It looks the downgrade is happening after all.
Update. This never would have happened if Democrats had just confirmed Robert Bork.
Update. Official Washington has declared that this is good news for Republicans (via commenter lamh34).
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102Comments
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lamh34
meme being set???
@marcambinder Marc Ambinder
Sir Nose'D
Well clutch my pearls! Did McMegan get something right?
“But though I will take a lot of hell for saying this, I’m afraid I think that the lion’s share of the blame goes to the GOP, which escalated to this completely unnecessary showdown, and then gave up any hope of a grand bargain because it would have required some revenue increases.”
Comrade Mary
Fuck it, I’m opening the wine.
lamh34
more tweets from Ambinder:
@marcambinder Marc Ambinder
Oh and John King is saying that “yes the country has been embarassed and espeically, the President has been embarassed”
lamh34
@marcambinder Marc Ambinder
Ron
@lamh34: I’m shocked, SHOCKED, I tell you that John King points to this as a negative to Obama.
Amanda in the South Bay
Hmm…what if Congress had raised the debt ceiling back in May? Would this have even happened? This seems like S&P is saying “make all these cuts, or we’ll downgrade your rating” but IANAE.
Reality Check
See those green shoots!
Feel the thrills up your leg!
HOPE! CHANGE!
PeakVT
@lamh34: Ambinder is probably thinking up Republican ad material on his own initiative and for free. Which makes him even more pathetic than if he was merely planting it.
Maude
@Amanda in the South Bay:
The Republicans refused to increase revenue. That and the debt mess has brought us to this point. Time to tell the righties, DIAF.
Amir Khalid
I suppose everyone is about to find out exactly how seriously Standard & Poor’s credit ratings are taken nowadays.
The Sheriff's A Ni-
“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.”
Well, that ad just wrote itself too.
cynn
I was going to try to refinance my first and second so I could afford to keep my house and pay my other bills. I feel like a Mastodon.
kd bart
So we’ve been reduced to “Nice country you got there. Hate to see something happen to it.” as the motto of one of our major political parties.
JGabriel
Possibly the most pointless downgrade ever. We didn’t default. And they’re still downgrading our debt? Whatever the merits of S&P’s reasoning, this will look to political to everyone — to the extent that there will be many who don’t take it seriously.
It will affect contracts that specify a requirement for S&P, and only S&P, AAA rated debt.
Other than that, who will it affect? Anyone who can use Moody’s, or others, for ratings won’t be affected. Maybe it will add a small percentage to our interest rates for T-bills, but even that looks unlikely. There’s just too much demand for an investment safe haven during the stock market downturn.
Those with more experience in economics and the markets, please tell me where I’m wrong — if I’m wrong.
.
Danny
The smoking gun in the hand of a teabagger:
ETA: They’re specifically saying that they havent downgraded up until now because projections assumed that the Bush tax cuts would be allowed to expire. Given republican behavior in the debt ceiling fight, they changed that assumption….
beltane
Somewhere, a group of billionaires is salivating as they add to their fortune thanks to the efforts of their teabagging servants. Our country has detained and tortured countless numbers of people in the War on Terror and yet the actual terrorists are prancing around in $600 shoes and drinking $350 bottles of wine with not a care in the world.
Amanda in the South Bay
@JGabriel:
Yeah, I’m not entirely sure why this happened now. Shouldn’t they have done this like months ago?
Barney
And, Danny, notice that the base case scenario has a negative outlook. But:
S&P is finally saying the teabaggers are bad for the USA.
Keith G
The White House can shape this story. It will be hard as they are late to the game, but they have to decide to get into the trenches and start combat.
Or they can just do the scatter-shot Obama message thing and ride this puppy down.
Danny
@Barney:
Do as the President says or face further downgrades. But will the Village listen or are both parties equally at fault?
Carl Nyberg
What is S&P evaluating? Whether creditors will get paid?
Is there a plausible scenario where creditors won’t get paid?
lamh34
More from twitter:
@Reuters Reuters Top News
Bruce S
UC Berkeley economics professor Brad DeLong has a cogent and relatively accessible professional analysis of the S&P downgrade here, based on the best available data:
http://delong.typepad.com/sdj/2011/08/which-has-a-higher-rating-the-usa-or-sp.html
nellcote
http://blogs.abcnews.com/politicalpunch/2011/08/govt-official-us-expecting-sp-downgrade.html
Chyron HR
@Reality Check:
Tell us more about this fascinating theory of yours.
Fucen Pneumatic Fuck Wrench Tarmal
is it too late for a song of the week vote, as cheesy as this one is.
we can’t afford to be innocent, stand up and face the enemy
Danny
@Keith G:
Reading Erick Eriksson at RedState (Teabagger central) the dems are out spinning this enough for him to post counter-spin. But we got our usual problem that they got more village flacks in their pocket.
Here’s hoping that the admin & dems navigated this whole debt ceiling shit-storm well enough to be able to get on top of this….
Alex S.
@Barney:
This is a really weird situation. S&P is saying that an extension of the Bush Tax Cuts is bad for the country, they are actually helping Obama, but in the most twisted way possible.
beltane
@Barney: That’s pretty explicit. All the media people saying this is good for the Republicans may as well put on their hooker boots and start hanging out on street corners looking for their customers as they are nothing but GOP’er whores.
The Dangerman
How can that be? Bachmann said that there would be no downside to dancing around with the debt limit.
(S)he steals from the poor and gives to the rich, stupid bitch.
Maude
@nellcote:
I feel like Alice when she went down the rabbit hole.
Suffern ACE
@Danny: Not really. If they expect that those revenues won’t be forthcoming, they can call bullshit on the baseline. What they are saying is not that default is gonna happen tomorrow, but don’t bet on it 3-5 years out. My guess is that those cuts were the missing few trillion “math error” that we were discussing earlier.
Those tax cuts are very large and the only disbute is between letting them expire for the wealthy only or letting them continue for everyone. Why should they assume that the either party is going to raise sufficient revenue, when the bulk of the revenue problem isn’t going to be on the table and one party will not even discuss any part of that?
Alex Scott
My tweet to Ambinder: “Isn’t that a bit like a serial killer taunting the cops who can’t find him?”
MikeJ
BTW, congrats on the Parliament title.
cynn
Somebody explain this to me. Please, I’m a financial dummy. What’s going on? You people are smart. I’m supposed to go to a housewarming tonight but it seems to me smashing a bottle of champaigne on a house corner is a stupid waste of booze.
Jenny
S&P made a big computational error, but will downgrade anyways because to reverse would add even more egg to their disgraced face.
beltane
I have a solution to the current impasse. In exchange for a to-be-determined “courtesy fee” our “job creators” will be permitted to peacefully repatriate to a country of our choosing on the condition they take the teabaggers with them.
jl
@38 cynn
My economic and statistical training, and close examination of reams and reams of economic and financial data, says that you should drink the champagne before you smash the bottle over an economists head, or corner of the house, or whatever sturdy and solid object is handy at the party.
Keith G
@Danny:
Indeed.
And we have POTUS. If he ever decides to pickup the sword, he will create his own weather.
JGabriel
beltane:
I always wondered who would be the serving class in a real-world equivalent of Galt’s Gulch.
Now we know. Perfect solution, beltane. Kudos.
.
demkat620
Told you the Big Money Boys would fight back. Methinks Mr. Santelli is gonna be persona non grata in alot of places.
Wonder if Tom Donoghue is still returning Karl Rove’s calls.
Danny
@Suffern ACE:
But what they’re saying is that previous projections assumed that current law would stand (all tax cuts expire) but the debt ceiling deal and the fight leading up to it made them change their assumptions, and with that make new projections. Right? Am I reading that wrong?
Cat Lady
What fuckery is this? Apparently we’re in the wingularity event horizon where the field of perception is distorted enough so that a $2 trillion error counts for nothing and the matrix is being revealed. Has Halperin told us it’s good news for John McCain?
Jenny
Bush spent trillions on elective wars.
Bush spent trillions in tax cuts for the rich.
Bush spent a trillion on prescription drugs.
And S&P looked the other way.
Country elects a black guy and S&P downgrades.
Danny
@Keith G:
Is that “ironic” magical bully pulpit bullshit, or just run of the mill bully pulpit bullshit?
Dexter
@demkat620:
Donahue has been threatening to take out the Tea Party reps in the next election since early May.
cynn
@jl: the problem, as it has always been, that I can’t grab it quickly enough.
beltane
@Cat Lady: Marc Ambinder beat him to it alas. All I can say to Mark Halperin is “you snooze, you lose”.
lamh34
From watching Rachel M’s great indebt coverage, it seems that S&P’s downgrade, that it seems purely politcal Rachel was making a point of reporting that the press release from S&P did not actual include much detail on legitimate reasons for the downgrade
Oh, and John Harwood from CNBC, also said that POTUS “rhetoric” lead S&P to feel more comfortable using obvious political reasons for the downgrad What ever the hell that meant?
Cain
BTW Cole’s getting drunk on twitter.. Tunch on lap, Lilly at the bottom, Rosie… crated.. drinks in hand.. he’s having fun.
gene108
Gotta agree.
Bork was basically derailed by some uppity Negroes, who weren’t (1) old money trust fund billionaires, who by divine right should be able to bend politics to their will and (2) got all upset about Bork’s interpretation of a law, the 1964 Civil Right’s Act, that rammed the Imperial Federal Government down the throats of states rights.
The old money billionaires had had all they could stand – from women, uppity Negroes, the household help, etc. – and couuldn’t stands no more. They organized in ways the Left could never imagine to make sure their interests were protected and the Left’s destroyed.
lamh34
@Danny: Obama does use the bullpit, but is doesn’t get the coverage it deserves. In this case, he will again use the “pulpit” but with the MSM in the bag as usual, it will STILL not get the coverage it deserves. Obama will of course be blamed for that.
jl
@48 cynn
Oops. I thought you were the one who was going to smash it. Well, then if you have a cat or dog who likes a little sip once in awhile, take it along.
JGabriel
Reuters via lamh34:
So, let’s get this straight.
The debt compromise bill yielded cuts of a little over $2T. S&P was looking for cuts of $4T.
S&P made a $2T error in its calculations — coincidentally identical to the $2T difference between the actuall cuts and the cuts they S&P wanted to see.
Shorter S&P: When the US is off by $2T, that’s a fuckin’ downgrade! When we’re off by $2T … oh, look, there’s a pretty dragon in the sky!
.
Cat Lady
@beltane:
Whoever the commenter was here that said the epitaph of this country will be “killed by a narrative arc” should pick up their lifetime Internets Award at the courtesy booth.
lamh34
Well shit, I guess that’s it for the “pivot to jobs” that the WH planned to do will be delayed as this downgrade sucks up all the oxygen that the MSM has to breathe!
gene108
Also, too…yawn…
Two year T-bills are trading near or below a 0% return…other than S&P, the rest of the world still loves us…
Yeah, us :-)
Suffern ACE
@Danny: Yes. You are reading that right. Originally, I think S&P in their “watch” rating said “find $4 trillion in deficit reduction” or we’ll review and probably cut you in October. Congress found $2T (and we’ll see you in December) and despite efforts to raise a dime in revenue, the negotiations produced no revenue agreement. It’s all been punted to an unusal committee that will be made up of at least 6 members who won’t raise revenue and likely one Democrat who won’t either. Even if they fail, their aren’t any revenue increases in the trigger plan.
I’m surprised that they downgraded earlier than they originally said, but at least their analysis is correct. Now we can argue whether or not this is at all necessary, or that we could print money or do coins, or that we could run deficits forever, or whatever, but S&P disagrees.
Marshal T
Who the fuck is consulting Obama. The dude needs to get on TV and quite literally tell the country that the republicans are insane.
What the hell does he have to lose at this point?
Seriously. What the fuck.
Keith G
@lamh34: Is that “ironic” nothing is ever Obama’s fault bullshit, or just run of the mill nothing is ever Obama’s fault bullshit?
lamh34
@Keith G: you figure it out!
MikeBoyScout
Over time two things will inevitably flow out of the S&P downgrade.
1) Some less sophisticated traders/investors will sell on the news enabling our Galtian Overlords a sweet opportunity to buy US debt more cheaply than they otherwise could.
2) With the other corrupt and incompetent rating agencies having kept the USA at AAA, S&P is the odd one out. As they ‘oops, our math was off by a couple of trillion” story gets replayed, over time the effect of the story will further reduce the relevancy of the analysis of S&P and the other rating agencies will continue to significantly diminish.
malraux
@Carl Nyberg:
Sure, its certainly plausible that in a decade, tea party candidates could gain enough control of the levers of power to consider defaulting on some debt. Because some t-bills are very long term purchases (30 years), its hard to say that the current fight shouldn’t make you reconsider how committed and capable the US political system is to properly handing its obligations.
MikeJ
@gene108:
Exactly. Even if the rating falls to ZZZZZZZ, if the rate is 0% or below as it has been, S&P can go piss up a rope.
The real question is, does anybody on earth take S&P seriously?
JGabriel
@Jenny:
… And blames it on the Republicans.
Not exactly fitting the narrative. I’m usually one of the first to think that Obama gets a lot of flack for being black, and I think that the GOP thought they could get away with ransoming the debt limit because of the President’s blackity-black black-blackness.
But I doubt that’s the case with the downgrade: this seems to have more to do with the rating agencies’ bias towards holding governments to a higher fiscal standard than the corporate world.
.
Jinxtigr
My gut reaction here is: this is an attempt by the money guys to put a stake in the heart of the teabaggers in hopes the money Republicans will regain control.
I think they see Obama as a bystander, and have no interest at all in seeing him rebuild the country or the economy- but they see the teabaggers as WORSE and potentially a huge, destabilizing, threat to all economies everywhere.
It’s a massive vote of no confidence in how America’s operating, and that’s something I can get behind. I think to a large extent they’re making the correct call, it’s just unhelpful.
We’re seeing all the Illuminati ripping off their masks and stepping forward in turn, all to try and beat down the teabaggers. Now we’ve got the banksters sending a message.
Remember, if they didn’t stand to gain something they would certainly not be doing it. There is no moral center there, no deepseated need to speak truth. You’ve got to look at what they stand to gain, and my gut reaction says they’re trying to crush the teabaggers by throwing an immediate bad consequence at ’em.
I do not believe their primary motivation is to weaken Obama, I think they’re doing this now while people are still thinking teabaggers raised havoc.
Jenny
Krugman is mad and frustrated, saying S&P’s reasoning makes no sense and they didn’t even have credibility to begin with.
Congratulations Paul, now you know how it’s feels to deal with terrorists.
Narcissus
Can we start shooting plutocrats yet
Please
lamh34
@Jenny:
S&P and the USA
Paul Krugman
Jenny
Boehner did say he got everything he wanted, so he’s responsible for this downgrade.
Emerald
@Danny:
In the Village, when Republicans are at fault, then yes, both parties are equally at fault.
When both parties really are at fault, then it’s Obama’s fault. And the Democrats’. Also too.
Danny
@Keith G:
Big picture Keith my boy. This is about the teabaggers wrecking the US credit rating. We’re trying to keep this from turning into yet another Obama shitstorm. Why is everything about Obama with you people?
Roger Moore
@MikeJ:
Unfortunately, the opinions of ratings agencies do have a practical effect. Financial institutions have to treat different kinds of debt differently, including how they account for it as reserve capital, according to its rating by official ratings agencies. That’s why the people selling junk mortgage backed securities were so eager to get AAA ratings.
Having our debt downgraded means that some financial institutions that have been relying on US debt being AAA may have to dump for other debt and/or increase their capital reserves to account for the downgrade. It doesn’t matter that S&P has proven itself incapable of telling its ass from a hole in the ground. It still has the official stamp of approval, so people are legally obligated to treat it seriously.
Danny
@Emerald:
Yes. And will the Village ride our troubled ship all the way to the bottom of the ocean for the benefit of the republican party that’s what I’d like to know.
Roger Moore
@Danny:
You may not have noticed, but he has a funny name and his skin color is just a few shades darker than any previous president. Also, too, he has drawn attention away from the media whores of the professional left by making more progress on their pet issues than they ever have.
Danny
@MikeBoyScout:
But this is a brilliant way to get the S&P brand in the news as the most strict and trustworthy ratings in the biz wouldnt you say? Those guys even had the BALLZ to downgrade the US Government.
Danny
@Roger Moore:
Also he didn’t show them enough love (presumably meaning enough dinner invites). Which goes to show that inside every netroot blogger there’s a little villager trying to get out…
burnspbesq
@JGabriel:
This is going to have ripple effects, so anyone who has written a CDS that has a trigger based on a downgrade (as opposed to an actual default) is about to get reamed. Could be a torchlight parade on Sixth Avenue some night soon (S&P’s HQ is in the McGraw-Hill Building).
Keith G
@Danny: There are no guarantees, but if you read the histories of (especially contemporary) presidential administrations you will see that there are messaging procedures and tactics that are unique to the White House. Some presidents use them well, others less so.
“Bully Pulpit” has been so over used as to mean very little. Here, we are talking about marketing. Obama does not have to convince folks to do what they are against. All he has to do is get in on the front end of idea formation.
Something unusual and important has happened. Most people will wait until a frame is given to them to help them deal with this new information. He needs to get there early.
It’s not easy, but he is the one who wanted this job.
Yevgraf
That’s what happened to Greece, too – they were paying their bills, in full and on time, then they got downgraded, escalating their payments out the wazoo.
WyldPirate
@Keith G:
Banking on the Obama administration’s pathetic, late-to-the-game, ass-backwards messaging (they’re going to pivot to “jobs, jobs, jobs” now with north of 15% U-6 rate and a declining work-force participation rate), you can bet on the “scatter-shot” messaging.
MazeDancer
Have to go with Rachel tonight. We all agree that the Repubs and TParty are close to ruining the Republic. But no math-challenged bunch of junk paper upraters has any business having any kind of judgment power or say so in how the US runs its politics.
Even if I agree with S&P’s opinion of how the US is running politics and the TParty, S&P got no standing here. Or, for that matter, credibility in general.
And Jared Bernstein says it doesn’t matter as long as the other two raters are still AAA. And ever since he got his Power Buzz hair cut, I listen to everything he says. (Really, one of the best style moves in Talking Headery. Never noticed him much when he had the basic gray bushy blob hair.)
Judas Escargot
If you had, for example, a few hundred thousand small-time investors… what could they do collectively (within the law, obviously) to “hurt” S&P?
A few hundred thousand people could boycott a Target, or a Walmart, or a Home Depot if they wanted. But what would be the equivalent action against a credit ratings agency?
Rhetorical question, I suppose.
Danny
@Keith G:
Yes. Everyone knows that, including the White House.
The point where you guys stop being magical pulpit wielding emobaggers is when you are able to point out at a given moment in time exactly what Obama ought to do and make predictions of how it would play.
At that point we can start discussing those suggestions and how plausible your predictions are.
Fucen Pneumatic Fuck Wrench Tarmal
@Judas Escargot:
project mayhem.
burnspbesq
@Judas Escargot:
A few hundred thousand small-time investors? Hmm, that sounds a lot like the Thrift Savings Plan, or CalPERS. They have the ability to mess with S&P if they choose to do so. If you’re a participant, you might want to fire off an email to the plan administrator.
Anya
@Keith G: @WyldPirate: Eyes on the enemy, guys. Every issue should not lead you to a criticism of Obama.
Judas Escargot
@Fucen Pneumatic Fuck Wrench Tarmal:
Cute… but as satisfying as that might be, I did say “legal”.
Consumers can send pricing signals to companies. But I can’t think of a way to send a pricing signal to an organization like S&P. I was naively asking the folks here, I guess.
I didn’t vote for the S&P. Yet they get to decide our collective fate. That sort of pisses me off.
Yevgraf
@Judas Escargot:
Surround the S&P building as a group and fire machine guns into it, indiscriminately slaughtering each person who tries to escape the fusillade. That would probably be about the only thing that would bring this under any form of control.
Keith G
@Danny:
I am not sure. Every WH has blind spots. This is Obama’s, I feel.
A few months back, I heard Anita Dunn on the Diane Rehm Show. She detailed how the WH was blind sided by the “Death Panels” gambit. When they first heard it, the Obama communications shop did not feel it was important, so they did not respond – until..they finally realized..that it was.. a “thng”. It was too late.
Don’t call me names. That is not worthy of adult discussion and it can be evidence of sloppy thinking.
I want this president to do better. I know he can do better if he opens his mind to the many options available to him. I fail to see that as being something so extraordinary.
Comrade Kevin
@Cain:
Boy, is he ever. heh heh.
JGabriel
@burnspbesq:
Are there a lot derivatives based on US downgrade? It seems like a losing bet either way, since anyone who is supposed to pay out on a downgrade may very likely be negatively impacted by said downgrade such that they couldn’t pay out.
I’m not saying there aren’t such contracts. We know the market puts out some really puzzling financial instruments. But it seems pretty dumb to bet on a downgrade, given the increased risk of the other side reneging on the bet due to the potentially dire consequences of said downgrade. It seems there’s a stronger than normal chance of not collecting on that bet even if you do win.
.
Judas Escargot
@burnspbesq:
I don’t belong to either of those, but something similar. I just might do that.
I was thinking out loud: Trying to imagine something along the lines of an “investors’ union”. Some way for people, across different plans/funds/etc, to send signals to these organizations. Just as consumers will boycott a company en masse to try and change its behavior, investors could independently send signals upwards to favor one credit ratings agency (or investment bloc, etc.) over the other.
These organizations have neither morals nor logic, but they sure as hell should understand pricing signals.
Keith G
@Anya: Have I criticized him every time? NO!
Why would you type such? Zillions of years ago I played football. I expected to hear about it if I needed to do some things better. I depended on it, as I was aware that there was so much I did not know, and I really hated to under perform.
Obama has some amazing strengths, and it seems some reoccurring weaknesses. I just need him to work on the weaknesses.
Edited (sigh)
JGabriel
MazeDancer:
That’s been my thought too. Glad to see it confirmed by someone who actually knows about something about economics, though, instead of relying on my own auto-pedantic ignorance.
.
Suffern ACE
@Yevgraf:
Well if the ratings agencies ALWAYS waited for a default before downgrade, they wouldn’t exactly be good for anything. (How they missed the housing bubble is a bit suspicious.)
Ken
JGabriel @93:
So? By then, I’ll have collected my big bonuses for writing those contracts and retired. Sure, the company will be screwed, but the employees aren’t the company, are they?
piratedan
@Reality Check: yeah, thanks for scorching the earth and then salting it after we started to seed it. You’re a prince for keeping your eye on the prize….
Fucen Pneumatic Fuck Wrench Tarmal
@Judas Escargot:
yeah, an organization like s&p has as its customers, institutional banking and investors. its ratings are inside baseball.
the industries that use their rating, and the investors in the market place, are their customers and their credibility. they are only as relevant as the widely held perception of their competence.
Johannes
So, I go to McCardle’s post, and try to politely correct her on the Bork thing. I give a citation to a witness who testified on Bork’s behalf, and thought him eminently qualified and worthy, but who, on actually looking at the history, found that the narrative of “deference” being the norm was just not accurate. Result? Crickets. And more comments (including from McCardle) that the Bork affaire was a break with tradition. Senate deference to presidential nominations, in McMegan land, remains the norm, history be damned.
That’ll larn me to tussle with Her Invincible Ignorance!
Beth
The fix was in from the beginning. S&P’s been making it up for years and now they conveniently provide Republicans with their 2012 campaign theme. Obama and the Democrats, however, played into their hands as usual by agreeing to the debt deal and the debt as the dialogue in the first place. Now, the guy’s talking about more free trade deals as a party of his “jobs” plan. Time for a third party that represents the rest of us.