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Robert Reich: Why S&P Has No Business Downgrading the U.S.

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highplainsdem Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-05-11 11:21 PM
Original message
Robert Reich: Why S&P Has No Business Downgrading the U.S.
http://robertreich.org/post/8542550924

Pardon me for asking, but who gave Standard & Poors the authority to tell America how much debt it has to shed, and how?

If we pay our bills, were a good credit risk. If we dont, or arent likely to, were a bad credit risk. When, how, and by how much we bring down the long term debt or, more accurately, the ratio of debt to GDP is none of S&Ps business.

S&Ps intrusion into American politics is also ironic because, as I pointed out recently, much of our current debt is directly or indirectly due to S&Ps failures (along with the failures of the two other major credit-rating agencies Fitch and Moodys) to do their jobs before the financial meltdown. Until the eve of the collapse S&P gave triple-A ratings to some of the Streets riskiest packages of mortgage-backed securities and collateralized debt obligations.

Had S&P done its job and warned investors how much risk Wall Street was taking on, the housing and debt bubbles wouldnt have become so large and their bursts wouldnt have brought down much of the economy. You and I and other taxpayers wouldnt have had to bail out Wall Street; millions of Americans would now be working now instead of collecting unemployment insurance; the government wouldnt have had to inject the economy with a massive stimulus to save millions of other jobs; and far more tax revenue would now be pouring into the Treasury from individuals and businesses doing better than they are now.
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nadinbrzezinski Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-05-11 11:22 PM
Response to Original message
1. Another one missing it by a mile
this is not about the debt... but our unstable political system... and it is not even buried in the statement...

There is always a first time...
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frustrated_lefty Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-06-11 12:14 AM
Response to Reply #1
11. First comes denial....
then anger, bargaining, depression and acceptance.
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indurancevile Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-06-11 12:16 AM
Response to Reply #1
12. bs
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-06-11 01:24 AM
Response to Reply #1
13. Reich is right.
Much of our debt is due to transferring toxic waste that S&P had rated AAA onto the public balance sheet. I warned you during those bailout fights that the neoliberals would go after the social programs once they successfully turned the private debt crisis into a sovereign debt crisis.

This isn't about raising revenue. Even if it were, raising taxes in the midst of balance sheet recession is a bad idea.
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Spider Jerusalem Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-06-11 05:49 AM
Response to Reply #13
17. Well no, much of it is due to the Bush tax cuts and the wars in Iraq and Afghanistan
this isn't about debt. This is about long-term structural deficits and a government with no credible plan to close the fiscal gap because a significant faction in the legislature won't let it make one.
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-06-11 04:05 PM
Response to Reply #17
21. Deficits, in and of themselves, pose no danger for sovereign currency regimes.
Right now we need to be expanding the deficit, not shrinking it. Once the economy recovers, the automatic stabilizers fade away, tax revenues increase and the deficit is reduced without any need for economically destructive interventions such as spending cuts.
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Amonester Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-05-11 11:29 PM
Response to Original message
2. Yep. Let's shine the National spotlight on these fuckeR$ since they R
like Asking For It.

Someone tell me again why aren't these S&P "We R Sorry" bailed-out crooks accomplices rotting collectively in jail yet? :shrug:
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Ruby the Liberal Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-05-11 11:32 PM
Response to Original message
3. Surprised to hear this from Dr Reich. He knows that the ratings
of a corp or sovereign nation are based on more than default risk. Uncertainty and dysfunctional leadership at the helm are risk factors.

They just explained WHY they feel we are not stable, and they aren't wrong. 10% of this country held us all hostage over ideology.
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nadinbrzezinski Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-05-11 11:36 PM
Response to Reply #3
4. I think both Reich and Krugman are having a slight case
of cognitive dissonance, this happens to OTHER countries, not us.
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Ruby the Liberal Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-05-11 11:39 PM
Response to Reply #4
5. That could explain it, but I am still surprised by both.
Harry Reid and Van Jones (among others) are all over the twitter making the case for raising revenues because of this. Van has really been prolific tonight.
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nadinbrzezinski Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-05-11 11:41 PM
Response to Reply #5
6. I should turn to twitter now, shouldn't I
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Ruby the Liberal Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-05-11 11:43 PM
Response to Reply #6
7. Van is really on a rip.
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nadinbrzezinski Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-05-11 11:51 PM
Response to Reply #7
8. Just sent him a tweet
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JDPriestly Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-06-11 03:38 AM
Response to Reply #7
15. Van Jones is great. I really like his movement and its emphasis on the
environment and grass-roots action.
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Major Hogwash Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-06-11 12:00 AM
Response to Original message
9. Reich is right on the money!!
Edited on Sat Aug-06-11 12:01 AM by Major Hogwash
Good for you Robert, tell it like it is.
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Major Hogwash Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-06-11 12:08 AM
Response to Reply #9
10. The answer is, nobody did, Robert.
Thanks for telling it like it is.
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JDPriestly Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-06-11 03:27 AM
Response to Original message
14. And S&P's hint that the Treasury should default on the Social
Security and Medicare trust funds is really ignorant. Sorry, but that money is in a trust fund. It is not to be spent at the whim of Congress. When we paid our FICA taxes on the first dollars we earned into that fund, we were assured that the money would be held in trust.

A Trust Fund is the highest obligation.

People go to jail for embezzling trust fund money. And a good argument could be made that failure by Congress to repay in full the trust fund money used to purchase Treasuries is embezzlement.
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nc4bo Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-06-11 07:16 AM
Response to Reply #14
19. I think it's just more evidence of how corrupt our entire political and finiancial systems
Edited on Sat Aug-06-11 07:28 AM by nc4bo
have become. Hell, our entire system of democracy has been infiltrated and corrupted. This is just more proof of how deep the corruption has gotten.

There are ways to address it but no one in power seems to be interested.
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Fool Count Donating Member (878 posts) Send PM | Profile | Ignore Sat Aug-06-11 05:45 AM
Response to Original message
16. What does he mean "no business"? That's all they do - rating various
financial instruments. That's why they are called a "rating agency". Is he saying that US Government
bonds should be exempt from any independent scrutiny? One can disagree with S&P's opinion, but saying
that they have "no business" expressing it is a bit too much.
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Ilsa Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-06-11 07:12 AM
Response to Original message
18. K&R. Emailing out. nt
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highplainsdem Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-06-11 09:16 AM
Response to Original message
20. kick
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woo me with science Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Aug-06-11 04:10 PM
Response to Original message
22. K&R nt
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