S&P: Liars or Idiots?
David Atkins ("thereisnospoon")
This blog has been hard on S&P. But even I have to admit that there is one thing they got right in their decision to downgrade the U.S. debt, and it’s this from the report:
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. Key
macroeconomic assumptions in the base case scenario include trend real GDP growth of 3% and consumer price inflation near 2% annually over the decade.
Remarkable that they finally figured that out. Loyal readers may recall that I roundly mocked S&P for blithely assuming in their original report that the Bush tax cuts would expire on schedule. Allow me to quote myself from just over a week ago:
But beyond that, there are two ways of looking at this move by S&P. One is that they're putting the screws on the United States on behalf of their Wall St. pals in a conspiratorial extortion scheme. That is certainly an easy conclusion to draw, until you realize that they're also demanding an end to the Bush tax cuts for the wealthy...
So let's get the S&P position straight: unless Congress and the White House enact a whopping $4 trillion dollars in spending cuts and repeal the Bush tax cuts, they're going to downgrade our credit rating.
Ultra-wealthy Wall St. bankers definitively do not want the Bush tax cuts to expire. So collusion and extortion on behalf of the likes of Goldman Sachs seem to be excluded as a motive. Which leaves the other way of looking at it: the "analysts" at S&P are just plain stupid.
In what political universe are these people living that they think both cutting spending by $4 trillion and killing the Bush tax cuts can actually happen given today's political climate? It's insane. Even Democrats are too afraid of wealthy donors and anti-tax attack ads to actually let the Bush tax cuts expire--to say nothing of Republicans--but no way in hell do even the most morally compromised Democrats go along with $4 trillion in spending cuts. Neither of those has a real prayer of happening, much less both.
Either S&P were the clueless fools back in July that they usually are, but suddenly realized the obvious truth about Republican extremists only after the debt ceiling bill--in which case, what happened to change their minds? Or they never really believed that the Bush tax cuts would expire in the first place, and were just playing a rhetorical game.
So which is it, S&P? Were you lying, or just stupid? And either way, why should we listen to anything you say now?
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