Politico says it’s the downgrade, but as Veronique de Rugy explains, if that’s the case, then why isn’t Washington doing anything to prevent a downgrade when S&P has made it clear that a downgrade will result if we don’t get ahold of the spending problem?
S&P has specifically said that we need to get the spending problem under control or there will be a downgrade whether there’s a debt ceiling deal or not. Neither the Reid plan nor Beohner 1.0 or 2.0 do that. Deal or no deal, we’re closer and closer to a downgrade, which may drive up interest rates, weaken the dollar further, and give investors even more reason to take their money offshore.
President Obama doesn’t actually have to worry about default. That card is in his hands to play against the Republicans. When he told Rep. Cantor not to “call his bluff,” he was threatening to lay down that card and starve Granny (a threat he has since repeated). But playing that card isn’t his worry, because he has the choice of when and whether to play it. Assuming he is a rational actor and not the comic book villain that he often acts like, Obama fears downgrade because doesn’t want to be the president who presides over the historic downgrading of US debt. Too bad, big spender. While Washington’s overspending is chronic and predates the Obama administration, the Democrats’ accelerated spending spree since 2007 led directly to the present juncture. They emptied the Treasury while strangling America’s ability to encourage the creation and use of our wealth via ObamaCare and empowering the regulatory state, making a downgrade of our credit almost inevitable at some point.
There is a fundamental lesson in all this that I hope isn’t lost, and it has to do with the power the ratings agencies now have over the national credit rating. Who gave S&P, Moody’s etc this much power to influence the national political debate? Monica Crowley just asked this very question, rhetorically, on Fox: Who elected them and gave them this much power?
Well, we did. We didn’t vote them this power directly, but our addiction to spending more than we take in year after year has put these agencies in a position of power over us. We have enslaved our nation to them. That’s where excessive debt will get you, kids, in national and personal life: Weakness. Slavery. No longer undefeated and in control of your own fate. Max out the Visa and fail to pay up, and Visa sends someone out to take your stuff, which isn’t really your stuff because you bought it with Visa’s money.