In the making-lemonade-out-of-lemons category, the S&P downgrade of our credit rating and the subsequent massive sell-off of stocks might actually weaken the Republicans’ resolve to make no revenue concessions on the SuperCommittee. I know they’re going around pretending that this is the president’s fault, but business leaders know better. The Republicans spent all summer shrugging off all warnings that they shouldn’t play around with debt ceiling, telling us repeatedly that our credit rating was safe and even a default wouldn’t be that big of a deal. They were wrong. And I think a lot of people who went along with their kidnapping ransom scheme with a wink and a nod are now much less trustful of Republican assurances. The outcome of the Republicans’ hostage-taking plan has been a total disaster for the country, and I don’t see how the GOP can just continue down the same path. Obfuscation can only carry you so far. When the chickens come home to roost, you’ve got a problem.
About The Author
BooMan
Martin Longman a contributing editor at the Washington Monthly. He is also the founder of Booman Tribune and Progress Pond. He has a degree in philosophy from Western Michigan University.
I think there’s a real question how much of this is the default and how much of this is related to Europe.
Look at the rates: http://www.bloomberg.com/apps/quote?ticker=USGG10YR:IND#chart
The global markets got spooked and rushed to buy… Treasury Securities!
that’s because there is nowhere else to go but the mattresses.
Then how did the political situation end up hurting the actual US credit rating (borrowing costs) as opposed to the “label” stuck on it by the rating agencies?
No one cares what S&P said, apparently. Right now investors are buying treasuries, lending money to the US Government basically at a loss (when inflation is taken into account.) Right now the 10 year bond is at 2.36% – ridiculously cheap. We should borrow a few Trillion at these rates but we just agreed that we can’t do that. So we won’t.
But because we can’t do that (and fix our economy with it) everyone knows we’re gonna be in the dumps for a long time to come, unable to recover. So US Consumers and Businesses won’t be buying much and our “recovery” is over. So every company in the world is losing value because they all depend on a strong US economy to buy their goods.
People sell stocks in companies that won’t perform and fly to safety (Treasuries, Gold, etc) and it becomes a vicious cycle.
We could break that cycle by issuing a few trillion in bonds (free money) and employ all of our unemployed. They could then work on whatever they do and pay taxes. That fixes the deficit. But we can’t do that because Mitch McConnell and John Boner set a trap for Obama and he happily walked in to it so he wouldn’t have to have any conflict. We’ve now committed to not borrow any more than the minimum to get by. And slash budgets at the same time, with no new taxes.
Utter incompetence.
And that’s where S&P comes in. They see that we’ve locked ourselves in to this death spiral. Oddly, they seem to want more in budget cuts, which would only make the death spiral worse. They’re playing politics and they shouldn’t be allowed to do that. They’re always wrong about virtually everything but we allow them to exist – why, exactly?
But no one cares what S&P thinks unless the other ratings agencies join them. That’s unlikely.
Obama didn’t walk into a trap. You’re acting like he has lost the ability to do stimulative spending by signing the debt ceiling bill into law. In reality, he lost the ability to do stimulative spending as soon as he signed the first stimulus bill. Certainly, the 2010 midterms removed any doubt.
Okay whatever.
Ok What ever? Either you are willfully being ignorant of the realities of how our government works or you think Obama does have some magical power that allows him to circumnavigate the will of Congress when it comes to spending. If it is the latter please clue me in on it and how it works.
Okay Whatever = “I don’t want to debate this right now.” But I did not retract my statement.
Sure .. the GOP are Koch suckers and all that .. but do you remember what the President said when he signed the stimulus bill into law? And you know how else I knew we were screwed? .. When people like Turbo Tax Timmeh have to write op-eds touting the “Recovery Summer” I knew it was trouble .. as I am sure you did too .. if it was a real recovery .. people could tell .. and you wouldn’t have to throw a coat of paint on a dilapidated house.
Then I’m glad I never fooled myself into thinking he’d have another crack at a stimulus bill after the first one.
Members of Obama’s own party sabotaged the first stimulus bill. The chances of another one was very slim as he would have had to fight his own party and went completely with the 2010 elections.
you’re expecting the market to behave rationally and also for the ramifications of this event to become clear after four hours of trading.
This is surely bad news for corporate jet owners then.
…C’mon, are you really fantasizing about November being anything other than another gigantic clusterfuck? Stop underestimating the Republicans. It’s impossible.
Remarks from the Prez in 8 minutes.
I totally agree, Boo, and that’s one of the reasons I’ve been so disgusted by all the hand-wringing of left wing Chicken Littles that’s been going on the last few days. Even if the Republicans try to persist, they are going to bludgeoned with a blunt instrument (i.e. “the Tea Party downgrade) every time.
Although obviously a lot more serious, this does reminds me of the Birther craze a few months ago, which, at its highest pitch (with similar Chicken Little effect from the left), was suddenly ended by one simple document, followed by the sudden demise of ObL.
And here’s something else to bear in mind, Little Chickens. Yes, there are lots of people in this country that believe this is all Obama’s fault. Because they always believe everything is Obama’s fault. However, there are a lot more people in this country, and the world, that see the OBVIOUS. I mean who are you going to believe, the GOP or your lying eyes?
I agree that most of the Teabaggers and many regular Republicans will get kicked out of both houses of Congress. We should have Democratic majorities – as a result of this crisis we’re feeling now. They are directly responsible.
As far as president goes, it all depends on who wins the R primary. Obama does not deserve re-election but he may be the only decent choice so he might win it by default.
By what fuckin’ measure does the President not deserve re-election?! Because he didn’t fulfill your erotic fantasies or simply didn’t live up to your white liberal stereotype of how a Black President should act? GTFOH!
If the Eurozone does end up imploding and taking the entire planet down with it, I can’t see how anybody in the G7 group could possibly justify their own reelection.
Though I can’t imagine that’s what RandyH was referring to…
I’ll just disregard your comment.
Grow up.
Tell that to the millions unemployed!! And no one is forcing this austerity agenda on the President.
Really? No one is forcing austerity on the president? Really? Did you have a straight face when you wrote that?
Well clearly he just needs to fight, show leadership, twist arms, and bully pulpit bully pulpit bully pulpit.
Did I miss anything?
Who is forcing it? The ratings agencies? Give me a damn break!! Those agencies have no credibility. And it’s just going to tank the economy. And if you agree, that means you agree that our elites are killing this economy, and this country. So in that case, why is the President going along? Does he realize he’s hurting his re-election chances? If not, why not?
Calvin, I love you, but sometimes you exasperate me.
Who was the hostage? Who was responsible for saving the hostage?
Here is where Calvin and I are getting pissed:
They just refuse to admit that they got it wrong.
http://delong.typepad.com/sdj/2011/08/how-should-obama-answer-the-stock-markets-wake-up-call-we-need
-different-cossacks-department.html
there we go with the tried ‘n true “you criticize obama because he’s black” line, as if there could be no other reason to have issues with this president.
it gets old NMP. really, really, really fuckin’ old.
I wonder, do you call out people for criticizing herman cain too? he’s black too.
Just askin’.
The “Tea Party downgrade”. I like it for a sound bite. Also “Tea Party default”.
That’s the best bumper-sticker soundbite the Dems have come up with in a while. When I heard John Kerry say that for the first time yesterday, I just said “Right on.”
A 3-word slogan “Tea Party Downgrade.” is just so awesome. It fits all the rules of effective PR and no one will forget what it means, even a couple years from now.
Say it loud. Wherever you go.
I like this. Perfect.
.
"But I will not let myself be reduced to silence."You may be right. Down down 450 as I write this…I think the new name for the American stock market should be “6 Flags over New York.” Question is whether we’re on a roller coaster or just on that ride that drops you ten stories like a rock.
indeed. “blame the democrats” ain’t gonna cut it this time. everyone knows this is the GOP/tea party plan.
we’ll be having some fun with Pat Toomey this week. He was very vocal about how the debt ceiling and default don’t matter.
heh. funny how that worked out for him.
Is he doing a town hall meeting? Got a video camera?
I would love to see his ass get kicked by some nice old lady at a town hall meeting on YouTube. That could go viral.
Remember what they did to us during the August recess after the Healthcare bill passed? They need the same treatment.
i’ve been writing scripts for woodshop films. We do a bunch of news and opinion shows. Toomey’s going into tonight’s script.
we always shoot for viral.
Is he doing any town halls?
Where is that shithead doing townhalls?
Dow is down another 500 points. Gold up to $1717. Insane.
And the talking heads are talking about how we need to slash more from budgets. (Social Security, Medicare, etc)
Life in opposite-land. Hello? Opposite-land.
Investors are pulling out because they see we’re becoming a country of poor people with no jobs. Borrow money (cheap – for FREE – 10 yr @2.36% adjusted for inflation is FREE) and hire people so they have money to pay taxes and buy stuff.
Don’t slash budgets. Fucking Morons in suits.
“Borrow money (cheap – for FREE – 10 yr @2.36% adjusted for inflation is FREE”
that is an excellent point, and one I haven’t heard much in the mainstream media.
Krugman’s been saying it for at least two years. But he’s shrill and shouldn’t be listened to by any respectable Washington insider.
Is this the Obama version of “the fundamentals of our economy remain strong”? Man, what a delightful Monday this has turned out to be. Very dramatic.
Anybody who claims to have any idea where any of this is going is lying. No macroeconomic result will surprise me.
His statement did not inspire because everyone is confident in US debt. These drops we’re seeing are not a result of the downgraded Treasury debt. They are reacting to the fact that the US is forcing austerity measures, which are disastrous for future earnings of any company.
Then they are putting their money into Treasuries and Gold (for safety.) No loss in confidence of Treasuries as a result of the downgrade.
Obama’s statement showed that they don’t understand this, and after he spoke, Dow fell another 200 points right away.
Anybody who claims to have any idea where any of this is going is lying.
Really? You mean all of us warning that this austerity crap is going to be the ruin of a lot of people are lying? I don’t think so.
Dow down 633. Gold at $1720.
Just insane. But it actually does make sense. As long as the US is telling the world that we’re going to be another stupid “Austerity Nation” consisting of poor unemployed people who can’t buy anything for the foreseeable future, they will lose confidence in every company that we buy anything from.
And they bought Treasuries and Gold for the safety.
It just doesn’t fit the pre-planned narrative. They thought bond rates would go up. They went down. And all stocks went down down down.
Dow finished 5.5% down, under 11k points.
They’re going to double down on spending cuts, especially to entitlements. That’s what the whole exercise is about. Besides trying to defeat Obama by sabotaging the country.
And Tweety leads the show with “What is Your Plan Mr President”. Tweety says that the President came out today and blamed the downgrade on the Tea Party. Accordign to Tweety, “it’s not the time for blame Mr President…it’s time for leadership”. And then Tweety brings out Ed Rendell and Michael Steele to discuss it the President’s lack of leadership. I’ve already switched the channel.
And that is what the MSM takes away from the Presidents Press Conference. But hey, next time President Obama needs to try harder.
I’d be interested to see how the “national news” anchors cover it, cause the “partisan” press has already taken a side.
I liked some things in the President’s statement today. Disliked some others. What I liked was the pivot to jobs. What I disliked was the blaming Washington instead of putting it on the Republicans. He sort of alluded to that when he said the debt ceiling was being held hostage but I feel he needs to be a lot clearer that this is on the Republicans, not Washington as a whole, Republicans. Washington as a whole feeds into the idea that government doesn’t work and that hurts Democrats. Government can work but not when there are insane teabaggers blocking everything that works. It is past time to draw distinct lines. PBO can do that and then call for the Republicans to compromise.
Let me also add that since S&P’s downgrade is basically a downgrade of our current political climate versus our current economic climate I don’t think the call for compromise is misplaced. I think the call for Washington versus Republicans to compromise is. I doubt they can be shamed into actually compromising. I thought they could be (by their Wall Street overlords) during the debt ceiling debate and I was wrong. They were willing to shoot the hostage. Not the Senate for sure but the house – yes. The point is now that their utter willingness to tank our economy just to protect tax rates for those who don’t need it has been exposed now is the time to drive that point home over and over. Those on the Sunday morning shows did a good job yesterday by repeating tea party downgrade. The President did not today. Not that I expected him to say tea party downgrade but I expected a stronger finger pointed at the Republicans.
My other criticism is that while all of the measures he is talking up when it comes to job creation are good I still think it is time for the Democrats to come up with a large comprehensive plan and dare the Republicans to vote it down (they will). Kerry’s BUILD Act is a good template that can be beefed up. All Democrats should be talking that up.
Really all of this adds up to my point that nothing constructive is going to get done on the legislative level for the next 1.5 years (like it hasn’t since the Republicans caome into control of hte house). It just won’t so the only thing left to do is make sure the Republicans take the blame for that in the hopes that we can clear enough of them out so that things can get done starting in 2013.
Well-thought-out analysis. My thoughts: Perhaps (and my crystal ball is never all that clear) the President is waiting for the GOP Congresscritters to get an earful from enraged constituents during the August recess; then when they return he’ll roll out a jobs bill, perhaps built on Kerry’s proposal, lob it at them as the first order of business they should take up, and dare them to vote it down.
This would fit Obama’s pattern as a counterpuncher, who will wait and wait till he believes the groundwork’s been sufficiently laid and the right moment has arrived to strike.
Am I right? We’ll see at the end of August.
I hope you’re right. But I am skeptical.