Who’s to Blame for the Downgrade?

by Andrew Stiles

The Left has been engaged in some full-throated gloating today in response to this Politico interview with S&P senior director Joydeep Mukherji:

A Standard & Poor’s director said for the first time Thursday that one reason the United States lost its triple-A credit rating was that several lawmakers expressed skepticism about the serious consequences of a credit default — a position put forth by some Republicans.

Without specifically mentioning Republicans, S&P senior director Joydeep Mukherji said the stability and effectiveness of American political institutions were undermined by the fact that “people in the political arena were even talking about a potential default,” Mukherji said.

“That a country even has such voices, albeit a minority, is something notable,” he added. “This kind of rhetoric is not common amongst AAA sovereigns.”

Proof! The Tea Party downgrade! Those crazy House Republicans are the ones who are “really responsible.” Rep. Michele Bachmann (R., Minn.) and “people like her…were a primary reason for the downgrade,” Greg Sargent writes (emphasis mine).

A couple thoughts:

1) Say what you will about the hard-line opposition to raising the debt ceiling, it was a position that GOP leaders never considered seriously (e.g., Senate Minority Leader Mitch McConnell’s much-maligned “contingency plan”). In contrast, every Democratic leader, including President Obama, is on record supporting a “clean” debt-ceiling increase without any spending cuts attached (See: here, here and here). In late May, nearly 100 House Democrats voted for a “clean” extension. Later, on July 15, just one day after S&P issued a report warning that the U.S. credit rating could be downgraded “unless substantial and credible agreement is achieved on a budget that includes long-term deficit reduction,” Rep. Peter Welch (D., Vt.) a member of the Democratic whip team, told Politico: “It’s looking like default or a clean extension. We’re absolutely intent that we’re keeping our AAA credit rating.” At this point, to claim that passing a “clean” debt increase would have salvaged our AAA rating is ludicrous. In all likelihood, we would have been downgraded by every major ratings agency, and would be fortunate to be left with an AA+. Furthermore, one can argue quite persuasively that the Tea Party and the hard-line stance of House conservatives were a primary reason why we avoided this fate.

2) In its report explaining its decision to downgrade the U.S. credit rating, the S&P argued that the recent debt-ceiling deal (while much better than a “clean” increase) was insufficient because “the plan envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability.”

Throughout the debt-ceiling debate, Obama insisted that he was willing to “put everything on the table” and “get serious” about entitlement spending. This would have been more convincing, however, if he had bothered to put forward an actual plan in writing. Either way, House Speaker John Boehner (R., Ohio) cited as a primary reason for his decision to abandon “Grand Bargain” talks with the White House the fact that Obama was “adamant that we cannot make fundamental changes to our entitlement programs.”

He still isn’t, at least not judging from his remarks on August 8 to address the S&P downgrade. “I intend to present my own recommendations over the coming weeks on how we should proceed,” the president assured us. It would include two major items: 1) tax increases, and 2) “modest adjustments to health care programs like Medicare.” Maybe S&P was not explicit enough in their prognosis when it comes to entitlements. Unless, of course, the difference between a “minor change” and a “modest adjustment” is the only thing keeping us from regaining our AAA credit rating.

When S&P says the containment of entitlement spending, specifically on Medicare, is “key to long-term fiscal sustainability,” this is why:

I would simply suggest that those who mock the Tea Party, and Republicans in general, for wanting to avert this coming fiscal train-wreck, and who can look at a graph like this and nod approvingly when House Minority Leader Nancy Pelosi (D., Calif.) proclaims “We have a plan; it’s called Medicare,” are in no position to be pointing figures, and should think twice before calling anyone else “irrational” or “crazy.”