Tea Party downgrade? Here’s what S&P actually said

August 10, 2011

Was it a Tea Party downgrade?

Beltway media has offered the usual pox-on-both-political houses analysis of Standard & Poor’s downgrade of U.S. debt and this week’s market meltdown. The two parties spent Monday blaming one other side for the debacle. According to this narrative, both sides must bear equal guilt.

But what does S&P actually say in its downgrade report?

Politics: The downgrade analysis is very political. S&P issued the downgrade even though we avoided default — and even after the Treasury pointed out S&P’s $2 trillion math error. S&P went ahead with the downgrade due to its concerns about political dysfunction in Washington, which has created “greater policy uncertainty.”

Which political party does S&P fault? Let’s go to the memo (emphasis added):

The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.


Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.

So, brinksmanship and refusal to discuss new revenue are critical reasons for the downgrade. Does that sound to you like bipartisan blame?

Granted, S&P also talks about the extraordinary difficulty of bridging political differences between the two parties, shortcomings of the debt ceiling deal and its concerns about Medicare spending. Yet Democrats are only mentioned specifically once:

Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures.

But here’s S&P’s essential point:

In our view, the difficulty in framing a consensus on fiscal policy weakens the government’s ability to manage public finances and diverts attention from the debate over how to achieve more balanced and dynamic economic growth in an era of fiscal stringency and private-sector deleveraging…

One last point: Social Security is mentioned nowhere in this memo — unless you count two general references to “entitlements.” Perhaps S&P understands that Social Security isn’t a contributor to the deficit. Heads up, super committee.


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Posted by S&P: Forcing Rating Firms To Disclose Errors Compromises Firms’ Independence – NASDAQ | Report as abusive

My new custom bumper sticker says:

Don’t tea on me and tell me it’s Reagan.

Posted by skinnydog | Report as abusive

It clearly states Republicans will not vote to raise revenue or let the Bush tax breaks (supposedly temporary)expire.

We may as well let the government shut down. Let the states create their own constitutions eliminating corporation recognition as persons and limit campaign contributions by individuals.

The U.S. is finished.

Look at what happened in Wisconsin: the american people are voting against their own best interest to the extreme and elections are manipulated by powerful corporate backed interests. Time to call it quits.

Posted by basementfrog | Report as abusive

It’s the ‘tax entitlements’ – loopholes, deductions and credits – which I want to see reformed. Why should others have to subsidize (aka ‘make up the difference’) for those who paid lobbyists to ge those entitlements into the tax code?

There’s no such thing as a free lunch.

Posted by TomJx | Report as abusive

Calling it a Tea Party downgrade is like blaming a 9-1-1 caller for the fire they are reporting or -you should pardon the expression – blaming Paul Revere because the Red Coats were coming!

The Tea Party didn’t spend one dime of money it didn’t have & supported both the Ryan Budget & Cut, Cap & Balance, both of which, according to S&P, would have met their standard of cutting $4T over the next 10 years.

This is nothing more than the Obama team & their supporters in the ENE-Media, trying to shift the blame for their failed efforts to fix the lousy US economy and their historical levels of debt & deficits. It’s always someone else’s fault with these guys.

Posted by RoyHaynesNY | Report as abusive

The CEO of S&P’s parent company is a long time supporter / employee of right-wing politicians so making the democrat look bad is all in a day’s work. Seizing power is their only aim – if it benefits ALEC, then let’s enact it. We’ve been heading this direction for a while.

“I see in the near future a crisis approaching that unnerves me and cause me to tremble for safety of my country; corporations have been enthroned, an era of corruption in High Places will follow, and the Money Power of the country will endeavor to prolong its reign by working upon the prejudices of the People, until the wealth is aggregated in a few hands, and the Republic destroyed.”
— Abraham Lincoln, in a letter to Col. William F. Elkins, Nov. 21, 1864

Posted by KaizerSoze | Report as abusive

Social Security isn’t a contributor to the deficit? That is not true at all. How did this get published?

Posted by gatormba2003 | Report as abusive

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Posted by Tea Party Sparks More Antipathy Than Passion | Election 2012 | Report as abusive

I read the S&P report. It was fairly partisan. It sounds like the report wants to encourage more compromise by the Republican party. But given the report, you have to then ask, “What steps need to be taken to restore the AAA rating.” Because if the Republican’s compromise, then we’ll just be left with bigger and bigger spending. Historically, when the Republican’s have compromised on allowing taxes to be raised in exchange for future spending cuts, the taxes are raised but the future spending cuts never materialize. So, if the Republicans had compromised this time and allowed taxes to be raised, we’d just be left with larger and larger deficit spending. Which is what drove us into this AA+ ditch in the first place. No, it is time for a line in the sand with regards to govt spending.

Posted by Laughter | Report as abusive

the republicans are positioning for the ’12 elections. their contempt for americans, and the rule of law is blatantly clear in such a way as never seen before. they don’t bother to tell “good”lies any more. Their conjoined relationship with the wealthy is as obvious as a toothache. these people clearly despise any idea of democracy, and clearly have no mind to become bipeds again. the US is morally, spiritually, and ethically bankrupt. the government does not represent the people. they haven’t read the preamble to the Constitution which clearly states the provision for the welfare of the people. It wasn’t the people who created this debt. But they didn’t stop them either. IF america doesn’t put ALL of it’s mindless issues aside and join together to stop the governmental madness, no one, nor nothing else will.

Posted by kiowa351 | Report as abusive

Remember, before George W. Bush took over, the US had a budget SURPLUS (remember those debates between him and Gore on what to do with it?). When he left, we had a deficit (and the wars were not even counted in the budget – Obama added those for transparency). He put some bad policies in place for which we are still paying. So republicans should own up to their past mistakes.

Posted by Bert2 | Report as abusive

I have become an independent because of the Republican political establishment refuses to make the changes necessary- there is a protectionism of both parties campaign donors – while the country goes to hell in a handbasket. Senators and Congressmen – are managers of our Federal budget and use this power to enrich cronies – we have been corrupted – slowly but surely. Government has become unable to manage itself fiscally – and places an unsustainable burden on us. We need to take the medicine and quit crying – I don’t care if bugs bunny ran for president – as long as he would move the country to a balanced budget and financially stable place.
It is no longer about how we got here – it is about what we do to make the future more secure. Cut government spending ASAP, cut partisan loopholes, and stop the government from running anything – just keep the playing field fair for all.

Posted by xit007 | Report as abusive

@ gatormba2003: You are sort of right. Social Security went cash-negative for the first time last year. However, because of the money borrowed out of the fund by the USG, SSA holds treasuries in large numbers, which they can use to fund the difference as the bonds mature, plus some. But that assumes they are permitted to do that. SSA should NOT be contributing to the deficit (so you are sort of wrong, too), but to the extent the USG prefers other creditors over SSA, then the USG actually CREATES an impact on the deficit by SSA.

Posted by BowMtnSpirit | Report as abusive

@ xit007: Actually, Bugs might be just the ticket. Being a cartoon character, if he did nothing at all, it would be an improvement over the counter-productive actions of our “representatives.”

Posted by BowMtnSpirit | Report as abusive

[…] are quick to blame partisan gridlock for executive and legislative failures, and their disastrous consequences. However, an often-overlooked fact is that many of our most disastrous policies enjoy bipartisan […]

Posted by Perilous Bi-partisanship | Berkeley Political Review | Report as abusive