The Fortnightly Rant for August 12, 2011, from The New Hampshire Gazette, Volume 255, No. 23, posted on Monday, September 26, 2011.
Well, we certainly have to hand it to Speaker of the House John Boehner (R-OH). We weren’t sure he could do it, but in the end, with hours to spare, he convinced his cadre of storm troopers to put down their political crack pipes and vote not to trigger their explosive vests on the floor of the House. What leadership!
Before the deal passed, Boehner’s unruly mob had been threatening to destroy the economy in order to save it. “Wall Street hates uncertainty,” they said, “and we intend to eliminate it.” Hardly had the deal been signed, though, before a slide began on Wall Street, as traders began to realize the true depth of Congress’s recklessness.
Mission De-Accomplished
Like the sorcerer’s apprentice, in their effort to eliminate financial uncertainty, the Tea Partiers had multiplied it. The rating agency Standard & Poors (S&P) was so rattled that it downgraded U.S. Treasury bonds from AAA to AA+.
S&P does not spook easily; in recent years it calmly gave Triple-A ratings to unknown — indeed, unknowable — amounts of mortgage-backed derivatives which later proved to be so fanciful that they should have been classified “science fiction.”
Indeed, there would be little reason to take anything S&P says seriously, except for a demonstrated record of low animal cunning: Lehman Brothers is defunct, but S&P is still standing.
The rating agency explained that it had downgraded U.S. bonds because the debt ceiling deal did not go far enough and because “the effectiveness, stability, and predictability of American policymaking and political institutions have weakened” since April.
Despite the undeniable accuracy of the last part of that statement, Treasury Secretary Timothy Geithner seethed at the downgrade. He and others said S&P had made a $2 trillion math error in their calculations. When called on it, S&P said, in effect, that $2 trillion one way or the other did not matter. The fault, it said, was not in its numbers, but in our politics.
The sovereign debt team writing S&P’s report explained that their previous assumption had been that the Bush tax cuts of 2001 and 2003 would expire at the end of 2012. “We have changed our assumption on this,” they wrote, “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.”
The Tea Partiers — marching as always to their own rhythmically-challenged drummer — reacted to the downgrade by blaming President Obama.
Investment Dysfunction
On the Monday following the downgrade, Wall Street’s Masters of the Universe awoke to discover themselves fearful and impotent. After a couple of days of losses that were already reminiscent of 2008, when Alan Greenspan was finally exposed as an idiot, the Dow plummeted six hundred points in a single day.
The Washington Post, that exemplar of the left-leaning media, responded by posting columns by Dana Milbank, Jennifer Rubin, Richard Cohen, and Marc Thiessen all lambasting the President — apparently for what he let the Republicans do.
Paradoxically — at least to those who can’t count past ten with their socks on — despite the nation’s federal debt and the deficit, and despite the stock market’s 6th worst day in history, global investors immediately flocked to U.S. Treasuries, driving the rate of return on ten-year T-Bills from 3.5 down to 2.5 percent.
The Bigger, Uglier Picture
It may be worth remembering that there’s a broader context here. While the U.S. debt ceiling crisis is a relatively minor matter that was largely manufactured by the Murdoch/Koch Brothers wing of the GOP, there are some genuine financial problems in Europe and Asia. But as a consequence of our bogus crisis, when the global economy could use a life ring, we’re throwing it an anchor instead.
What’s more, the alleged solution that allowed the debt ceiling to be raised will slash government spending, and, therefore, jobs. Although they would never admit it, in the eyes of most members of the GOP that’s not a defect — that’s a feature. The only thing worse than an economic catastrophe would be a vigorous recovery, leading to a second term for Barack Obama.
Get Ready for the Sequel
The debt ceiling is now lifted, and the immediate crisis averted, thanks to the bipartisan passage of a face-saving gimmick: passing the buck to an extra-Constitutional panel that might achieve a lasting solution three months from now. Or not. Should the panel fail, draconian cuts [for which no one will be responsible] will be implemented automatically.
Broad swaths of the public now feel as if they have just been abused by a bunch of thugs: treated as hostages, then given a provisional release.
Naturally, Republicans and Fox News — pardon the redundancy — were outraged by the libelous slur inherent in the use of the term “hostage.”
A quote in the Washington Post suggests that Senate Minority Leader Mitch McConnell may have missed that memo:
“I think some of our members may have thought the default issue was a hostage you might take a chance at shooting. Most of us didn’t think that. What we did learn is this — it’s a hostage that’s worth ransoming.”
Putting aside all the quibbles about vocabulary, the GOP’s intentions are obvious, and once again the Minority Leader was kind enough to level with us about them. Speaking to CNBC’s Larry Kudlow on August 1st, McConnell promised that the GOP would use the same procedure as a “template” for every future debt ceiling increase.