Downgrading our politics

[andym]

http://www.economist.com/blogs/freeexchange/2011/08/sps-credit-rating-cut
The Economist:

...As S&P’s announcement makes clear, the inadequacy of the deal was only one motivation. As important (to me, even more important) was the the reckless and divisive battle that preceded it: "The political brinksmanship 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 … weakens the government’s ability to manage public finances …"

This is crucial. Sovereigns aren’t like companies. They can’t go bankrupt, and creditors can’t seize their assets. Their creditworthiness depends as much on their willingness as their ability to pay. As Felix Salmon presciently noted before the announcement was made, it’s not our ability to pay that’s in doubt: "America’s ability to pay is neither here nor there: the problem is its willingness to pay. And there’s a serious constituency of powerful people in Congress who are perfectly willing and even eager to drive the US into default. The Tea Party is fully cognizant that it has been given a bazooka, and it’s just itching to pull the trigger. There’s no good reason to believe that won’t happen at some point."

....After all, it was Mr Boehner who reminded his freshmen colleagues that on the debt ceiling they’d have to act like “adults.”
That is not what happened. As the fight dragged on, the leadership moved closer to the Tea Party, not the other way around. And they seem happy with the results. Why else would Mitch McConnell have promised on August 1st to do exactly the same the next time the debt ceiling must be raised?

It is striking that the proponents of this strategy seem so oblivious to its impact. Our economy is lubricated by a sophisticated and stable credit market whose most vital component is also the most ephemeral: trust. As the crisis amply demonstrated, when trust erodes, the system freezes up. America has built a reputation for responsible and credible management of its finances over the centuries, and that reputation has been reduced to a political football, like a federal judgeship. Henceforth a foreign pension fund or central bank that once mindlessly ploughed his spare cash into Treasurys will have to think twice.
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Basically the Tea Party's willingness to not allow the USA to meet its obligations puts America on the brink of economic instability and empowers our competitors (like China). Editorialist thinks " record disapproval ratings will force Congress to acknowledge the idiocy of their recent behavior and to adapt by substituting compromise for brinkmanship."
He is probably naively optimistic.

[Turbineguy]

1. Teaparty voters are OK with default

They think if you refuse to pay your debts they magically go away.

[nadinbrzezinski]

2. My that was my analysis as well

should i also ask for a job at the Economist?

Recommended.


We may hate the messenger, but they ARE right.

[andym]

3. British politics are a bit different from ours

From wikpedia: http://en.wikipedia.org/wiki/The_Economist
"It takes an editorial stance which is supportive of free trade, globalisation, government health and education spending"

Not too many liberals or conservatives in the USA would support that mix.

[nadinbrzezinski]

4. Oh I am aware what the economist is

I just find it interesting, that now we are seeing the same analysis in publications, Now I can count Reuters and the Economist...

And I find it funny in a way.

Let's just say I find the pattern amusing at this point.