, who is rumored to be short U.S. Treasuries, and, if he is, stands to profit from the downgrade as interest rates on U.S. bonds and notes go up.
"For months, the president was saying, let's get together, let's compromise," Axelrod continued. "We thought we had such an arrangement with the Speaker of the House... then he went back to his caucus; he had to yield to the most strident voices in his party. They played brinksmanship with the full faith and credit of the United States. This was the result in that."
"The fact of the matter is that this is essentially a Tea Party downgrade," he declared. "That clearly is on the backs of those who were willing to see the country default."
Parties to the $4 trillion dollar negotiations knew that $4 trillion might have satisfied the rating agency. See Reuters' "S&P: Deficit cuts of $4 trillion a good start."
To understand why Republicans are afraid to increase revenues, see our post, "Never say never: How Republicans put themselves into a box," which has some information about Americans for Tax Reform and its leader, Grover Norquist. It was Norquist who once said, "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub." Most Republicans have put Norquist's interests ahead of the nation's interests by signing his pledge on taxes.
Clive Crook, a senior editor at The Atlantic and a financial journalist, has written "Some Thoughts on the S&P Downgrade." Among other things, he writes about the absolute necessity of never negotiating with terrorists like those members of congress who have taken the economy hostage.
In a few hours we'll begin to see markets' view of the downgrade. Markets in Australia, Japan, Hong Kong and Korea open in a few hours, as do U.S. futures markets. Earlier today, the Tel Aviv market fell more than 6%.
Update: At 5:05 PM (Pacific), U.S. futures are down about 2%. Bloomberg's quotes on worldwide markets are here. There is a link to a story about Eric Cantor's trading in the comments.