Yesterday, three of the nation’s biggest banks — Bank of America, Citigroup, and Wells Fargo — had their credit scores downgraded by Moody’s. And the credit rating agency’s rationale for dinging the banks’ was simple — due to the Dodd-Frank financial reform law, it is less likely that the government is going to step in and bail out a mega-bank that is in trouble:

Now, having moved beyond the depths of the crisis, Moody’s believes there is an increased possibility that the government might allow a large financial institution to fail, taking the view that contagion could be limited.

Moody’s decision to assign a negative rating outlook reflects the possibility it may further reduce its systemic support assumptions in the future as a consequence of the process set in motion by the enactment of the Dodd-Frank Act. Under the rules recently finalized by the FDIC, the orderly liquidation authority included in Dodd-Frank demonstrates a clear intent to impose losses on bondholders in the event that a systemically-important banking group (such as Citigroup) was nearing failure. If fully implemented, the provisions in Dodd-Frank could further lower systemic risk by reducing interconnectedness among large institutions and could further strengthen regulators’ abilities to resolve such firms.

Moody’s is not entirely certain that Dodd-Frank’s resolution authority — which is designed to dissolve systemically risky banks that are failing, without needing to resort to a bailout — will work, and it added that there is still a high probability that the government will rescue a failing firm. But due to Dodd-Frank, the iron perception that troubled banks will be bailed out has taken a blow.

“I am glad that Moody’s recognizes that such large institutions are not ‘too big to fail,’” said Rep. Barney Frank (D-MA), whose name graces the financial reform law. However, in recent weeks, several Republicans, including those seeking the GOP’s presidential nomination, have said that they want to repeal Dodd-Frank, resetting the regulatory system to 2007.

“Repealing that Dodd-Frank act is one of the first things that we need to do,” said Texas Gov. Rick Perry (R). “We cannot go forward with Dodd-Frank,” agreed former Utah Gov. Jon Huntsman (R). But repeal would set the financial system back to its pre-crisis status quo, ensuring that the only option when a big bank gets in trouble is shoveling in boatloads of taxpayer dollars.

The GOP presidential field will trot out for yet another debate in Orlando, FL tonight. Between taking pot shots at each other, the candidates have predictably come out against President Obama’s economic plans to create jobs and reduce the deficit with infrastructure investments, more progressive tax rates, and the elimination of corporate tax loopholes. On cue, the candidates are bringing back talking points from the dead — falsely insisting that Obama’s plans will destroy small businesses and job growth.

But with all their talk, presidential candidates risk drowning out their own base. A new Gallup survey found that Americans “favor almost all proposals” in Obama’s economic plans — including a majority of Republicans. Indeed, a high majority of Republicans favor Obama’s plan to provide tax cuts for small businesses, provide additional funds to hire teachers and firefighters, and giving tax breaks to companies that hire the long-term unemployed.

And while all of the candidates have embraced corporate tax cuts as the key to job creation, it turns out that a majority of the Republican public wants to increase corporate taxes by eliminating tax deductions:

Altogether, 70 percent of the public supports eliminating these tax loopholes and 66 percent support increasing tax rates on individuals earning at least $200,000. As Gallup notes, this is the second survey that shows “the American public broadly support Obama’s jobs plan.” These candidates may win political points by bashing Obama’s economic plans, but they’ll evidently have to adopt much of his vision to win over the public.

Former Massachusetts Gov. Mitt Romney’s (R) presidential campaign continued its assault on Texas Gov. Rick Perry’s (R) views on Social Security yesterday, issuing a release titled “Six Questions for Rick Perry on Social Security.” The release focused on Perry’s positions about the program’s constitutionality and what would happen if Social Security was converted to a state-level program. Perry’s campaign immediately hit back, asking if Romney remembered that he was a Republican, not a Democrat.

While the questions Romney posed are both relevant and pertinent, his own support for Social Security privatization proves that he is, indeed, not a Democrat. Romney offered consistent support for privatization during his 2008 presidential campaign, saying of former President George W. Bush’s privatization plan, “That works.” He later wrote about it in his 2010 book, “No Apology,” and has spoken of it on the campaign trail during this race. With that in mind, ThinkProgress compiled six questions Romney needs to answer about his support for privatizing one of America’s most popular government programs:

1) Do you know how much retirees would have lost under privatization in the financial crisis?

According to a Center for American Progress study, a person who retired in October 2008 and had saved for 35 years would have lost $26,000 in a private Social Security account, and that report was done well before the American market bottomed out in March 2009. Had the American stock market, which performed well over those 35 years, performed like the Japanese market over that time period, the retiree would have lost $70,000.

2) Why would privatization work for Americans who lost trillions in private retirement accounts in the financial crisis?

Americans lost trillions of dollars out of their 401(k)s and other retirement accounts in the aftermath of the financial crisis. In 2009, CBS News posed the question: “What kind of retirement program allows millions of people to lose 30 to 50 percent of their life savings just as they near retirement?” According to a lobbyist for the 401(k) industry, the answer was one that empowers people to make their own investment decisions. Fortunately for Americans who lost nearly all of their retirement savings, Social Security was still there for them. But privatization would mean the program was subject to the same market whims as their other retirement accounts.

3) Did you know young people want to have Social Security in its current form?

Romney and his fellow Republicans push privatization as a way to give younger Americans more choice in Social Security’s future. But polling conducted by the AARP in 2010 found that 90 percent of Americans aged 18 to 29 viewed Social Security as an important program, and more than 80 percent would rather keep the program as it is than invest in the market on their own, even if they knew their private investments would outperform the program itself.

4) Are you aware that Social Security is neither broke nor a main driver of our deficits?

Republicans continually lump Social Security with other entitlement programs, leading voters to believe it is both broke and a main driver of our debt. In reality, it is neither. Social Security can pay out full benefits until 2037, and it hasn’t added a penny to the nation’s debt or deficits, since it’s prohibited by law from doing so.

5) Why do you dismiss the easiest way to ensure Social Security’s long-term viability?

Both in his book and on the campaign trail, Romney has repeatedly dismissed proposals to raise the payroll tax cap. Raising the cap and allowing income above $106,800 to be taxed for Social Security purposes would ensure the program’s long-term viability for the next 75 years. But not only does Romney dismiss that fact, he often gets it wrong, telling one town hall attendee that lifting the cap wouldn’t “begin to solve the problem,” when in fact, it would solve the problem entirely.

6) How would you pay for privatization?

Romney assures older voters that his privatization plan won’t change the way benefits are structured for Americans over age 55 or older. But that raises serious questions about how his privatization plan would be paid for. If younger Americans are diverting some money into private accounts, it would reduce the amount taken in by the Social Security trust fund. To avoid cutting benefits, Romney would likely have to add trillions of dollars to the deficit. But to avoid adding to the deficit, he would likely have to cut benefits.

Romney continues to stake his campaign on Perry’s radical views on Social Security, betting that opposing such a popular program will be anathema even to GOP primary voters. But a major part of Romney’s own position on Social Security is one that has already been pitched to and subsequently rejected by the American people. While he continues to ask important questions of Perry, Americans deserve some answers from Romney too.

The House yesterday failed to pass a continuing resolution to fund the government beyond Sept. 30, after 48 Republicans broke with their party and voted the measure down. Democrats almost unanimously voted no, citing an inadequate amount of funds provided to the Federal Emergency Management Agency for disaster relief, and the fact that disaster relief funds were being offset with a cut to the Advanced Technology Vehicle Manufacturing program.

Many on the left have already blasted the idea of paying for disaster relief by cutting funds that help promote cleaner, more efficient vehicles (and the jobs that go along with them). And they gained an unlikely ally today in the U.S. Chamber of Commerce, which sent a letter to the Senate urging it to reject cuts to the ATVM program:

Again, while the Chamber understands the importance of reducing America’s unacceptable debt and believes that all programs must be on the table, the Chamber urges you to bear in mind the facts about the ATVM loan program, which promotes manufacturing in the U.S. and is an important component of America’s energy security.

Indeed, the ATVM program has several benefits that make it an absurd thing to sacrifice on the altar of deficit hysteria. For instance, as Climate Progress noted, the program has “directly created 39,000 jobs and is responsible for another 2,600 construction jobs in 11 states. An additional 18 loan applications in progress are projected to create 50,000 – 60,000 more jobs.” Here’s a rundown of what and where those jobs come from:

The projects supported by the program would also “reduce gasoline use by more than 311 million gallons annually.”

House Appropriations Committee Chairman Hal Rogers (R-KY) yesterday blasted Democrats for voting down the CR “over a government subsidy for failing industries.” But it seems left and right agree that, in this instance, it’s the GOP that’s failing: failing to adequately support a program that is creating American jobs.

Former Sen. Phil "mental recession" Gramm (R-TX)

The House Budget Committee — which is led by House Budget Committee Chairman Paul Ryan (R-WI) — is holding a hearing today titled “The Broken Budget Process: Perspectives From Budget Experts.” The lead witness at the hearing is former Sen. Phil Gramm (R-TX).

For those who don’t remember, Gramm gained notoriety in 2008 when he, as an adviser to Sen. John McCain’s (R-AZ) presidential campaign, said America was only in a “mental recession.” “We have sort of become a nation of whiners,” he said. “You just hear this constant whining.”

That “mental recession,” of course, has cost 14 million Americans their jobs.

But Gramm has made far worse contributions to the nation’s economy. In 2000, he snuck the Commodity Futures Modernization Act into an unrelated, 11,000 page appropriations bill. That act ensured that the huge market in over-the-counter derivatives stayed unregulated, laying the groundwork for the 2008 financial crisis (and the implosions of AIG and Lehman Brothers). He then left Congress for a posh job with mega-bank UBS (where a rogue trader just lost more than $2 billion).

On budget-related matters, Gramm “lent his name and energy to passage of the first Reagan budget in 1981, whose sweeping tax cuts failed to prevent recession — and eventually required a long series of tax increases, beginning in 1982, to stanch the enormous deficits they created.” Gramm’s also believes that there should be no minimum wage and has derided the working poor by saying, “we’re the only nation in the world where all our poor people are fat.”

This is not the first time that the House GOP has sought Gramm’s input on budget matters. And with the nation facing a jobs crisis and a structural deficit that needs to be brought down over the next several years, sage budget advice would indeed be useful for Congress. Instead, the House GOP has turned to a man who played an outsized role in blowing up the federal deficit before he turned his efforts to blowing up the global economy.

SHOWDOWN: Chuck Grassley vs. Delicious Muffins

A Justice Department inspector general audit released last week has generated a lot of buzz on Capitol Hill over the suggestion that the agency has been spending too much on food at taxpayer-funded conferences. Some have interpreted the report to mean that DoJ spent as much as $16 per muffin at one event — which is pure fiction.

But to hear Sen. Chuck Grassley (R-IA) tell the tale, this is the worst example of extravagant “elitist” spending in government since Marie Antoinette declared, “Let them eat cake!” The Iowa conservative even said yesterday that heads should roll over the incident:

Sen. Chuck Grassley said Thursday unless “heads roll” at the Department of Justice following revelations of extravagant spending on conferences that included $16 muffins, the scandal will not change the way government agencies use taxpayer money.

The Iowa Republican told CNN’s “American Morning” that President Barack Obama should ax the people responsible for the excessive spending on food and beverages at the department’s conferences uncovered by an audit earlier this week.

“Unless people are fired, and heads roll, you never get changes made,” Grassley said.

As Kevin Drum at Mother Jones explained yesterday, the $16 muffin charge is a myth. After plowing through the invoice for the event it’s obvious that “someone quite carefully calculated the amount they were allowed to spend and then gave the hotel a budget. The hotel agreed, but for some reason decided to divide up the charges into just a few categories instead of writing a detailed invoice for every single piece of food they provided.” As Drum notes, this sort of exchange happens all the time, and makes it seem on paper like the DoJ spent $16 per item. But “did DOJ really pay $16 for muffins? Of course not.”

Nevertheless, the Obama administration has already responded quickly to allegations of waste by ordering that agencies review spending at taxpayer-funded conferences. According to Politico, Vice President Joe Biden said a deputy secretary or equivalent chief operating officer at each agency will have to approve conference-related expenses during the review period.

But none of that is likely to satisfy Grassley, who seems determined to keep the $16 muffin myth alive because it’s a catchy, if completely false, story.