RE: RE: Bullish or bearish?Yes, along those lines, Prospekt:
In what sounded at first like something from the
Onion,Standard & Poor's postponed its planned downgrade of U.S. debt for afew hours today after the White House pointed out that it had made a $2trillion arithmetic error in its calculation of future deficits.Seriously. These guys are supposed to have the most sophisticated stableof financial analysts on the planet, but apparently they can't comewithin $2 trillion of figuring out something that's a simple matter oflooking through OMB tables and CBO reports.
But set that aside for the moment. What's $2 trillion betweenfriends? We all agree on the rough size of America's fiscal woes and $2trillion one way or the other isn't all that decisive. So the questionof the day is: should S&P have downgraded our debt? Felix Salmon says emphatically yes:
The US does not deserve a triple-A rating, and the reasonhas nothing whatsoever to do with its debt ratios. America’s ability topay is neither here nor there: the problem is its willingness to pay.And there’s a serious constituency of powerful people in Congress whoare perfectly willing and even eager to drive the US into default. TheTea Party is fully cognizant that it has been given a bazooka, and it’sjust itching to pull the trigger. There’s no good reason to believe that won’t happen at some point.
I hate to let anyone one-up me in my contempt for the absurd stranglehold the Tea Party holds over John Boehner and a cowering GOP,but this really, really just isn't true. Yes, there were a few teaparty-ish lunatics in Congress who apparently intended to vote against adebt ceiling increase no matter 
what.About 20 or 30, I think. And yes, the Tea Party contingent brought usto the brink of a partial government shutdown, which would have been badnews for the economy.
But in the end — and no one who has even a nodding acquaintance withpolitical history should be surprised that it took until the 11th hour —a deal was cut. What's more, even if a deal hadn't been cut by August2nd, we wouldn't have defaulted on our debt. A bunch ofgovernment services would have been temporarily put on hold, butbondholders would have been completely unaffected. This is a reallyimportant point. It's true that a temporary government shutdown wouldhave been bad, but this has happened before. It's ugly and stupid andunnecessary, but it's politics. America's debt, however, was never atany risk.
On a similar note, here's Ezra Klein:
S&P is downgrading their estimation of our political system, notour actual ability to pay our debts....Of course S&P is downgradingour political system. Did you see the nonsense we pulled over the pastfew months?....Why shouldn’t S&P downgrade our debt?
Answer: because S&P shouldn't be in the business of commenting ona country's political spats unless they've been going on so long thatthey're likely to have a real, concrete impact on the safety of acountry's bonds. And that hasn't happened yet. There's no seriousmacroeconomic reason to think America can't service its debtand there's no serious political reason to think the Tea Party hasanything close to the power to provoke a political meltdown in which we won't pay our debt.
Look. The United States has been running up big debts for the pastcouple of years because we're trying to climb out of an epic recession:jobs and economic recovery are exactly where our fiscal spotlight shouldhave been. As a result, we've been focusing on our long-term debt for,literally, less than a year. Pretending that our political system isfundamentally broken because we haven't solved our long-term entitlementproblems in a few months is staggeringly panicky and ahistorical, andS&P's weird obsession with hitting a $4 trillion target formedium-term deficit reduction is economically vacuous. If we still can'tget our act together in four or five years, then fine. We deserve adowngrade. But a few months? That's crazy. It's the kind of hair-triggerreaction that belongs on cable shoutfests, not in the boardroom of asober, 150-year-old financial firm.
Ezra predicted that in its downgrade S&P might call out Republicans for refusing to accept any deal that increases taxes. In their statement tonightthey did in fact do this, albeit pretty gingerly. I think that's greatand I welcome it. But it still doesn't mean that S&P is right to useits rating authority as an excuse for political tsk-tsking. It shouldcare only about the safety of U.S. bonds, and for the moment anyway,there's no legitimate reason to think either that we can't pay or thatwe won't pay. The bond market, which has all the same information asS&P, continues to believe that U.S. debt is the safest in the world,and in this case the market is right. S&P should stop playing dumbpolitical games and stick to its core business.
https://motherjones.com/kevin-drum/2011/08/why-sp-wrong