Despite the fact that both other major ratings agencies declined to do so, S&P downgraded US debt today. I have not hesitated to criticize the Obama Administration on this blog, but the most proximate cause of the downgrade was the unprecedented use of the debt ceiling for political leverage and the obstinate refusal to consider any tax increases to address the deficit by the GOP extremists that have taken control of the party. Neither party escapes blame--I just think the GOP arson squad holds disproportionate responsibility because they specifically attempted to jam their agenda down our throats through unprecedented political blackmail. Obama on the other hand put entitlement reform on the table. Here is the operative quote from S&P that fully supports my position:
"We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade."
"The political brinkmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy."
S&P specifically singles out the GOP's refusal to raise taxes:
"[N]ew revenues have dropped down on the menu of policy options. . . .[c]ompared 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."
Read the full report and weep--this is an indictment of our political leadership and was not necessary.