The Downgrade Trifecta: S&P Slams Third GOP Debt Stance For Jeopardizing U.S. Credit

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"The Downgrade Trifecta: S&P Slams Third GOP Debt Stance For Jeopardizing U.S. Credit"

Since the Standard & Poor’s (S&P) agency lopped one “A” off the U.S.’s AAA credit for the first time, Republican politicians and pundits have been quick to blast the White House for the downgrade. Labeling it “Obama’s downgrade,” GOP lawmakers like Rep. Michele Bachmann (MN) blamed Obama’s “failed economic policies” as the root cause. House Speaker John Boehner (R-OH) insisted that he “warned the President that his plan didn’t cut spending enough but he didn’t listen.” House Budget Committee Chairman Paul Ryan (R-WI) even viewed the downgrade as “a vindication of [the GOP's] actions.”

S&P, however, takes the exact opposite view. In fact, the credit agency cited almost every stance the GOP took during the debt ceiling debacle as a reason for the downgrade.

Tax Increases: During debt negotiations, Republicans obstinately refused to even consider tax increases as part of the deal. On the day S&P announced the downgrade, the agency repeatedly slammed “the majority of Republicans in Congress” for continuing “to resist any measure that would raise revenues,” which, it complained, seems to be a priority that has “dropped down on the menu of policy options.” Contrary to GOP delusion, S&P indicated that it would improve the U.S.’s credit rating if “the 2001 and 2003 tax cuts for high earners lapse from 2013 onwards, as the Administration is advocating.”

Balanced Budget Amendment: Though considered one of “the worst ideas in Washington,” Republicans are continuing their efforts to pass a balanced budget constitutional amendment (BBA) and even suggested that the downgrade would not have happened, or would be reversed, if a BBA were passed. S&P head John Chambers, however, publicly denounced the idea and indicated that a BBA would hurt, not help, the U.S’s creditworthiness. “We think that fiscal rules like these just diminish the flexibility of the government to respond,” he said, adding that S&P would question a BBA’s “credibility.”

Default Denial: Despite a deluge of warnings from numerous economists and experts, several Republican “default deniers” simply did not believe that failing to raise the debt ceiling would result in negative economic consequences. “The case has not been made that this is an absolute necessity,” said Rep. Bill Huizenga (R-MI). “I don’t think it’s going to have an adverse on the economy” or “be disruptive to the economy per se,” said now-supercommittee member Sen. Pat Toomey (R-PA). Yesterday, S&P senior director Joydeep Mukherji noted that this level of skepticism about “the serious consequences of a credit default” was yet another reason for the downgrade. “That a country even has such voices, albeit a minority, is something notable,” he said. “This kind of rhetoric is not common amongst AAA sovereigns.”

That the downgrade is a result of this Tea Party trifecta has forced many Republicans to do what they do often: ignore the facts. Responding to S&P’s default denial charge, Rep. Tom McClintock (R-CA) insisted that “no one said [default] would be acceptable.” And, as is her fashion, Bachmann completely disregarded the facts last night in the Iowa GOP debate. “Standard & Poor’s essentially proved me right,” she said.

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