JONATHAN COHN AUGUST 12, 2011
[Guest post by John Judis]
When Standard & Poor’s issued its statement downgrading America’s long-term credit rating from AAA to AA+, it said it based its decision on two factors: first, “the difficulties in bridging the gaps between the political parties over fiscal policy,” and second, because the “fiscal consolidation plan that Congress and the Administration agreed to … falls short of the amount … necessary to stabilize general government debt burden by the middle of the decade.”
In the longer exposition of the decision, S&P singled out the “political brinkmanship of recent months” as evidence that policymaking has become “less stable, less effective and less predictable.” A reader might have taken this as criticism of the House Republicans, but the statement was sufficiently vague that Republicans could take it as laying the blame on the Obama administration for not agreeing to their proposals for raising the debt ceiling. And, indeed, Mitt Romney and other Republican presidential candidates have blamed President Barack Obama for S&P’s decision.
But, in an interview with Politico, an S&P senior director explained more clearly what the rating agency was referring to when it singled out “political brinksmanship” as a cause for its downgrade:
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.”
As Politico notes, those appearing to discount the danger of a default were right-wing Republicans like Representative Michelle Bachmann and Senator Pat Toomey, who are identified with the Tea Party. So, while continuing not to use the adjective “Republican,” the S&P director acknowledged that a major factor driving the downgrade was the utter irresponsibility and ignorance of a significant minority of Republican legislators.
Why didn’t S&P say this more clearly in the original statement? I suspect it was out of a desire to appear non-partisan, but the effect was to apportion the blame equally on both parties. That is a disservice to the country because it allows a deranged faction of the Republican Party to continue to run riot in the Congress and to undermine any possible of a constructive response to the economic crisis.
And S&P is not the only establishment institution to take this misguided approach. In their statements urging Congress to agree to raise the debt ceiling, the Business Roundtable praised the House’s passage of a poison pill making support for raising the debt ceiling contingent on support for a balanced budget amendment. I would guess—based upon reading Chris Nelson’s excellent K Street newsletter—that there is as much support for a balanced budget amendment on K Street as there is for the reinstitution of the gold standard—in other words, almost none at all—yet the Business Roundtable was willing to coddle the Republican right.
I stand second to no one in criticizing the White House for failing to fight the Republicans, but it is worth recalling here that the principal cause of our counterproductive fiscal policy is the Republican opposition. And coming on their heels are the establishment institutions like Standard & Poor’s and the Business Roundtable that are unwilling to hold the Republicans to account.
John B. Judis is a senior editor at The New Republic and a visiting fellow at the Carnegie Endowment for International Peace.