As I wrote last night there’s nothing obviously mistaken about the judgment that Tea Party mania and increasing dysfunction in the US political system pose a plausible threat to timely repayment of US sovereign debt. That said, a correspondent has pointed out to me that one ought to assess these kind of things in some kind of relative context. Does Mitch McConnell’s taste for brinksmanship really pose a bigger political risk than the various sources of uncertainty surrounding Hong Kong?
Don’t get me wrong. Hong Kong’s fiscal and economic management is admirable. But we are talking about an offshore dependency of the People’s Republic of China. At the moment, the PRC’s fiscal and economic management is also admirable. But obviously one wouldn’t say the same about the 1948-1978 version of the PRC. And how firm a grasp of Chinese internal politics does Standard & Poor’s have? I’d say there’s a good deal of risk here, very hard to quantify risk. But it would be impolite, I guess, to downgrade Hong Kong on those grounds whereas someone at the S&P front office thinks an intervention into US political debates would be timely and somehow helpful.
Maybe so. Nothing would make me happier at this point than if Eric Cantor were to phone up the White House on Monday and say “lets close a bunch of tax loopholes while leaving rates in place and agree to a package of spending-reducing Medicare reforms.” Or maybe someone wants to embrace Christian Weller’s Social Security revisions to fight elder poverty while eliminating the long-term funding gap. Good stuff in that report! But it’s kind of weird to see ratings agencies encroaching on the turf of us lowly political pundits.