Krugman: S&P and the USA

[jpgray]

...

On the other hand, it’s hard to think of anyone less qualified to pass judgment on America than the rating agencies. The people who rated subprime-backed securities are now declaring that they are the judges of fiscal policy? Really?

...

More than that, everything I’ve heard about S&P’s demands suggests that it’s talking nonsense about the US fiscal situation. The agency has suggested that the downgrade depended on the size of agreed deficit reduction over the next decade, with $4 trillion apparently the magic number. Yet US solvency depends hardly at all on what happens in the near or even medium term: an extra trillion in debt adds only a fraction of a percent of GDP to future interest costs, so a couple of trillion more or less barely signifies in the long term. What matters is the longer-term prospect, which in turn mainly depends on health care costs.

So what was S&P even talking about? Presumably they had some theory that restraint now is an indicator of the future — but there’s no good reason to believe that theory, and for sure S&P has no authority to make that kind of vague political judgment.

In short, S&P is just making stuff up — and after the mortgage debacle, they really don’t have that right.

So this is an outrage — not because America is A-OK, but because these people are in no position to pass judgment.

http://krugman.blogs.nytimes.com/2011/08/05/sp-and-the-usa/

[polichick]

1. It's true, "these people are in no position to pass judgment"...

And you can say the same thing about almost every agency of the U.S. gov't too - because of infiltration by special interests. Hell, our regulators are industry insiders. It's all a big joke on the American people.

[kenny blankenship]

11. but they ARE in position. They ought to be in "jail" and neutralized, but they aren't.

Instead they were left free and unscathed and their credibility went unimpeached. That PUT them in position to start striking at the one party that MIGHT, just MIGHT get to the bottom of their criminal behavior in collusion with the big 5 banks. And now they have struck the first blow, which makes striking back at them very hard to do without being accused of pursuing political payback. NEVERTHELESS IT MUST BE DONE.

These people take down whole governments and countries, and they will do it to us without a second thought.

[Better Believe It]

2. K & R

[Quixote1818]

3. K and R

[flamingdem]

4. S&P are MORANS basic math wrong in calculation, White House calls them AMATEURS nt

[DURHAM D]

5. So who paid S & P for the downgrade and why?

[Grandrose]

6. Koch brothers!

They are screwing up everything else....just saying!:think:

[tex-wyo-dem]

14. Excellent question....

And what is the endgame here?

[spanone]

7. k&r...

[BlueCheese]

8. Krugman, as usual, nails it.

S&P is full of nonsense.

[rdking647]

9. s&p

a group which things teh US is a worse credit risk than france and germany... 2 countries whose currency is in the process of imploding

[cbdo2007]

10. Well....at least they put that we need "increased tax revenues" in the report....

so they can't use this against us in the next election. President Obama literally tried to do everything S&P requested when he was shut out by Congress. If any of them try to use this in 2012 the Dems will just turn it back on them for not raising taxes.

[mmonk]

12. He is correct. All the financial institutions that were not spared

collapse were rated AAA the day they plummeted (the CDOs and such).

[sixmile]

13. Krugman for Treasury Secretary!

Immediately!

[tex-wyo-dem]

15. I would support that with every breathe in my body...

But if you think Elizabeth Warren's attempted appointment to CPA was contentious, Krugman to SoT would make that look like a picnic in the park.

[tomp]

16. the republicans will say if they had gotten more cuts...

...s&p would not have downgraded. as i recall 4 trillion was, coincidentally, their magic number, too.