The Downgrade

On MSNBC’s Rachel Maddow Show last night, Congressman Barney Frank (D-MA) expressed his outrage at the S & P downgrading of the U.S. credit rating, with a negative outlook. Listen carefully – an excellent analysis all around.

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Not just a mathematical error, but a blatant political move designed to tilt our economic policy in a conservative direction. Despite the error, actually. Deficit reduction did not go far enough, in “our view.” And the American “political process” is not great, either.

Yet another institution that helped get us in the mess we are in, continuing to have the ability to exert power over economic policy, and the lives of the average American. How this is still possible, is beyond comprehension.

And from Paul Krugman, in yesterday’s New York Times. The emphasis is mine:

More than that, everything I’ve heard about S&P’s demands suggests that it’s talking nonsense about the US fiscal situation. The agency has suggested that the downgrade depended on the size of agreed deficit reduction over the next decade, with $4 trillion apparently the magic number. Yet US solvency depends hardly at all on what happens in the near or even medium term: an extra trillion in debt adds only a fraction of a percent of GDP to future interest costs, so a couple of trillion more or less barely signifies in the long term. What matters is the longer-term prospect, which in turn mainly depends on health care costs.

So what was S&P even talking about? Presumably they had some theory that restraint now is an indicator of the future — but there’s no good reason to believe that theory, and for sure S&P has no authority to make that kind of vague political judgment.

In short, S&P is just making stuff up — and after the mortgage debacle, they really don’t have that right.

Barney Frank urges us not to pay any attention to these people, but will anyone with power and control listen? Is it even a possibility?

In short, by Atrios:

Apparently we're supposed to care about what some idiots at some corrupt organization think about anything.

The Republicans will use this as an excuse to lobby for more deficit reduction. And I have no faith the Democrats will use what happened yesterday to (begin to) systematically ensure that the institutions that got us where we are, are stripped of their power now, and for good.

Looking forward to the day when something like this happens again, and we can collectively say, “who cares.” And mean it.