The decision by Standard & Poor’s to strip the United States of its AAA credit rating, for the first time, has triggered a barrage of catcalls against the umpire from the press box and Obamaites.
S&P, we are reminded, was giving A ratings to banks like Lehman Brothers, whose books were stuffed with suspect subprime paper, right up to the day Lehman Brothers fell over dead.
Moreover, S&P made a $2 trillion error in its assessment of U.S. debt and used political criteria in making its downgrade.
All of which may be true. But none of which is relevant.
This downgrade is deeply deserved. For no one really believes the United States is going to pay its creditors back the $14 trillion it owes them, or the $21 trillion it will owe them at decade’s end, with dollars of the same value as those the United States is borrowing today.
In the last year alone, the U.S. dollar has lost 30 percent of its value against the Swiss franc.
A Swiss citizen who exchanged francs for $100,000 in dollars in June 2010 to buy one-year T-bills, then cashed those T-bills in this June, would have gotten back $100,000 in U.S. dollars. But those dollars would now be worth 30 percent less in Swiss francs.
On “Meet the Press,” Alan Greenspan insisted that the United States is not going to default. Why not? Because our debt is denominated in dollars, and we can print dollars to pay off our creditors. Which is pretty much what Chairman Ben Bernanke and the Fed have been doing.
With the dollar down 5 to 10 percent this year alone against the world’s more respected currencies, we are engaged in what the Romans called coin-clipping – official stealing from citizens and foreigners.
Why are the Chinese so upset?
Because they are sitting on more than $1 trillion in U.S. bonds and Treasury bills bought with dollars we paid them for Chinese-made goods, while the purchasing power of the dollars that those bonds and T-bills represent withers away every week.
“I believe this is, without question, the ‘tea-party downgrade,’” says Sen. John Kerry.
How so? Because the tea party blocked the big deal President Obama sought to cut with House Speaker John Boehner to resolve the deficit-debt crisis.
The president, we are told, was prepared to accept $3 trillion in reduced future spending for entitlements like Social Security, Medicare and Medicaid, but the tea party caucus refused to let Boehner agree even to $1 trillion in “revenue enhancement.”
But here, a question arises: If the president believes entitlement reform is essential to get America’s deficit-debt crisis under control, why does he need tea-party cover to do his duty?
He doesn’t. Tea-party intransigence on taxes is not the reason for Obama’s failure to cut spending. It is his excuse.
Indeed, if Obama announced tomorrow that he was going to cut future spending on entitlements by $3 trillion to restore our AAA credit rating, he would have the full support of the tea party.
His opposition would come from Kerry’s colleagues in the Senate and Nancy Pelosi’s in the House.
To see how absurd it is to blame tea-party Republicans for the downgrading of America’s debt, imagine this scenario: Rep. Ron Paul is speaker of the House, Sen. Rand Paul is majority leader, and Rep. Paul Ryan is president of the United States.
Does anyone doubt this trio would restore the U.S credit rating in a New York minute? Every sacred cow in the federal pasture, from food stamps to foreign aid, would be hanging in the meat locker.
The American people have come to like the president, but a majority is coming to believe he is simply not the decisive president we need to lead us out of the morass in which he found the country and from which he has failed to extricate us.
“He made it worse!” is shaping up as the GOP slogan for 2012.
If Obama wishes to restore the AAA rating of his country, he might consider two separate and bold steps, both consistent with his professed beliefs.
First, tell the Republicans that if they will not agree to revenue enhancement, he will nonetheless do his duty and pare back spending in the entitlement programs. He would get instant GOP support.
Following this, he could go to the Republicans and tell them that if they agree to eliminate the clutter in the tax code – exemptions, loopholes, deductions – he will agree to cut tax rates for individuals and corporations alike, to make America more competitive.
Again, he would have the support of Republicans and the tea party. It might even advance his re-election prospects, if he could get renominated by his own party, which would rebel at both reforms because they would mean a suspension of the politics of tax and spend.
As for the S&P downgrade, again, the only surprise is it didn’t come sooner.