Saturday, August 6, 2011

Response to S&P Downgrade

Fred Bauer writes on the conservative blog Frum Forum that GOP intransigence on revenues is a big culprit.

The statement hammers away at what it views as political gridlock. The battle over the debt-ceiling has exacted a considerable toll, in S&P’s eyes...Many wanted a “battle” over the debt-ceiling and hoped for more “battles” in the future; S&P suggests that this might not be a good idea for the long-term fiscal situation of the United States.

Though the report does vaguely ask for reforms to various entitlements, it mentions Republican intransigence on raising taxes multiple times. Unlike earlier reports, this new one, with its projections for an accelerating amount of federal debt, assumes the extension of all Bush tax cuts “because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.”

S&P makes the following recommendations for the United States: increase revenue, improve the economy, and ensure that government can fulfill its routine fiscal responsibilities. Those aren’t exactly bad points. High-wire political knife-fights may make for riveting blogging and TV, but they do not always reflect the utmost of fiscal prudence. Perhaps the US government should not dance to the tune of (far from infallible) ratings agencies, but S&P does have a worthy point in this: in order for our government to work in the long term, it must have some kind of governable consensus. We must also have an economics anchored in reality and not in ideology, and a fiscal politics of compromise and empiricism instead of flamboyance and wrath.

Predictably, the Republicans are blaming Obama. As Thomas Lane reports on Talking Points Memo, the 2012 GOP Presidential candidates can't agree on why.

--Ballard Burgher

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