The blind fighting the blind
by David Atkins ("thereisnospoon")
Of all the darkly comic notes in this New York Times story about S&P's defense of its downgrade of U.S. debt, the darkest and most droll is almost certainly this:
As early as April, S.& P. had changed its credit outlook on the United States to negative. By July, S.& P. warned that if the government did not agree to a deficit reduction package of about $4 trillion, there was a one-in-two chance a downgrade.
Still Treasury officials claim they were taken by surprise on Wednesday. Just the day before, Ms. Miller and her team met at the Hay-Adams Hotel with a group of senior Wall Street executives who advise the Treasury on its borrowing. None of the members believed that the government’s credit rating would be lowered in the near-term.
On Thursday, the ratings agency informed the Treasury that its seven-person panel would meet Friday morning to assess the creditworthiness of the United States government.
Even then, one administration official said, “We didn’t think they would actually do it.”
It's hard to know whether to laugh or to cry here. Please forgive me if I quote myself yet again, this time from just two days ago:
The fact is that S&P, for whatever reason—be it political, economic, corrupt or some combination thereof—has desperately wanted to downgrade U.S. debt for months. First came the clearly unfeasible demand that the U.S. cut $4 trillion in spending while eliminating all the Bush tax cuts, even on the middle class. Then came the austerity bill, which was put in place over the top of a snookered public precisely to avoid a credit downgrade. Then came the threat to downgrade our credit anyway. Then came the admission of their $2 trillion accounting error in making the threat. And then came the downgrade in spite of it all. Let’s be clear: S&P was always going to make this move, no matter what we did. The austerity bill was thus an utterly pointless exercise to appease a ratings agency acting in bad faith.
And yet the Treasury Department claims to have been taken aback at the downgrade, in yet another "no one could have predicted" moment, Obama Administration edition.
S&P couldn't have predicted that the GOP would scuttle ending the Bush tax cuts, even though anyone to the left of Joe Lieberman could easily have predicted it. And then Tim Geithner and friends couldn't have predicted S&P's obvious move, even though anyone paying close attention could have predicted that, too.
If this is a all a kabuki conspiracy, it's the best acted Vaudeville farce of all time. The other alternative is to concede that we're governed by drooling idiots in Wall St. and Washington alike, largely because anybody with a clue about what's really going on is relegated to the sidelines and not allowed anywhere near real policy decisions.
Neoliberalism and free market fundamentalism are both used up, obviously failed dead ends in the world of ideas. Yet the proponents of these ideologies both cling desperately to their beliefs, fighting for control of Washington like two people fighting desperately for an inner-tube as they fall out of a doomed airplane, confident that their preferred version of the same policies will save them from certain death. Meanwhile, progressives have all the parachutes, but are strapped, helpless and curiously irrelevant, into the plane as it careens inevitably into the mountains ahead.
And all the clueless media can do is report on who's winning the seesaw battle for the useless inner-tube, while moaning about how they could both be saved if only they would learn to share it like nice little children.